The Economics of Crime

The Economics of Crime

Zagros Madjd-Sadjadi

The Economics of Crime Copyright Business Expert Press, LLC, 2013. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any meanselectronic, mechanical, photocopy, recording, or any other except for brief quotations, not to exceed 400 words, without the prior permission of the publisher. First published in 2013 by Business Expert Press, LLC 222 East 46th Street, New York, NY 10017 www.businessexpertpress.com ISBN-13: 978-1-60649-582-7 (paperback) ISBN-13: 978-1-60649-583-4 (e-book) Business Expert Press collection: Economics Collection ISSN: 2163-761X (print) Collection ISSN: 2163-7628 (electronic) Cover and interior design by Exeter Premedia Services Private Ltd., Chennai, India First edition: 2013 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

Abstract
This book will guide readers to an understanding of effective public policy designed to reduce criminality. By understanding how incentive mechanisms affect criminal behavior, business managers may use this information either to reduce criminal activity in their own enterprises or to understand how unethical business decisions affect the wider society. As we always do in such circumstances, we must make sacrices to balance the competing interests. To accomplish this with a minimum of disruption, at the end of many chapters there is a section called For the Economist where additional material of a more advanced mathematical and theoretical nature, which tends to be more tangential to the non-economists, is provided. In so doing, economics students, who typically have an advanced knowledge of modeling, can be trained in a parallel fashion to those for whom economics is a new eld and, as such, may have only had a high school or introductory level exposure to economic science, if any at all.

Keywords
crime, economics, rational crimes, organized crime, victimless crimes, marginal analysis, crimes against property, crimes against persons, game theory, general equilibrium

Contents
About the author ................................................................................... ix Preface ................................................................................................. xi Introduction: Why Should Businesspeople Care About Crime? ................ xiii Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 What Does Economics Have To Do With Crime Anyway? .......................................................1 Are Criminals Rational? Gary Beckers Rational Criminal Thesis ................................................31 Game Theory and the Victim/Perpetrator Calculus..........................................................................65 Organized Crime .......................................................... 83 Victimless Crimes ......................................................101 Crimes Against Property...............................................121 Crimes Against Persons ................................................151 Public Policy ................................................................165

Conclusion .........................................................................................179 Notes .................................................................................................181 References ...........................................................................................183 Index .................................................................................................185

About the Author

Zagros Madjd-Sadjadi is Professor of Economics, Master of Healthcare Administration Program Coordinator, and former Chair of Department of Economics and Finance at Winston-Salem State University. He was the rst Chief Economist of the City and County of San Francisco and has developed a course in the economics of crime, corruption and terrorism at Winston-Salem State University. He has written papers published in top academic journals in economics, political science, international relations, and criminal justice and has served as a reviewer for research grant proposals through the U.S. Department of Homeland Security. He has also received two research grants in the area of the economics of crime and authored the textbook used for many years at San Francisco State University in its Economics of Crime course. Madjd-Sadjadi has a B.S. degree in Computer Science and a B.A. (equivalent) in Economics from Sonoma State University. He holds a PhD in Political Economy and Public Policy from the University of Southern California and is a former Occidental Petroleum CanadaUnited States Fulbright Scholar to the Institute for Intergovernmental Relations at Queens University in Kingston, Ontario. He also won a Haynes Dissertation Fellowship from the University of Southern California for his research there. He conducted a cost-benet analysis for the Center for Juvenile and Criminal Justice in San Francisco on its highly successful implementation of the Streets to Work Program in San Francisco and Oakland and his work detailing the unsustainable costs of Californias war on drugs was cited in the ballot arguments in favor of Proposition 36, the Substance Abuse and Crime Prevention Act, which the voters of California approved with 61% of the vote in the year 2000.

