Economic Philosophy: Crime and Punishment

Economic Philosophy: Crime and Punishment

In this paper, we are examining the economic impact of crime and punishment on society. This is accomplished by analyzing the article Crime and Punishment by Gary Becker. Once this occurs, is when we will see how this is affecting productivity and what steps can be taken to deal with these issues.

Over the decades, the impact of crime and punishment has been increasingly brought to the forefront. Part of the reason for this, is because this can have positive or negative effects on the economy. This is dependent upon the way various laws are enacted and enforced. In Crime and Punishment by Gary Becker, he is discussing how this can be analyzed. To determine the effectiveness of this approach requires examining his ideas using the Four Part Framework (FPF). This will be accomplished by mapping out Becker's strategy and assessing the arguments that are presented by Becker. Once this occurs, is when we can see the impact that crime and punishment are having on economic growth.

The Four Part Framework

The Four Part Framework (FPF) has several different elements to include: the level of crime, the total amounts of crime fighting, the costs and the social effect of punishment. The level of crime is when you are measuring the total amounts of criminal activity in a particular area. The basic idea is to understand the impact of crime on: the offender, victim and society itself. ("Social")

Becker is taking these ideas to show how crime is having an effect on the economy over the short- and long-term. To do this, he is highlighting how there different effects upon the underlying levels of crime in relation to the total costs for society. Where, he is discussing several ways in which this is contributing to the underlying challenges in communities. Evidence of this can be seen with Becker saying, "These values are important components of, but are not identical to, the net damages to society. For example, the cost of murder is measured by the loss in earnings of victims and excludes, among other things, the value placed by society on life itself; the cost of gambling excludes both the utility to those gambling and the 'external' disutility to some clergy and others; the cost of 'transfers' like burglary and embezzlement excludes social attitudes toward forced wealth redistributions and also the effects on capital accumulation of the possibility of theft." (Becker 174) This is significant, because it is showing how the underlying levels of crime will have an economic effect on communities. The way that this occurs, is through the losses that are experienced by the offender, victim and within the economy itself. Over the course of time, this will lead to a decline in productivity throughout a particular region. ("Social")

The total amounts of fighting crime are when you are studying the economic costs associated with enforcing different laws. This is accomplished through analyzing the total amounts that are spent on: law enforcement, the courts and specialized equipment that are designed to go after offenders. ("Social")

Becker is taking these ideas and is illustrating, how this will have an impact on the actual costs of employing various individuals as part of criminal justice system. A good example of this can be seen with Becker writing, "In 1965 public expenditures in the United States on police and courts totaled more than $3 billion, by no means a minor item. Separate estimates were prepared for each of seven major felonies. Expenditures on them averaged about $500 per offense (reported) and about $2,000 per person arrested; with almost $1,000 being spent per murder $500 is an estimate of the average cost of these felonies and would presumably be a larger figure if the number of either arrests or convictions were greater." (Becker 175 -- 176) This is important, because it is showing how the process of enforcing the law and punishing offenders will lead to increased costs for communities. This will have a negative impact on the budgetary process for local governments and the underling tax rates that the public is paying for these services. Over the course of time, this can have a negative effect on economic growth through creating situations where the government must spend more in dealing with criminals. This is when there can be an adverse impact on the budgetary process and the kinds of services that are provided to the general public. ("Social")

The costs of crime and punishment are when you are examining the total economic influence on the community. This is accomplished through looking at the actual costs to local governments and the benefits that they are receiving. What is happening; is the process of enforcing the law will lead to immediate upfront expenditures that will be continually impacting the budgets of these entities. While at the same time, local governments are benefiting from the increases in revenues from fines that offenders are paying. This is helping to provide them with consistent long-term financial benefit from enforcing the law. ("Social")

As a result, Becker believes that there will be financial costs for communities. This will occur with offenders having to pay different fines and local government spending more to enforce the law. Evidence of this can be seen by looking no further than, comments from Becker with him saying, "Punishments affect not only offenders but also other members of society. Aside from collection costs, fines paid by offenders are received as revenue by others. Most punishments, however, hurt other members as well as offenders: for example, imprisonment requires expenditures on guards, supervisory personnel, buildings, food, etc. Currently about $1 billion is being spent each year in the United States on probation, parole, and institutionalization alone, with the daily cost per case varying tremendously from a low of $0.38 for adults on probation to a high of $11.00 for juveniles in detention institutions." (Becker 180) This is significant, because it is showing how there are costs associated with crime. The way that this is occurring is through local governments having to spend continuous amounts of money enforcing the law and offenders having to pay fines. This will have an adverse impact on communities by forcing offenders and the government to have higher costs in dealing with these issues. While at the same time, this is providing cities with a continuous stream of income from the fines that are imposed upon offenders. As a result, this is an illustration of the how the costs of crime will have a negative impact on communities and a positive benefit on governments. ("Social")

