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The price of crime
We’ve probably all wondered how hard it could really be to establish complete order—to keep the bullies in line, punish the fraudsters, and catch all the virus makers… An economic approach to crime and punishment provides some answers.
Traditional thinking says that criminals can be deterred from committing offences if the inevitable punishment is sufficiently severe. That is, with longer sentences, higher fines, and law enforcement agencies operating flawlessly, law-abiding citizens can be reliably protected from crime. But experience shows that, even in China, the threat of the death penalty doesn't eradicate corruption.
In 1968, American economist Gary Stanley Becker published the essay “Crime and Punishment: An Economic Approach”, in which he offered a completely different view of the problem. According to Becker, a crime can be regarded as a type of risky business. Potential criminals weigh the potential profits from a crime against the potential losses that may result from the punishment and then choose the activity (legal or illegal) that will improve their well-being. Law enforcement agencies behave in a similar fashion: they pick methods to fight crime that will minimise the damage to citizens and require minimum effort on their part.
How does this theory determine the crime rate?
The key factors that impact the crime rate:
- People's willingness to commit crimes for profit—the probability of apprehension, conviction, and punishment; The type and extent of the punishment; Income from alternative forms of legal and illegal activities; The risk of unemployment; One’s initial well-being;
- The behaviour of potential victims and consumers of illegal goods; the demand for illegal goods and the demand for a means of protection;
- Measures taken by authorities—by apprehending criminals, the authorities are, in a way, enacting a tax on illegal activities, i.e., the risk of getting arrested.
When the cost of each protective measure equals its effectiveness, then the optimal crime rate is reached.
Can crime be eradicated by repressive measures alone? In theory, yes. Microchips for all citizens, no anonymity on the Internet, all personal computers based in the cloud, user behaviour continuously analysed… That’s all quite feasible; solutions that can perform some of these tasks already exist.
But, from the standpoint of cost and utility, we have to consider what costs more—fighting crime or allowing it to exist. Enhancing protection will improve our security, but maintaining order requires money that will be collected from us in the form of taxes. And that’s not taking into account the fact that some inconvenient constraints may be placed on us.
The principle of optimising behaviour in this case requires that the total cost of crime—including societal losses resulting from crimes committed—and the funds expended by society to prevent those crimes be minimised. To minimise total costs, a society needs to allow for an acceptable (non-zero) crime rate.
For example, no one likes it when someone steals money from their bank card, but can society afford to have the police review each reported incident regardless of the amount stolen?
On the other hand, the crime rate is impacted not only by the severity of a punishment, but also by differing profits from legal and illegal activities. That is, to stop spam mailings, spammers need to be put behind bars and deprived of their customers. If there are no customers, the business becomes unprofitable. But is society ready to establish total control over order processing?
Becker also found out that for individuals with a higher propensity toward risk (and criminals belong to this very group), it’s far more effective to increase the likelihood that they will be apprehended than it is to increase their prison sentences. He also showed that well-educated people prefer crimes that incur significant monetary costs, while poorly educated individuals are more likely to carry out crimes that require a considerable time commitment. Imprisonment will be a more severe punishment for the first group, while the latter will suffer more if they are forced to pay monetary compensation. Fines appear to be more cost-effective because victims are compensated and society doesn't need to pay to keep offenders in jail.
As for the optimal amount of compensation for a crime, Becker determined that it should be sufficient to completely cover the victim's costs arising from the crime as well as the indirect costs to society that are associated with detaining and convicting offenders.
There’s no shortage of ideas in this world about how to solve problems including cybercrime—a problem for which people often blame the powers that be. But before placing all the blame on those in charge, let's take a look in the mirror:
- Can we say that each of us is ready to pull the carpet out from under criminals—never give bribes, always use legal software copies, and buy books and files instead of downloading them free of charge?
- Are we ready to agree to the total control of traffic and a significant increase in the number of employees who analyse it, which means paying for their labour out of a state budget, something that will inevitably increase our taxes?
Are we ready to agree to the total control of traffic and a significant increase in the number of employees who analyse it, which means paying for their labour out of a state budget, something that will inevitably increase our taxes?