Preface
Economics students often emerge with a clear grasp of theory, but little ability to apply it, especially in microeconomics. They leave with a model they believe is relevant solely to market mechanisms, when it actually is one suited for inquiry into all avenues of rational choice. At the same time, there is a popular conception that criminals are decient in some psychological, physiological, or sociological aspect that means we need to either lock them all away or x the root causes of their social deviancy. Neither is a entirely satisfactory response to crime. Workers, employers, and managers have a stake in effective public policy designed to reduce criminality. According to the Institute for People with Criminal Records, approximately 3% of the U.S. population will be in jail or prison for at least one day during any given year, and nearly 30% of the population has a criminal record (including misdemeanors). Yet having a criminal record may be a bar to employment and lead individuals who have paid their debts to society on a pathway to recidivism. Thus, everyone from managers in companies considering whether to bar felons from employment to individual voters considering felony disenfranchisement laws, needs to understand how rational criminals act and think. By understanding how incentive mechanisms affect criminal behavior, business managers may use this information to reduce criminal activity in their own enterprises or to understand how unethical business decisions affect the wider society. As we always do in such circumstances, we must make sacrices to balance the competing interests. To accomplish this with a minimum of disruption, at, or near, the end of some chapters is a section called For the Economist where material of a more advanced mathematical and theoretical nature, which tends to be more tangential to the non-economists, is provided. Thus, economics students with an advanced knowledge of modeling can be trained in a parallel fashion to those for whom economics is a new eld and, as

xii

PREFACE

such, may have only had a high school or introductory level exposure to economics, if at all. Rather than always use the convention of he or she or simply he throughout, I will, at times, use she in my examples to remind the reader criminality knows no gender. Finally, I encourage those interested in other areas of law to read my forthcoming companion book from Business Expert Press, The Economics of Common and Civil Law.

Introduction: Why Should Businesspeople Care About Crime?

The cost of crime is staggering. Nearly 1% of all Americans are currently in jail or prison and about twice that number are under probation or parole. In the United States, as high as 10% of the population has committed a felony. Felony disenfranchisement laws can bar a person from ever voting again in some states while businesses may ask potential employees about prior convictions. Smoking marijuana, betting on a Celtics game (except where gambling is legalized), viewing obscene material over the Internet, or having one too many drinks before getting in a car can mean, under 3 strikes provisions, a life prison sentence for someone with prior felony convictions. Spending on prisons, lost productive capacity due to incarceration, costs to victims of time and medical expenses, payments to security companies, and payments for insurance against theft drain about $2.4 trillion a year from the U.S. economy based on gures given by Anderson1 and adjusted for ination. Business leaders who care about their businesses and the communities in which they reside and work have an active stake in this question. A lower quality of life in areas replete with crime means fewer jobs and property losses associated with vandalism and theft relegate certain neighborhoods to retail deserts with few opportunities for residents to acquire goods from businesses larger than small convenience markets. High losses from shrinkage (the accounting term for retail losses of all types) require higher gross margins and higher prices for everyone. In 2011, according to the University of Floridas National Retail Security Survey, shrinkage accounted for 1.4% of sales, translating into $35 billion in losses. Of this, 25% was due to shoplifting, 45% was employee theft, and 12% was administrative error. The remainder was caused by spoilage, accidental losses, and vendor fraud. When one considers net margins for retailers are typically between 1% and 5%, it should be clear why business leaders must take all cost-effective measures possible to reduce these losses.

xiv

INTRODUCTION

According to the National Association for Shoplifting Prevention, only 2% of all shoplifting incidents are caught by security and, of those who are caught, only half are handed over to the police. Internet piracy has reached epidemic proportions with billions of dollars in losses to the computer software, lm, book, and music publishing industries. This book will help you to better understand the incentives people have to break the law and give you way to adjust those incentives so that you and your business are not victimized. For example, bribery of corrupt ofcials may seem to be the only way to get things done in some countries and those ofcials know that quarterly prots may depend on such bribes. What is needed is a Credible Threat discussed in Chapter 3. Businesses practice price discrimination, selling to different consumers at different prices. A classic example is the academic book publisher who sells the same book to international and domestic audiences at widely different prices. The pharmaceutical, software, and movie industries engage in similar practices. An exposition of why this does not always work is found in the section on Black and Grey Markets in Chapter 2. Many industries utilize undocumented workers and there is a debate on how these workers affect wages. A discussion of this is found in Chapter 5 on Segmented Labor Markets but the basic premise can be expanded to any market where entry is restricted in one segment but there is a competing segment that is unrestricted. For example, the use of homeopathic medicine as a counter to traditional medicine may be seen in this light. Managers worrying about theft and its effect on prices would do well to read the section on Supply-Side Changes found in Chapter 6 while those interested in reducing employee theft should read the section on White Color Crime in the same chapter. These are just a few of the examples in this book that have wide application to legal businesses. The fact is the legal markets have always had to deal with illegal ones and always will and managers who ignore the economics of crime do so at their own peril.

