Ecn ch 4 - Ecn of Crime: Chapter 4 OPTIMUM ALLOCATION OF...

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Ecn of Crime: Chapter 4 OPTIMUM ALLOCATION OF CRIMINAL JUSTIC RESOURCES For the most part we focus on crime prevention as the primary output of the criminal justice system. We have considered 2 basic economic aspects of crime: 1. The economic impact of criminal activity 2. The economic explanations of criminal behavior A 3 rd and related aspect are the costs of law enforcement and crime prevention, and knowing these costs and recognizing the ways in which criminal activity hurts society, the amount we should spend to prevent crime. Determining the Optimum Amount of Crime There are economic costs associated with the production of crime prevention either by the public sector (police, etc) or by the private sector (burglar alarms, security guards, etc). Because there are costs associated with producing crime prevention and because society values other private/public goods, it can’t afford to prevent all crimes. Society must therefore choose how many of its scarce resources to devote to crime prevention. By doing so, society also chooses the amount of crime that it will tolerate. Choices concerning the amount of resources to expend are reflected in budgets. A given budget will buy only a certain amount of resources. Crime prevention thus reflects decisions concerning how many resources will be spent on crime prevention, and therefore, how much crime to tolerate. The Optimum Size for Any Industry The optimum amount of crime prevention for society can be determined by: the units of output that should be produced up to the point at which the marginal benefits from the last unit of output produced are equal to the marginal costs of production. By producing this amount in each industry, no more and no less, society will be maximizing its social welfare (the happiness it derives from the production and consumption of goods/services) We assume that the objected of society as an economic unit is to maximize social welfare. Social Welfare = total benefits - total costs SW= TB – TC Marginal benefits are defined as the change in total benefits with an additional unit of output produced, Q. Marginal Benefits can be expressed as: MB = TB = “change in” Q The marginal benefits of an additional unit of output are the increase in benefits that society derives from one more unit of product. We assume in general that MB are positive: increases in output will increase total benefits. However, while marginal benefits from producing any product are positive, they get smaller and smaller as we produce more and more of the same thing. We value each extra unit less and less. So if we graph MB it looks like this:
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$ MB Q Marginal Costs, MC, are defined as the change in total costs, TC, with an additional unit of output. MC = TC Q Marginal Costs are positive—producing more and more will cause total costs to increase. In addition, the increase in total costs will get larger and larger; that is, marginal costs are positive and increase with increases in output. $ MC
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Ecn ch 4 - Ecn of Crime: Chapter 4 OPTIMUM ALLOCATION OF...

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