Fall_2007_sample_term_paper___The_Market_for_Murder.f07

Fall_2007_sample_term_paper___The_Market_for_Murder.f07 -...

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Unformatted text preview: The Market for Murder Ari Economa'Ar/iaflm anamhr and Capital Pam's/Emmi “Nature has placed mankind under the governance of two sovereign masters, pain and pleasure” (Bentham, Morals and Legislation 1). jeremy Bentham, a classic utilitarian, believed that these two masters worked n1 tandem to determine how each gerson ought to act. According to Bentham’s principle of utility, a person ought to act in a way that maximizes the balance of pleasure over pain. With this principle in mind, Bentham’s meditations on the criminal justice system lead him to the conclusion that “general prevention ought to he the chief end of punishment, as it is its real justification” {Bentham Rationale of Punishment 20). The purpose of punishment should be deterrence, not retribution. Punishment itself, being the imposition of pain, is an evil. However, punishment can protect and promote planters by deterring would—be criminals from harming others. The appropriate criminal sanction is the one that maximizes the balance of pleasure over pain. Economics is simply the intersection of mathematics and utilitarianism. The economists “cost—benefit analysis” is the modern version of Bentham’s “utilitarian calculus.” Like the utilitarian, the economist should evaluate capital punishment on two criteria: first, the pm}: or car: of the punishment itself and second, the pleasure or 5611(er achieved by capital punishment through deterrence. If capital punishment maximizes the balance of pleasure over pain, then the twin sovereigns pain and pleasure would demand that all those conficted of first—degree murder be put to death. To put capital punishment in an economic context, I describe the market for murder in Part I of my paper. In Part II, I investigate whether capital punishment is fulfilling its role in this market by deternng potential murderers. Finally, in Part III of this paper, I briefly illustrate an economic model for murders of passion. Based on this survey of the economics of capital punishment, I can only conclude that it is unclear whether the threat of execution deters suppliers from participating in the market for murder. I suggest that future research should distinguish between calculated murders from murders of passion, calculating the deterrent effect of capital punishment on each kind of murder separately. I hypothesize that the contradictory findings of the vast body of research on capital punishment and deterrence is probably the result of conflating the two distinct types of murder. While the benefits of capital punishment are uncertain at best and non—existent at worst, the costs of each execution is clear: the loss of one human life. The utilitarian and economist must conclude that, on balance, capital punishment favors pain over pleasure. I. The Market for Murder The Demaadfltr Murder According to the rational decision model, a person will decide to commit murder when the benefits of the crime outweigh the costs. Hellman and Alper classify benefits into two broad categories: monetary and psychic (Hellman and Alper 48). A son may murder his father for the insurance money, a monetary motivation. A Wife may murder her husband to avoid future abuse, a psychic benefit. The exact size and type of these benefits will vary greatly from person to person, making it impossible to generalize across all criminals. If we knew how much each consumer in the market valued murder, we could create a demand curve for the market for murder. The demand curve would 13mg have the typical negative slope; at a high price relatively few murders are demanded, at a low price more murders Quantity will be demanded. As the price decreases, the relatively . FIGURE 1: DERLLXND FOR less “beneficral” murders become affordable. MURDER {\J The demand curve depends on consumer’s tastes and preferences, consumer’s income and the prices of related goods. A change in any one of these factors w0uld cause the entire demand curve to shift (like in the above graph, where the curve shifts from D to 13,). Say, for example, that violence on television has slowly eroded the social norm against murder. This change in consumer tastes would cause more murders to be demanded. The demand curve would shift to the right. The effect of a change in income on the demand for murder is less clear. In general, as income increases so does demand. However, murder is a unique good. Part of the price of murder is a prison term. As a consumer’s income increases, the opportunity cost of a prison term increases; time spent in prison is time that corxld have been spent making money. The more income a consumer has, the more costly murder becomes, the less murder is demanded. Because there are several forces at work, it is impossible to say a priori whether an increase in income would shift the demand curve left or right (Hellman and Alper 140). There are two