CHAPTER 1

What Does Economics Have to Do with Crime Anyway?

In this chapter, we will examine how economics can be used to study crime through what is called the rational actor model. There are, of course, limitations to this approach. No discipline can claim a monopoly on the truth but economics allows us to reduce criminal activity and lead to a better society for everyone.

Why Study Crime?

In your lifetime, you will likely be a victim of multiple property crimes and have a signicant chance of facing violent crime, most likely an assault. More than 10 million crimes are reported every year to the police in the United States; yet only a minority of crimes is reported. Over 5 million people are arrested for victimless crimes (including driving under the inuence, drug possession, prostitution, gambling, and the catch-all crime of disorderly conduct) and about 11,000 are murdered. Yet crime rates have fallen dramatically over the past two decades. Since the early 1990s, the homicide rate has been cut in half and overall crime has dropped by about 45%. Many argue this is because of 3 strikes laws and reinstatement of the death penalty, but Canadas laws have not been similarly toughened and it has seen similar percentage drops, calling into question if public perception is a reality.

What Is a Crime?
Dening crime is tricky and carries certain complications. Crime is a transgression of the law but laws vary between localities and time periods. From 1919 to 1933, it was illegal to serve alcoholic beverages in the United

THE ECONOMICS OF CRIME

States. Today, prohibition has been repealed, although laws exist to prevent the sale of intoxicants to minors. In the 19th century, cocaine was proclaimed the latest wonder drug, used mostly to treat pain but also everything from allergies to drug addiction. It even was part of Coca-Colas formula, which contained traces of it until 1906. Cocaine was sold over the counter until 1914 when it was declared a controlled narcotic based on high incidence of addiction. When Jerry Lee Lewis visited England with his 14-year-old wife, Myra Gale Brown, in 1958, it caused a sensation, though he had been legally married in his state. Until 1967, interracial marriage was illegal in 15 states, while sodomy was a felony in 13 states until 2003. Marijuana is legal and openly used in The Netherlands, while possession is a crime in the United States. Prostitution is illegal throughout the United States, except for certain parts of Nevada. There are restrictions on gambling in most states and the minimum drinking age varies by province in Canada. Denitions of crimes may differ: the level at which one is charged with driving under the inuence of alcohol is 0.02% in Sweden, 0.05% in Japan, and 0.08% in Canada and the United States. Comparing crime rates is problematic when denitions of crimes differ across jurisdictions. While crime often has a geographical focus, countries can also apply their laws extraterritorially with regard to their own citizens. Americans working abroad are required to continue to le income taxes with the U.S. Internal Revenue Service, even as they might be forced to le with their foreign country of residence. Americans, when they travel overseas for sexual liaisons with underage foreign girls, are liable for prosecution upon return to the United States, even if the host countrys laws allow for such encounters. On the other hand, an American under the age of 21 legally drinking in a foreign country is not subject to prosecution, even if they would be if they had engaged in the same behavior in the connes of the United States. Immigration status can make some things criminal or may exempt people from prosecution. Diplomatic immunity, a standard feature of international relations, exempts foreign diplomats and their immediate family members from prosecution by the country to which the diplomat is posted. This is to protect foreign dignitaries from being tried on trumped-up

