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Crime as a Rational Choice (for one last time)

Before we wrap up this course, let’s talk about the rational choice model of crime for one last time.

Economists view crime as the result of a rational choice. An individual chooses to commit crime if he can gain more from crime than not committing the crime. This gain from crime is not limited to monetary gains. Criminals may gain a lot from guilty pleasure and excitement from breaking the law, inflicting violence, and consuming illicit drugs. But even when accounting for all the monetary and non-monetary gains from crime, it seems like crime usually does not “pay”.

According to Steven Levitt and Sudhir Venkatesh’s analysis of gang finances, a low-level gang member only earns the minimum wage on average, while suffering multiple injuries and police arrests. (The annual death rate for gang members was roughly 100 times higher than those of similar age in the general population.) Why does anyone choose this “job” as a gang member, when working at a legitimate, minimum-wage job offers similar money with a minimal risk of unexpected injury and death? From Week 4, we also saw that imprisonment deteriorates an individual’s subsequent employment prospects and adversely affect his family members. Why do so many individuals commit crime when the net gains from crime look much smaller than the gains from not committing crime?

There are two possible explanations here. First, criminals may be still making rational choices. Perhaps they derive so much non-monetary gains from crime (e.g., social prestige, protection, pleasure and excitement) that their net gains from crime are still larger than the gains from staying out of crime. Alternatively, criminals may have strong present-oriented preferences. If they heavily discount the future costs of crime (including displeasure of arrest, imprisonment, injuries and possible death in the future) while putting a lot of value on instantaneous gains and pleasure from crime, they may rationally choose to commit crime.

Lastly, potential offenders may have inaccurate information on the gains and losses from crime and the probability of punishment. Their expected probability of punishment may be unrealistically low, their expected gains from criminal activity may be unrealistically high, or they are not fully aware of how bad their future punishment is going to be. They may be poorly-informed, but they may be still making rational decisions, committing crime because their expected net gain from crime is greater than the expected net gain from not committing crime.

The second possibility is that many crimes are committed by irrational individuals. We have not talked about this possibility much because there is little we can say about irrational criminals using the rational choice framework. But some criminals do seem to commit their crimes out of impulse, frustration, and rage, not because of a careful deliberation on the gains and losses from crime.

Behavioral economists found many instances in which our daily decisions and behaviors cannot be explained as rational. Why should we expect criminals to make rational choices all the time then?

Thinking, Fast and Slow

Professor Daniel Kahneman is the 2002 Nobel Prize Winner in Economics, who made important contributions on our understanding of human judgement and decision making process. In his best-selling book “Thinking, Fast and Slow”, Kahneman describes two different systems in our mind: The first (System 1) involves the use of fast and automatic thinking, and the second (System 2) involves the use of slow and logical thinking.

We all use both systems in our daily lives, although their uses are quite different. System 1 is mostly used in frequent daily activities with little conscious effort. Examples include driving on an empty road and understanding simple sentences. (Do we put any conscious efforts when doing these tasks?) System 2 is used in less frequent tasks that require deliberate thinking, such as filling out tax forms and deciding which college to attend and which major to choose. System 2 thinking corresponds to a rational, economic decision-making we have seen from economics textbooks and classes. System 1 thinking does not.

Many crimes, especially violent ones, may be the results of System 1 thinking. For example, some physical altercations between youths start off for trivial reasons. A youth may “automatically” react to a simple eye contact from a stranger by uttering an offensive word or giving a stare. If the stranger responds in a similar way, a physical altercation can easily follow. However, if they used System 2 thinking and thought about the potential costs of an altercation, their responses may have been very different. This raises an important question. If people are committing many crimes because of their quick, automatic System 1 thinking, wouldn’t encouraging them to think slow and rationally (System 2) lead them to commit fewer crimes?

Researchers from the University of Chicago tested this hypothesis by running the following randomized control trial. They recruited 2,740 male students in 7th-10th grades from highly disadvantaged parts of Chicago and randomly assigned them into two groups. One group was then invited to participate in a program called “Becoming a Man” (BAM), which helped participants avoid making unhelpful automatic responses through group activities and regular meetings with adult program leaders. A typical group activity made participants think about how they can get what they want without instantly resorting to physical force and alleviate their hostile attribution bias. In other words, BAM participants were encouraged and trained to use System 2 thinking more often. Subsequent laboratory experiments on the BAM participants and non-participants show that students were indeed more likely to think slow and rationally after participating in the BAM program. Not surprisingly, they found that program participants were much less likely to be involved in violent crimes than non-participants (by 44 percent).

Up to this point, it may have seemed that the usefulness of a rational choice model of crime in understanding and predicting people’ criminal behavior would be fairly limited. If many crimes are committed by irrational individuals who do not think about the costs and gains from crime, what good is a rational choice model in explaining and predicting their behavior?

However, this may prove to be an important opportunity. If people commit crimes irrationally out of sudden rage and frustration, helping them to think slow and rationally, and realize the full consequences of their crimes may be a cost-effective crime-fighting strategy. The cost of the BAM program turned out to be $1,100 per participant, which looks miniscule compared to the costs of hiring more police officers, long prison sentences, providing better and longer schooling, and more generous government welfare programs.


  • Heller, Sara, Harold A. Pollack, Roseanna Ander, and Jens Ludwig. Preventing Youth Violence and Dropout: A Randomized Field Experiment. No. w19014. National Bureau of Economic Research, 2013.
  • Heller, Sara B., Anuj K. Shah, Jonathan Guryan, Jens Ludwig, Sendhil Mullainathan, and Harold A. Pollack. Thinking, Fast and Slow? Some Field Experiments to Reduce Crime and Dropout in Chicago. No. w21178. National Bureau of Economic Research, 2015.
  • Kahneman, Daniel. Thinking, Fast and Slow. London: MacMillan. 2011.
  • Levitt, Steven D., and Sudhir Alladi Venkatesh. “An Economic Analysis of a Drug-Selling Gang’s Finances.” Quarterly Journal of Economics 115.3 (2000): 755-789.

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Economics of Crime

Hanyang University

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