Course Summary

During the last six weeks, we have seen contributions made by economists in understanding our crime problems.

Economists use the rational choice model of crime to explain why people commit crime: Individuals compare the gains and costs from committing crime with the gains and costs from not committing crime, and choose to offend when the net gains from committing crime are greater than the net gains from not committing crime.

The gains and costs from criminal and non-criminal activities can be composed of many parts. For example, increased police presence and tougher sentencing laws may increase the cost of crime by increasing the probability and severity of punishment. Providing more high-quality public education may increase individuals’ earnings potential from legitimate jobs, and make crime as a less attractive “work” option for them. Under the rational choice framework, we predict that both of these policy changes would cause crime to fall.

We have also seen how economists attempt to recover a causal relationship of interest from real-life data on crimes and criminals. For example, in order to test whether more police causes crime to fall, ideally we would like to run a randomized experiment, in which some places receive more police officers than other places with similar characteristics. Running such an experiment closely related to public safety can easily become infeasible, and economists have used many clever strategies to recover a causal relationship of interest from non-experimental data. We have seen a number of real-life examples that enabled researchers to obtain the causal relationship of interest using fixed-effect panel regression, difference-in-differences, and regression discontinuity analysis.

Recent decades have seen a growing use of randomized policy experiments by researchers and policymakers, and we have seen the findings from some of the most influential policy experiments. For example, randomized policing experiments from Kansas City and Minneapolis helped researchers to better understand the crime-reducing effect of preventive policing.

We have also seen a research finding from an innovative randomized experiment in Chicago, which suggests that helping individuals to make rational decisions more often may significantly reduce their criminal risks. Critics of the rational choice model of crime would argue that the relevance of the model is limited because many criminals do not think rationally. However, this limitation may turn out be an important opportunity. Since many crimes don’t “pay”, encouraging more individuals to become rational decision-makers and realize the huge cost of committing crime can have large crime-reducing effects.

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This article is from the free online course:

Economics of Crime

Hanyang University

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