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

charges. The sole recourse of the host country is to expel the diplomat unless her country of citizenship allows for her prosecution within the host country. This does not mean the diplomat has a free pass to commit murder and mayhemindeed, she will likely nd herself prosecuted upon return to her own country if the charges are valid. A foreign visitor will nd himself unable to work or attend school unless his visa permits such activity. Violating terms of his visa subjects him to possible deportation. At the same time, ones visa status might confer benets as foreign nationals who are not permanent residents are not subject to certain requirements. They do not have to le income taxes on their worldwide income (only the income they receive in the host country), and can maintain multiple-spouse marriages that are legal in their country of citizenship, and are exempt from military service in their host country. Severity of sentencing for crimes differs from jurisdiction to jurisdiction. While some states enforce the death penalty for murder, others have a maximum penalty of life imprisonment. Even if the death penalty applies, the likelihood that someone will be sentenced to death is far greater in states such as Texas and Florida than in Wyoming, which, although it has had the death penalty on the books since 1977, has only one person on death row and only executed one other person under the revised law. In case of this book, we use a simple denition: if it is dened as a crime in a jurisdiction, it is a crime, regardless of whether it is legal elsewhere.

Why Use Economics to Study Crime?

Sociological, psychological, and physiological explanations for crime are wanting. By seeing criminals as victims of circumstances or biology instead of as individuals capable of making rational decisions, they fall into the blame society or blame someone else trap. Yet there are thousands of individuals who have experienced similar difculties but have not chosen to take action against civil society and such theories stigmatize these lawabiding citizens. Instead of dividing society into criminal and non-criminal elements, the economic approach to crime argues that virtually all individuals might commit a crime if provided the right motive, means, and opportunity.

THE ECONOMICS OF CRIME

Economics does not make moral judgments or argue punishment ought to be punitive or retributive but instead examines punishment and other measures from the perspective of preventing future crimes. Ironically, this amoral science may be the most consistent with modern conceptions of morality. By considering crime as a choice made by individuals, its analysis is not only compatible with, but complementary to, a notion that individuals are ultimately the sole forces responsible for their actions, instead of arguing it was because of a broken home, defective genes, or limited opportunity. This is not to say such factors do not cause crime but they are not the primary reasons for it. Since economics is about doing the best we can with the limited resources we have, it is useful to use it in conjunction with other tools to nd the most effective ways to reduce crime. That some individuals may not respond to incentives and feel compulsions that bring into question the degree to which they exercise choice does not mean we should abandon the economic approach. If at least some criminals respond to incentives, the economic approach has value. There is also validity to the sociological approach, suggesting we should alleviate unemployment, and the psychological approach, recommending more effective mental-health services. Unless we recognize a life of crime is a choice made by some individuals in society, our ability to reduce crime will be limited. Economics helps us deal with crime before the commission of the act as opposed to just looking at the consequences after the fact. While certain individuals may indeed suffer from reduced competence to make rational decisions and we need to consider this in mandating sentencing for them and others have a psychological compulsion to commit acts that cannot be mitigated, for the most part we are not able to prevent the rst criminal act of an individual and often cannot stop subsequent acts using alternative approaches. Stigmatizing the poor, uneducated, minorities, males, or mentally ill as having criminal tendencies demonizes a population segment that often will not commit crimes. Even if an African-American male high school dropout is more likely to commit a crime than a college-educated white female, that does not preclude the college-educated white female from committing a felony nor does it mean all African-American male high school dropouts are criminals. The vast majority of individuals in all such designated groups in society are law-abiding citizens. So, to stigmatize

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

them as having criminal tendencies only encourages discrimination and relegates many to the margins of society.

