Economics of Crime: An Investigation of the Deterrent Hypothesis for Urban Areas

Abstract

A. ~ number of arguments have been ad1A,vanced by social scientists to explain criminal behavior. For example, some sociologists believe in a sickness (Horton and Leslie, 1970) while some psychologists look for subconscious roots of human motivation toward crimes (Halleck, 1967). An alternative approach pursued by most economists and subject to objective empirical investigation is to rely on the familiar economic maxim that people are rational and in general do respond to incentives whether they pursue legitimate or illegitimate activities. One of the earliest discussions of such an approach to criminal behavior is found in Bentham's Principles of Penal Law (1962) where he lays down the hypothesis that certainty and severity of punishment deter criminal behavior. Therefore, a reasonable general hypothesis that needs to be tested is that illegitimate behavior can be explained by opportunities as measured by potential gains from legitimate and illegitimate activities. In recent years a number of studies have attempted to investigate the relationship between crime and certain quantifiable opportunities, for example, Fleisher (1966), Ehrlich (1973), Sjoquist (1973), and Swimmer (1974). The works of Becker (1968) and Ehrlich establish the basic theoretical foundation for the empirical work pursued in this paper. We test the opportunity hypothesis and the notion that offenders do respond to incentives whether provided by the market conditions or by the legal system. In particular, we would be concerned primarily with the effect of various deterrent measures on criminal activity. An additional issue that is closely linked to the former hypothesis and needs closer empirical scrutiny is whether or not the various deterrent measures like certainty and severity of punishment are complementary. In other words, do certainty and severity go together or are they inversely related to each other for various crimes. This empirical work has certain unique features. It provides the most comprehensive investigation of the deterrent hypothesis and the certainty-severity trade-off, if any, for the cities of the United States. It covers two time periods, 1960 and 1970, which would help to evaluate the consistency of the results over time.