Has demand for crime increased? The prevalence of personal media devices and the robbery spike in 2005 and 2006.

AuthorRoman, John K.

ABSTRACT

Seminal work by Becker (1968), Erlich (1973, 1981), Vandaele (1978), Cook (1986) Cameron (1988), Van Dijk (1994) and Garoupa (1997) posits that the supply of criminal offending is a function of four factors: (1) the probability (risk) of capture, (2) the severity of the sanction if captured, (3) the expected profit from a criminal transaction and (4) the opportunity cost of a criminal transaction. In this rational offender framework, a potential offender commits crimes when the expected benefits of offending outweigh the expected costs. Changes in any one of these variables will affect the crime rate. Public policies designed to reduce externalities associated with criminal offending typically seek to increase the probability an offender is captured and the severity of the sanction. Thus, relatively little scholarly attention has focused on the effects of changes in the opportunity cost and profit for potential offenders. We posit that increases in crime--particularly robbery--in the United States in 2005 and 2006 were caused by an exogenous shock to the crime market that increased the expected profit of a criminal transaction, concurrently decreasing the degree to which potential victims engage in private precautions. We present evidence that increases in violent offending in the United States in 2005 and 2006 are consistent with a secular change in the behavior of potential victims, specifically in the increased propensity of potential victims to carry valuable iPods and other personal media devices. In such cases, standard policy instruments used to effect a reduction in crime may be insufficient or less than optimally efficient.

INTRODUCTION

Neoclassical economic theory posits that there is a market for crime that behaves much like any other market. (1) Crime markets experience periods of substantial growth, such as was the case in the US in the late 1980s and early 1990s, and periods of substantial decline, as was experienced between 1992 and 2004. The primary mechanisms used by society to regulate this market are the police and prisons, which are expected to deter and incapacitate potential criminals. An increase in the number of police is expected to increase the expected probability an offender will be arrested for a crime, and an increase in prison populations increases the expected severity of the sanction. (2) Most policy discussions about interventions into the crime market focus on these two policy mechanisms. As a result, when crime rates change, speculation about the cause first turns to deterrence and incapacitation mechanisms. (3) To those unsatisfied by deterrence and incapacitation explanations, exogenous shocks to the crime market--specifically shocks that affect the supply of crime such as changes in economic conditions, demographics and cultural norms--are generally the only alternative explanation. (4) Often overlooked is the degree to which changes in the expected profits of a criminal transaction and changes in private precautions can affect on crime rates.

Since private precautions are known to be produced sub-optimally in the presence of a quasi-public good such as police, private precautions are considered to be a relatively inefficient means of addressing crime. (5) However, while changes in private precautions devoted to crime protection may be a relatively inefficient means of altering the amount of crime in the long-run, in the short-run large-scale changes in private precaution brought on by an exogenous shock may nevertheless be expected to have a meaningful effect. Likewise, abrupt changes in consumer behavior, such as a secular increase in the value of items individual's carry in public increases the expected profit of a criminal transaction. This signals suppliers of crime to rapidly increase their crime production.

In 2005 and 2006, tens of millions of personal media devices, particularly iPods, (6) were sold to US consumers. These expensive devices were displayed openly in public reducing search costs for potential offenders. Consumers of these products did not simultaneously increase their provision of private crime precaution. Rather, iPod users were less observant of their surroundings reducing their provision of private precaution. We posit that the habits of potential victims have increased the 'demand' for crime and that increases in violent acquisitive crime and the explosion in the sales of iPods and other portable media devices are related. Such a change in private behavior is predicted to increase the net return on criminal activity (especially robbery), by raising the expected profit for the marginal robbery while lowering the opportunity cost associated with criminal offending.

  1. THEORIES OF CRIMINAL OFFENDING

    1. The Rational Offender

      The idea that changes in the supply of crime by potential offenders and the demand of potential victims can affect the number of crimes is widely accepted in the field of law and economics. (7) In the economics of crime literature, the offender, like a profit-maximizing firm, commits a crime when the benefits of doing so outweigh the costs. In this framework, criminal offending is a function of four factors: (1) the probability of capture, (2) the severity of the sanction if captured, (3) the expected profit of a criminal transaction and (4) the opportunity cost of a criminal transaction. In this 'rational offender' framework, an exogenous shock to the crime market will affect the crime rate, either by shifting the supply of crime or by inducing a movement along the supply curve.