The Rational Actor Model

Economists study how choices are made under conditions of scarcity. Economics is not about money, though how to make and allocate money to various activities is something economists study. When a person steals a car, bribes an ofcial, or blows up a building, he makes a choice. Since that choice precludes other choices, conditions of scarcity exist. Economics knows people dont have unlimited amount of time, money, or resources but we assume people have unlimited wants and desires. Since we cannot have all we desire, we attempt to gain as much as possible given our limited resources. It is this focus on doing the best we can given what we have and what we want to achieve that is the cornerstone of the rational actor model. Economics focuses on incentives and how people react to them. Well-dened incentives will cause behavioral changes. Poorly dened incentives will toobut they might be ones that are unintended! You may ask whether some individuals who commit crimes are rational; the concept of rationality seems to preclude those who are insane. Yet, even the insane may be rational. A person is sane when she knows the difference between right and wrong. A person is rational when she chooses the right way to do something based on her knowledge and resources, regardless whether it is morally correct or deviant. A criminal acts rationally when she enters a building at night, instead of the day, since it lowers her chances of being caught. Even the criminally insane can behave rationally when trying to conceal actions or hide evidence of guilt. Lacking ability to differentiate between right and wrong doesnt preclude one from attempting to reduce the probability of capture. Rationality has other implications as well: if criminals are rational, they respond to punishment. The greater the punishment (or likelihood of receiving it), all other things being equal, the lesser the crime. Many religiously devout people believe in theomeny, that those who sin will be punished by God either in this life or the afterlife. This would imply such individuals are less likely to commit crimes than those who do not believe in divine retribution and econometric studies back up this claim.1 It also

THE ECONOMICS OF CRIME

implies when one increases punishments for repeat offenders, there is a lower likelihood of recidivism. On the other hand, punishment compression can occur, leading to unexpected consequences. Making rape a capital offense reduces the number of rapes but increases the likelihood a woman who is raped will be murdered because rational individuals think at the margin. Thinking at the margin is about incremental costs and benets. A rational rapist facing a possible death sentence calculates the probability of getting caught, the probability of being punished after getting caught, and the probability the punishment will be death. The greater the probability of the death penalty (assuming the individual views it as the ultimate punishment), the less rape will occur. Suppose one lives in a society where rapists, when convicted, are summarily executed and we convict 80% of the rapists. Under such circumstances, few rapes are committed. Yet, once a rape occurs, the calculus changes. Now a rapist looks at the increase in probability of punishment from murdering the rape victim. If this decreases the likelihood of getting caught, the rational rapist is more likely to kill. Moral sentiments may override the decision-making calculus. However, this would have to be the case for a large number of rapists and morality is not something we associate with criminals. The expression there is no honor among thieves is a truism for a reason. When we look at criminal behavior in the aggregate it is consistent with utility-maximizing behavior. Whether punishment is effective depends on if it is considered a bad thing by the individual. The movie Going in Style portrayed three senior citizens who pull a bank heist precisely because they saw getting caught and being placed in prison as being better than their present situations. For them, going to prison wasnt a bad thing and its prospect actually caused them to engage in antisocial behavior. Present Value Benets (and costs) accruing in the present are more readily considered than in the future because we value the present more. Criminals have short time horizons, tending to value present gains more than (possible) losses associated with incarceration. To discount the future, we apply a discount rate to our actions. How do we calculate the rate? One way is to ask: at

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

what interest rate are you indifferent between putting money in the bank for one year without being able to withdraw it or having it in your hands? This interest rate is your discount rate, r. The number of years you are willing to wait is the time, t. We then take the Present Value (PV ), which is the amount of money you are putting in the bank, and multiply it by (1+r)t to obtain the amount of money you will have at time t, your Future Value (FV ). If your interest rate is 10% and you invest $1,000, you would have $1,100 at the end of year one, $1,210 at the end of year two (10% of $1100 = $110, added to the $1,100 we had at the end of year one), and $1331 at the end of year three (10% of $1210 is $121, added to $1,210 gives us $1331): FV = PV(1+r)t = $1,000(1+0.1)3 = $1,000(1.1)3 = $1,000(1.331) = $1,331 Alternatively, we can solve for present value: PV = FV/(1+r)t Thus: PV = $1,331/(1+0.1)3 = $1,331/(1.1)3 = $1,331/1.331 = $1,000 Criminals may have a higher interest rate than the rest of us. They do, after all, go to loan sharks more often, who charge much higher interest rates than banks. Limitations of the Economic Approach Economists do not examine why or how people choose. We look at what choices are made and how changing incentives alters those choices. Changing the penalty or its probability has an effect on the number of crimes committed. Raise the cost of committing crime and you lower its incidence. Economists do not concern themselves with how people arrive at a decision. Crimes of passion or opportunity are, by denition, not thought out

THE ECONOMICS OF CRIME

in advance. The consequences are not completely calculated. Yet, these are instances of maximizing benets or minimizing costs, two sides of the same coin. In a crime of passion, the individual disregards the punishment that will accrue to them as their concern is with short-term consequences. Attempting to kill or cause bodily harm is the goal and the way an economist approaches the problem is to see if it was achieved with the minimum possible short-term cost. Crimes of opportunity, like picking a pocket or stealing a briefcase left in the open, are conducted to minimize possible detection or maximize potential gain. Thieves steal from those who are well-dressed (assuming they have fatter wallets) but also those who are not paying attention (easy marks). They maximize benets or minimize costs, even if they might regret the decision later. We will use the term rational behavior to mean benet-maximizing or cost-minimizing behavior. Economics examine broad public policy implications, not any one persons actions. Raising the ne for exceeding the speed limit will not stop everyone from speeding. However, the total number of speeders will decline, even if some do not choose to slow down with higher nes. Pretend you are late for a meeting and if you do not arrive on time you lose $20. You cannot make it to the meeting if you do not speed and you will make it to the meeting if you do. You have a 10% chance of getting caught and, if caught, you will be late for your meeting and will be ned $100. Will you speed? You might gure with a 10% chance of getting caught and a ne of $100, it is better to speed since 10% of the time you lose $120 (the ne plus the $20 for being late). On average, you expect to lose 10% $120 = $12. That is better than losing $20 for certain, isnt it? What if the ne were raised to $10,000? Now you better not speed. Similarly, if the meeting is more important, you will be more likely to speed. What about if the chance of getting caught were lowered to 5%? Raised to 90%? Wont these cause changes in behavior? There should be some point where anticipated cost equals anticipated benet. Perhaps it is at a ne of $180 and a 10% chance of getting caught versus the $20 you lose if late for the meeting. Any ne above this level will cause you not to speed. Any ne below will cause you to speed. We call this the indifference point and say you are at the margin. Being at the margin means you are indifferent between action and inaction. Altering the benets or costs will cause a change in behavior.

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

Of course, some individuals would never commit certain crimes under any circumstances. Their moral code imposes an innite cost for those actions and it would be irrational for them to commit those crimes. Similarly, some individuals will commit certain crimes regardless of the cost imposed by society. Their benets may be considered innite. This doesnt disprove the economic approach. The key is whether some individuals are inuenced by the degree of the penalty. Economics cannot be applied in a vacuum. A very effective way to reduce theft is to cut off a thiefs hand. Similarly brutal punishments can be implemented for sex crimes. But civilized societies have determined such punishments are cruel. Economics must be considered in conjunction with, and not as a replacement for, other approaches.

Benets of the Economic Approach Rather than looking at how individuals differ in nature or environment, economics looks at how individuals differ in choices made. Instead of classifying people into criminals and law-abiding individuals, economics reinforces the concept we are all on a continuum between these two extremes. Economics addresses how government and private individuals alter such behavior. While sociological, psychological, and physiological approaches help us to understand why criminal activity occurs in individuals, the latter two approaches do not help us alleviate this activity beyond a specic individual and the rst provides only broadly applicable policy prescriptions. The economic approach is particularly useful for transactions involving voluntary exchange of illegal commodities but it works well for those which are nonmarket-based as well.

Opportunity Cost Opportunity cost is the value to the person of the next best alternative not undertaken. In considering non-trivial actions, it is typically the most prevalent cost for an individual. How does opportunity cost enter into the question of analyzing crime? There are at least three ways we use this concept. First, we look at choices individual criminals make. Suppose you are a criminal. You can choose to

10

THE ECONOMICS OF CRIME

steal one of the two reasonably new Honda Accords but not both. The rst car has keys in the ignition, the second car is locked and the driver has used a steering wheel immobilizer device. Which car is more likely to be stolen? Obviously it is the one with the keys in the ignition. The cost of stealing a car in terms of lost time and potential effort is much higher when the car is secured. Does this mean the secured car will not be taken? No. However, if there are easier or more protable targets available, the likelihood of theft is reduced by these actions. Second are choices individuals and rms make to prevent or mitigate crime. Every dollar spent and each hour of time undertaken to secure oneself against crime is money and time not spent doing something else. When my daughters were young and we lived in Jamaica, I had an alarm system and burglar bars in my home but did not purchase a gun. The alarm system and bars were relatively minor costs relative to the chance of theft. However, a gun with two small children has a very high opportunity cost. If one of my daughters had come upon the alarm and accidentally triggered it, the alarm company will send armed response to investigate. If one of my daughters accidentally found my rearm, consequences would be far more serious. Given I am prone to being forgetful, I realized the possibility of such an occurrence is higher than with other individuals, so I rationally decided against a rearm at the time (that it is almost impossible to procure a rearm legally in Jamaica may also have played some role in my decision). We can also look at the choices governments make to combat crime. Crime prevention is a protection mechanism that attempts to secure already created goods but every dollar we spend on crime prevention is a dollar we cannot spend on good or service creation. We trade additional goods and services for more protection. A city or state that spends more on crime prevention must spend less on something else, such as schools, roads, or sewage treatment, or must tax its citizens more heavily, which reduces consumption of private goods and services, such as groceries, gasoline, or amusements. Choices once made open up possibilities and close off others. A person with a job is usually less likely to engage in crime due to fear of losing that job. However, holding certain types of jobs (such as auditor or CEO of a major corporation) allows one to engage in criminal activity that someone who lacks such a job would not be able to do. Barry Minkow, founder of Zzzz Best Carpet Cleaning Company, pled guilty to securities fraud

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

11

violations in connection with falsifying revenue on corporate statements, but he only could commit the crime because of his position. None of this implies an absence of morality. Moral compunction plays a role in how people act. Persons with an avowed moral code refrain from certain nefarious behavior simply because it is repugnant to their moral psyche. This too qualies as an opportunity cost. Recently I had occasion to return to a store when I discovered an item I purchased was not listed on my receipt. While the act was not one of pilfering, but instead lay in a clerks mistake in failing to scan the item, I felt a moral imperative to return and ensure payment was properly remitted. This was a rational decision because otherwise I would have faced mental anguish over not having done the right thing. Actions undertaken to satisfy the honor code of a profession, such as a priests vow against sigilism, the act of revealing what is said during a confessional, could lead to unfortunate consequences even as it upholds a larger principle in the priests mind. Breaking condentiality may lead to parishioners reluctance to engage in the sacrament. Not honoring patient or client condentiality by medical doctors and lawyers could lead to consequences much graver in the long run than would be gained by society by having them break their oaths. Yet some priests, doctors, and lawyers have decided to reveal these secrets despite repercussions for themselves and their fellow professionals because they believed the benet from doing so outweighed the cost. Since an individuals opportunity cost is personal and known only to that individual, an outside observer cannot determine in advance whether an action will occur. All we know is if someone is willing to act when her opportunity cost is low, she might be less willing as her opportunity cost rises. If opportunity cost is high, her reluctance to act may be alleviated by a reduction in this cost. People are more willing to turn states evidence and assist the prosecution when costs are lowered or benets are raised. Marginal Analysis When economists talk about how people make decisions, they use one of two models: the rst is marginal analysis and the second is institutional analysis. We will defer our discussion of institutional analysis until later in

12

THE ECONOMICS OF CRIME

this chapter and instead discuss the decision-making method most often taught in introductory economics: marginal analysis. People make decisions by weighing costs and benets at the margin. The margin is the decision you make on whether to buy an additional unit of something or not. Suppose you are the Superintendent of Public Instruction for the local school district. There are three schools in your school district and librarians at each school are complaining about book theft. You cannot give them additional money but they have a solution to reduce costs without increasing the budget. Indeed, they promise to increase spending on new books, a goal high on your agenda as Superintendent. Each year, the high school in your district experiences $5,000 of book theft, while the junior high loses $1,000 of books to theft, and elementary school book theft costs $500. The librarians want you to purchase an anti-theft device from a local rm to theft by 90%. It will cost $900 per school per year with no discount for multiple schools. The librarians tell you this is a very good deal because you will reduce losses from $6,500 to only $650, a savings of $5,850 at a cost of just $2,700. That means an extra $3,150 a year for purchasing new books. It is a good deal until you realize you can do better: only install the system in the high school! That saves $4,500 on theft for only $900, giving you an extra $3,600 for purchasing new books. At the junior high, benets (reducing theft losses by $900) equal costs. You also wont install at the elementary school, where it will cost $900 but only reduce theft losses by $450. Sometimes preventing crime isnt worth it.

