Skip to 0 minutes and 1 secondWhen I tell people, I teach a course in economics of crime, many people ask me what economics of crime is about. Is it about the corporate crimes committed by corporate bosses? Or does it have to do with monetary losses from crime and our criminal justice system? Both of these questions are studied by economists, but to me, economics of crime is much more broad than that. It includes any research that studies crime using economic theory and econometric techniques. So I think it is appropriate to start the class by first talking about the economic theory we use to study crime.

Skip to 0 minutes and 38 secondsIf you taken class in economics before, you would know this already, but the rational choice model is at the heart of micro economics. Consumer theory predicts that consumers are rational choice makers who choose optimal consumption bundle based on their limited budget. Labor economists predict that a person looking for a job would compare all the different work options and choose the best option that's available. Likewise, economists argue that potential criminals carefully weigh the costs and benefits of committing a crime, and compare them to the costs and benefits of not committing a crime. And they will choose to commit a crime only if the net gains from crime is greater than the net gains from not committing a crime.

Skip to 1 minute and 22 secondsIn this sense, there is little difference between consumers shopping for groceries, a student applying for jobs, or a potential thief contemplating whether to steal or not. At this point, some of you may say, “but that’s not realistic!” We don’t always care about comparing all the different options and choosing the best option when we go out to buy groceries. And it’s even harder to believe that all crimes are result of this careful deliberation by criminals. There are crimes of passion, the incidents in which offenders commit a crime because of sudden outbursts of emotion, and it is questionable whether psychopaths and terrorists commit their crimes because it is a rational thing to do.

Skip to 2 minutes and 5 secondsEven if criminals are rational and choose to commit a crime when crime pays, do they really know the gains and costs of committing a crime? When a government policy changes the costs of committing a crime, will there know this and respond to it by committing fewer crimes? All of these are valid questions worth thinking about. But there is one thing we should keep in mind. That is crime fighting policies based on this rational choice model can still work and lower crime, even if not every criminal is rational. Indeed, consumer's overall consumption pattern will respond to changes in prices and the quality of goods, even though not every consumer knows and cares about these changes and prices and quality of goods.

Skip to 2 minutes and 50 secondsLikewise, the overall crime rates can still go down when the costs and gains from crime change, even though not every criminal knows and cares about these changes in costs and gains from crime.

Crime as a rational choice

Economists view crime as a deliberate choice made by the offender.

For the remainder of the course, we will see how this “crime-as-a-choice” framework enables us to explain the observed patterns of crime and predict the effects of different crime-control policy interventions. For reasons that will be made clear in later weeks, we will mostly focus our analysis on “street crimes” (for example, homicide, robbery and theft) instead of “economic crimes” (for example, embezzlement and fraud).

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Economics of Crime

Hanyang University

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