types of related goods: substitute goods and complimentary goods. A drop in the price of a substitute for murder will cause the demand for murder to decrease. Conversely, an increase in the price of a substitute good will cause the demand to increase. Aggravated assault, for example, could be considered a substitute for murder. If it becomes less expensive, then some consumers who would have otherwise “bought” murder will opt instead for aggravated assault. On the other hand, a drop in the price of a compliment for murder will cause the demand for murder to increase, while an increase in the price of a complimentary good would cause the demand to decrease. Since guns are used in many murders, guns and murders could be considered complimentary goods. As a gun becomes more expensive, the quantity of guns decreases and the demand for murder decreases (Hellman and Alper 141). The market for murder is unique because the consumers are usually also the producers. Those who demand murder are hard pressed to find someone else to supply it for them. Due to the black nature of the market, secrecy is at a premium. If a consumer wants someone else to supply a murder for him, he must tell other people he is in the market. The more people a consumer tells, the greater the likelihood that he wiil be turned into the authorities. The consumer’s search for a producer is very dangerous in this hiackest of black markets. In other Words, the transaction costs in the murder market are prohibitive. To avoid the these costs, a person who demands murder will supply it themselves. Swpgy anarder The supply curve for murder is a function of the costs of murder. Hellman and Alper divide the costs of murder into four categories: material, psychic, opportunity and expected punishment. The first two categories of costs are straightforward. Material costs include the tools necessary to commit the murder. Psychic costs are more intangible: anxiety, guilt, fear of getting caught, etc. The opportunity cost of murder is the total value of his next—best alternative action. Instead of spending time plotting murder and in prison, the murderer could have been earning a legalnwage. This forfeited income is the murderer’s opportunity cost. On average, a murderer could potentially earn more during an economic boom than during an economic recession. The opportunity cost of murder is higher durfiig a boom than a recession. Since the opportunity cost of murder rises during a prosperous period, according to the law of demand we would expect the number of murders to decline during that period. Philip Cook and Gary Zarkin (1985) find no evidence to support this expectation. Using post~Worid War H data, they find a slight negative correiation between economic prosperity and murder rates. However, after including extending their data set to include 1935—1948, Cook and Zarkin find that economic prosperity is associated with an inmate in the murder rate. Neither of these correlations is statistically significant (Cook and Zarliin 126}. Based on the available evidence, opportunity costs do not seem to factor into a person’s decision to commit murder. Economists are most interested in the forth type of cost: expected punishment. Punishment is an uncertain prospect. A risk neutrai agent evaluates an uncertain cost by multiplying the magnitude of that cost by the probability that it will materialize. The typical murderer faces three possible futures. First, the murderer could escape conviction. Second, the murderer could be convicted and receive a prison sentence.] Third, the murderer could be convicted and receive a death sentence. The expected cost of ear/9 of these possible futures is equal to the cost suffered by the murderer in that future multiplied by the probability that future will materialize. The expected cost of all of the three expected futures is simply the sum of the expected cost of each future. Therefore, the total expected cost of punishment is: ECPEi(1~Pc0N)><Cul + [Pm X(1—PEX)'XC11 + {PCONXPFXXCJ (Cameron 3) Where: PCON is the probability the murderer will be convicted, Par is the conditional probability that the murderer will be executed gym a convictionz, C0 is the cost suffered by the murderer if not convicted, CE is the cost suffered by the murderer if convicted and given a life sentence, and C2 is the cost suffered by the murderer if convicted and sentenced to death (Cameronfi To demonstrate, assume that the probability of conviction is 75% and the probability of execution is 10%. Assume further that the cost of not being convicted is $0, the cost of a life sentence is $500,000 and the cost of capital punishment is $1,000,000. In order to compare the costs of each possible scenario, they must be converted into like units. In this case, the common unit is dollars. The total expected cost to the murderer would be: 1 For simplicity’s sake, I assume that the only possible prison sentence is life. 2 There is no need to include the a variable accounting for the probability that the murderer will get a life sentence. Since I have assumed that only two punishments are possihie w iife and death —— the prohability of a life sentence given conviction equals the probahiiity of not getting a death sentence given conviction. Therefore, the probability of a life sentence given conviction is (1 — PBX). 3 I do not give page citations for Cameron’s article, “A Review of the Econometric Evidence on the Effects of Capital Punishment,” because I tool; it from an online database that did not give page numbers. ECP =(1~0.75) x0 + 0.75 x(1~0.10) x500,000 + 0.75 x 0.10 x1,000,000 =0+ 337,500 ~E- 75,000 = $412,500 If we knew the cost of murder for each supplier in the market, we could construct the market supply curve. A murder will be supplied when the price Price 4—" commanded by murder is greater than its cost. The supply curve would. have the typical positive slope; at a low price relatively few murders are supplied, at a high Quantity- price more murders will be supplied. As the price FIGURE 2:8UP?LY OF MUREER increases, suppliers have incentive to provide the relatively more costly murders. If any of the four component costs of murder change, then the supply curve will shift. An increase in the material, psychic, opportunity or expected punishment costs will cause the supply curve to shift to the left (for example, from S to S1 in the graph to the right), While a decreased in any of these costs would cause it to shift to the right. The principle of deterrence is easily explainable in market terms: As murder becomes more expensive to produce, less is supplied. While materiai, psychic and opportunity costs are largely outside the control of the state, the state can control expected punishment costs. By increasing the certainty or the severity of punishment, the state increases the expected cost of murder. This artificially makes murder more expensive to produce, which gives potential murderers less incentive to commit the crime. Fewer murders are supplied in the market. The production costs of murder — material, psychic and opportunity —— are dwarfed by the social cost of murder. The most significant cost of murder to society is the opportunity cost. The utilitarian would calculate the opportunity cost of murder by taking the amount ofpfaamrr the victim would have experienced over the remainder of his life and subtracting from that the amount of pair the Victim would have experienced. Economists, less elegantly but more practically, would calculate the opportunity cost of murder by looking at the victim’s potential production and consumption. In 1976, Lee McPeters estimated the opportunity cost of homicide in Pheonix, Arizona by taking the difference between (I) what a murder Victim would have produced had he not been kiiled and (2) what a murder victim would have consutned over the remainder of his lifetime. By this calculation, the murder of a man cost society $434,744 and the murder of a woman cost society $287,376 on average {McPeters 42).”; The psychic sociai costs of murder are harder to quantify. The distress caused to a Victim’s family, friends and connnunity is a real cost to society. How to interpret this loss in dollar terms is unclear. What it clear, however, that the psychic and opportunity costs of murder to society are larger than the production costs of murder. To close the gap between production and social costs, the state artificially inflates the cost of murder using punishment. Marker Par/am: Irrationaljg; The economist sees murderers as rational utility maximizers. This assumption seems untenable since statistics suggest that most murders are crimes of passion. According to the Federal Bureau of Investigation, in 2003 approximately 13% of all murders were committed within family groups and 30% between lovers, friends and acquaintances. In only 12% of all cases did the murderer not know his Victim. In many cases (45%) the relationship between criminal and Victim was unknown (FBI 343). If the murder of close family and £riends is the result of emotion rather than cold calculation, then the economist’s assumption that murderers are rational is wrong. That said, an economic theory of crime should not be judged by the realism of its 4 The murder of a man cost society $134,440 the murder of a woman cost society $88,868 in 1976 dollars. I converted these numbers into 2004 dollars using the Consumer Price index from the US Bureau of Labor Statistics assumptions alone but also by the strength of its predictions (Posner 229). Posner correctly notes that a growing body of research suggests that criminals respond to changes in the likelihood of conviction, the severity of punishment and the size of the opportunity cost. This suggests that criminals are rational. However, this research has not yielded a clear and consistent model of criminal decision making. Ann Whitte (1980) found that increasing the certainty of punishment had a larger deterrent effect than increasing the severity of punishment. She also found that the strength of the labor market was unrelated to the murder rate. Samuel