      Gary Becket describes an economic model of criminal offending that is the foundation for future crime research, both applied and theoretical. Becker's principle argument is that the decision by a potential offender to commit a crime is no different from any other consumer's decision to enter a market. In this way, the study of crime can "simply extend the economist's usual analysis of choice" rather than considering crime as a special theory. (8) Becket models the offender's expected utility from an offense as:

      E[U.sub.j] = [p.sub.j][U.sub.j]([Y.sub.j] - [f.sub.j)] + (1 - [sub.j])[U.sub.j]([Y.sub.j]) (1)

      In (1), [U.sub.j] is the offender's utility function, [Y.sub.j] is the income (monetary plus psychic) from a criminal transaction, [f.sub.j] is the monetary loss equivalent to the punishment, and [p.sub.j] is the probability of capture. The offender's expected utility is equal to the benefits of the transaction (the utility associated with the income from the transaction) minus the costs (the loss of utility associated with punishment), weighted by the probability of capture. Becker models the total supply of offenses as the difference of expected payouts and expected costs, where expected costs include probability of punishment and cost of punishment and [d.sub.ij], a vector of other variables related to the decision to offend.

      [o.sub.ij] = f([p.sub.ij], [f.sub.ij], [d.sub.ij]) (2)

      Isaac Ehrlich extends the Becker model of crime by considering the offender's decision to commit crime within a labor economics framework. (9) In the Ehrlich model, potential offenders choose between legal and illegal activity under uncertainty, rather than simply responding to expected level and probability of punishment. In this framework, offender risk preferences determine whether criminal opportunities are pursued (for risk preferrers) or legitimate activities are pursued (for risk avoiders), conditional on expected certainty and severity of punishment. Ehrlich's supply of crime model adds four variables to Becker's model in (2): returns from legitimate work ([w.sub.ij]), returns from illegitimate work ([w.sub.ij]), probability of unemployment ([u.sub.ij]), and other variables that may affect offending ([[pi].sub.i]), including wealth, self-protection, self-insurance, other illegal activities that are close complements or substitutes to offending, and the form of the expected penalty:

      [o.sub.ij] = f([p.sub.ij], [f.sub.ij], [w.sub.ij], [w.sub.ij], [u.sub.ij], [[pi].sub.i]) (3)

      In (3), the total supply of offending (oij) is a function of the probability of capture and the severity of the sanction in addition to the four variables above. Potential offenders are influenced by the availability of legal and illegal rewards, and dissuaded from offending by increases in the threat of punishment and the severity of punishment, depending on their risk tolerance as modeled by the supply function.

      Demand for crime was not explicitly modeled in the market until Isaac Ehrlich in 1981, and is now measured somewhat un-intuitively as the derived demand for offenses. (10) Derived demand is measured as the differential value of crime gains and private crime prevention expenditures for both the offender and the victim, including victim self-protection such as insurance. In this way, Ehrlich posits that the demand for crime is the amount of crime that potential victims are unwilling to pay to avoid. In the current context, the derived demand for crime might rise if potential victims engage in riskier behaviors without increasing their expenditure on crime protection.

    2. Opportunity Theory

      One well-cited opportunity theory of crime (routine activities theory) states that three factors must converge for a crime to occur: a motivated offender, a suitable target, and the absence of guardianship--where guardianship could be police surveillance or, more simply, neighbors looking out for neighbors. (11) The three factors can be grouped into supply and demand two factors that influence the demand for crime by would-be offenders (the number of motivated offenders and the amount of guardianship) and one influences the supply of criminal opportunities (the number of suitable targets).

      Opportunity theory posits that the supply of offending is not merely the result of choices made by rational offenders in response to the expected profit associated with a criminal transaction, but...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT