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ECN of CRIME CHAPTER 3 A Traditional Economic Model We assume that criminals behave rationally. IT means that in making choices, the criminal takes account of expected gains and costs from various actions, where gains and costs include all kinds of psychic possibilieties, including taste or distaste for crime based on moral considerations. Gains from Criminal Behavior Monetary o Stealing property, objects, etc o Murdering for inheritance, insurance, etc For some crimes the exact monetary value is known, others it isn’t. Psychic gains o Thrill for danger o Peer approval o Sense of accomplishment Costs of Criminal Behavior Material Costs o Tools, equipment Time o Opportunity cost of having a legal job Psychic Costs o Fear, guilt Expected Punishment Cost o Accounts for the possibility of getting caught Fines, prison term, or both Evaluating Expected Punishment Cost If a criminal is caught for a particular crime, he/she will have to pay a fine of $100. IF the criminal isn’t caught, the punishment cost is 0. There is also a 50/50 chance that the criminal is caught. While foo a particular crime the criminal either is caught, and pays $100, or is not, and pays nothing, neither of these figures is a correct evaluation of the risk. A value of 0 would underestimate the risk and assume no possibility of a fine. On the other hand $100, overestimates the risk because the fine is not certain to be imposed. The best estimate is the Expected Value of the punishment. It’s calculated as the weighted average of all possible values, where the weights are equal to the probability of occurrence: V = P i *V i + P 2 *V 2 +…. V = expected value P i =probability of outcome i V i = value of outcome i
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V = .5($100) + .5(0) =$50 There are only 2 outcomes. The cost of being caught $100 with a probability of occurrence of .5 (50%). The cost of not being caught is 0, with a probability of .5. So the expected value of punishment is $50. This equation can be simplified. Since there are 2 outcomes, and the value of the one is always 0, expected punishment cost can be calculated as: V = p*P V= expected value of punishment p= probability of punishment P=value of punishment Probability of punishment is calculated as: P a * P c/a = probability of arrest * Probability of arrest and conviction Numerical Example: 2 people robbing a store for $50,000 Person A and B would both get a gain of $50,000 if they robbed this store For Person A there is $2000 worth of psychic gains from “ripping off” this store For person B there are no psychic gains Both have a cost of $400 for a gun. For person A there are no psychic costs but for B there is a psychic cost of $1000 worth of anxiety The time costs also vary. The planning takes a month. For person A, that month would earn him $900 washing dishes. Person A would’ve earned $6000 as a real estate agent.
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