Myers (1983) came to the exact opposite conclusion; he found that increasing the severity of punishmth had a larger deterrent effect than increasing its certainty, and that the level of unemployment was positively correlated with the murder rate. interestingly, he concluded that increasing the certainty of punishment actually dammed the deterrent effect of that punishment. These contradictory conclusions are probably the result of different data sets; W'hitte surveyed €X~iflfllflt€$ from North Carolina, Myers surveyed ex— inrnates from Maryland Thus far, research on criminal decision making neither proves not disproves the economist’s assuinption that criminals are rational. If murderers are irrational, then the market for murder breaks down. In order for the law of demand and supply to operate, quantity demanded and supplied must be responsive to price. Murderers who are irrational do not take price into consideration when demanding or supplying murder. They do not obey the law of supply or demand — let alone the law of the landl II: Capital Punishment On our model of the market for murder, the purpose of capital punishment is to ciose the gap between the production and social costs of murder. By dramatically raising the cost of producing murder, capitai punishment should shift the supply curve to the left, which would cause a decrease the number of murders supplied in the market. In the first econometric analysis of capital punishment, Isaac Ehrlich clainmd to Show just this. Ehrlich (1985) used data from the FBl’s [Inform Crime Rabat? (19334967) to construct a murder supply curve. He controlled for: unemployment rate, real income, proportion of popula’don between 14-25, public expenditure on police and percent of non-whites in residential populations. Based on the elasticity of the murder supply curve, Ehrlich concluded that each execution deterred seven or eight potential murderers. Put differently, an additional execution per year would have resulted in seven or eight fewer murders (Ehrlich 414). Ehrlich’s findings immediately came under attack. An alliance of economists, sociologists and legal academics criticizad Ehrlich’s study on four main grounds: weaknesses of the data set, omitted variables, weaknesses of the statistical model and the brutalization effects. I deal with each of these objections in turn. Wager/timer aft/ye Data Set Ehrlich relied on the FBI’S Uranium Crime Reports from 19334967. Bowers, Pierce and McDevitt (1984) note that the l3resident’s Commission on Law Enforcement and the Administration ofjustice warned that the pro-1958 data is less reliable than the post—1958 data. The FBI relies on voluntary reporting of homicides by individual precincts for its information. In the 1930’s only 400 agencies contributed data to the Unfit??? Crime Reborn, while in the 1960’s over 8,500 agencies contributed (Bowers, Pierce and McDevitt 309). Became of the larger sample size, national crime estimates from the 1960’s are much more reliable than the estimates of the 1930’s. According to Barnett (1978), the conviction and execunon rates between 1933 and 1967 were highly stable (Cameron). Due to insufficient variation, Ehrlich could not have created a robust murder supply curve from this data sample. This calls into question Ehrlich’s ultimate finding, that one execution deters seven or eight murders, which is derived from the elasticity of the murder 10 supply curve. A number of scholars have noted that Ehrlich’s conclusion depends on the inclusion of postwl962 data. According to Forst, Filatov and Klein (1978), Bechdolt (I 977), Bowers and Pierce (1975) and Passel and Taylor (1977), if Ehrlich’s data set is limited to the years 1933 throughl962, then the deterrent effect of capital punishment vanishes. Omitted Variable: According to Cameron, “it is an elementary point of econometrics that excluding a relevant variable may bias the estimates of included variables” (Cameron). Forst, Filatov and Klein (1978) argue that Ehrlich did not account: for changing consumer tastes and preferences for minder; they contend that: a declining propensity to commit crime caused the murder supply curve shifted right, which in turn caused the number of murders to decline. Forst, Filatov and Klein take a changing taste for crime into account by controlling for the crime rate. Their analysis reveals that capital punishinent does not appreciably deter murder (Cameron). Kleck (1979) controls for gun ownership, another variable Ehrlich omits. As mentioned previously, if guns and murder are complimentary goods, then as the availability of firearms increases so should the murder rate. Once gun ownership is taken into account, the deterrence effect of capital punishment disappears (Kleck 908). Weakamer of the fraternal! Model Ehrlich used a logarithmic model to analyze the FBI data. In order to run-log regressions, Ehrlich had to switch all the 9’s to E’s. As a result, the FEE data set was slightly skewed towards 1 (Cameron). A number o...
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