The social effect of punishment is when you are carefully examining the impact of crime on the community. The way that this is accomplished is through studying how enforcing the law will impact offenders and the local government. As there will be costs for: the offender and the victim of the actual crime that occurred. This will have a negative impact on cities by leading to a loss of productivity and income. This is despite the fact, that the local government may receive some kind of temporary benefit from having offenders paying a host of fines. This is when there will be a negative benefit to communities, families and individuals who are affected by crime. ("Social")

Becker is taking these ideas and he is using them to show how this can influence the social as well as economic fabric of various regions. A good example of this can be seen with him observing, "The total social cost of punishments is the cost to offenders plus the cost or minus the gain to others. Fines produce a gain to the latter that equals the cost to offenders, aside from collection costs, and so the social cost of fines is about zero, as befits a transfer payment. The social cost of probation, imprisonment, and other punishments, however, generally exceeds that to offenders, because others are also hurt." (Becker 180) This is significant, because it is showing how there are numerous challenges associated with enforcing the law. As the total amount of economic benefits that local governments are receiving (i.e. fines) is reduced. This is because the social impacts will have an adverse effect on offenders and victims. Over the course of time, this will lead to losses of income and productivity, even though local governments are receiving benefits associated with them. ("Social")

These different elements are important, because they are showing how communities will be negatively impacted by crime. This is because, there will be higher costs associated with: enforcing the law and the loss of income for offenders / victims. However, there will be some kind of positive impact through higher revenues for local government from the fines that are being imposed upon offenders. ("Social")

A Mathematical Analysis of Social Phenomenon

To determine the economic impact of crime on society requires looking at specific mathematical formulas that will help to improve our understanding of what is occurring. This is accomplished by examining number of different variable to include: the damage from crime i.e. D (0), the cost of fighting crime / proportion of corrections i.e. C (P0) and the crimes / social costs / negative impacts on to offender i.e. BBFO. These different elements are important, because the combination of them is helping us to understand the total impact of crime and punishment on the economy.

As a result, these different factors are used in a basic formula to comprehend the effects of social phenomenon and crime on the economy. Below is the equation that is used to objectively evaluate what is occurring.

L (social / economic impact) = D (0) + C (P0) + BBFO

This formula is important, because it is providing us with a basic strategy that can be used to objectively evaluate the how crime and punishment are impacting society. Once this occurs, is when we can see the total economic impact of this on communities and the way that they are affecting everyone.

Becker's View of the Formula and the way that it relates to Crime

Becker believes that crime and punishment can have a negative impact on society. This is because there will be added costs for everyone, a loss of productivity and a reduction in the standard of living inside communities. However, once he applied the formula to different kinds of social situations, is when he determines that there are certain factors which could impact the society. The way that this is occurring is through the negative effects of punishment and convictions on the underlying levels of crime. In those communities where these elements are applied more aggressively is when there will be a change in society. This is the point that crime will vary in different areas, as the total economic impact is not as severe.

Evidence of this can be seen with Becker writing, "If carrying out the punishment were costly, as it is with probation, imprisonment, or parole, the elasticity of response of offenses with respect to a change in p would generally, in equilibrium, have to exceed its response to a change inf. This implies if entry into illegal activities can be explained by the same model of choice that economists use to explain entry into legal activities, that offenders are (at the margin) risk preferrers. Consequently, illegal activities would not pay (at the margin) in the sense that the real income received would be less than what could be received in less risky legal activities. The conclusion that crime would not pay is an optimality condition and not an implication about the efficiency of the police or courts; indeed, it holds for any level of efficiency, as long as optimal values of p and f appropriate to each level are chosen. If costs were the same, the optimal values of both p and f would be greater, the greater the damage caused by an offense. Therefore, offenses like murder and rape should be solved more frequently and punished more severely than milder offenses like auto theft and petty larceny." (Becker 207 -- 208) This is significant, because it is showing how the underlying amounts of crime will vary from one region to the next. As this is based upon, how aggressively the negative effects of punishment and convictions are enforced regarding the more severe offenses (i.e. murder / rape).

Moreover, Becker found that fines are the most effective punishment. The reason why, is because they allow communities to conserve resources and they are providing them with some kind of economic benefit. A good example of this can be seen in the passage that says, "Fines have several advantages over other punishments: for example, they conserve resources, compensate society as well as punish offenders, and simplify the determination of optimal p's and f's. Not surprisingly, fines are the most common punishment and have grown in importance over time. Offenders who cannot pay fines have to be punished in other ways, but the optimality analysis implies that the monetary value to them of these punishments should generally be less than the fines." (Becker 208) This is significant, because it is illustrating how fines are utilized to deal with the issues of crime. The reason why, is because they are offering cities with some kind of economic benefit. However, in those situations when this is ineffective is the point that the government should be prepared to go after those individuals through more aggressive tactics.