Supply and Demand

Supply and demand refer to a price schedule spelling out the amount of a good people are willing to sell (supply) or purchase (demand) at a given price. We determine these schedules by looking at all individuals in a market and asking the minimum price they are willing to accept as payment to offer a good (supply) or the maximum amount they are willing to pay for a good (demand). As price rises, people are willing to sell more and as price falls, people are willing to buy more. Quantity supplied increases with price and quantity demanded falls with price.

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

13

Economics use graphs to illustrate supply and demand. We begin with a demand schedule (Table 1.1) representing those quantities buyers are willing to purchase at varying price levels for crack cocaine on any given day in a hypothetical major metropolitan area:

Table 1.1. Quantity Demanded of Crack Cocaine Quantity demanded (in ounces)
15,000 10,000 8,500 7,500 6,000 5,000 2,500

Price paid (in dollars per ounce)

50 100 150 200 250 400 500

The supply schedule (Table 1.2) showing the hypothetical quantities sellers are willing to sell at varying price levels is based on the cost for the seller:

Table 1.2. Quantity Supplied of Crack Cocaine Quantity supplied (in ounces)
2,500 5,000 6,000 7,500 8,500 10,000 15,000

Price received (in dollars per ounce)

50 100 150 200 250 400 500

We can combine these two schedules into one schedule (Table 1.3) and determine that the price where quantity supplied equaled quantity

14

THE ECONOMICS OF CRIME

demanded is $200 and there were 7,500 ounces purchased at that price:
Table 1.3. Supply and Demand of Crack Cocaine Quantity Price paid demanded (in dollars (in ounces) per ounce)
15,000 10,000 8,500 7,500 6,000 5,000 2,500 50 100 150 200 250 400 500

Price Quantity received supplied (in dollars (in ounces) per ounce)
2,500 5,000 6,000 7,500 8,500 10,000 15,000 50 100 150 200 250 400 500

Still, a picture is worth a thousand words (or a lengthy table). By graphing the two schedules (Figure 1.1), we can visually represent the aforementioned table and present the information in a much easier manner to digest:

$500 $400 $300 $200 $100 7,500 $0 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000

Price

$200

D 16,000

Quantity

Figure 1.1. Supply and demand of crack cocaine.

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

15

The price where quantity supplied equals quantity demanded is called the equilibrium price and it is $200 in this example. However, while, in most markets, the price paid by buyers is very nearly the same as the price received by sellers, this is not the case in illegal markets. The difference between what the seller receives and what the buyer pays is a transactions cost and represents the cost to the buyer (or the seller) of engaging in the transaction. Examples of transactions costs include commissions and taxes paid for legal transactions and bribes and costs of avoiding police capture for illegal transactions. Suppose there is a transactions cost of $100. This is the difference between what the buyers pay and the sellers receive. In that case, we can shift the supply curve up by $100 or shift the demand curve down by $100 (but not both) to reect this transaction cost. In Figure 1.2, you will see the revised graph and in Table 1.4, the revised table. Making something illegal and imposing a transactions cost reduces quantity demanded of the good, increases price paid by buyers, and decreases what sellers receive. Changes in Demand The price of the good is the result of the interaction of the supply and demand schedules. Quantity sold is likewise determined by this
$600 $500 $400 Price $300 $200 $100 $0 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000
Transaction Cost = $100

S1 S0

$250

6,000

Quantity

Figure 1.2. Supply and demand of crack cocaine with a $100 transsactions cost.

16

THE ECONOMICS OF CRIME

Table 1.4. Supply and Demand of Crack Cocaine with a $100 Transsactions Cost Quantity Price paid Transactions Amount received Quantity demanded by buyer Cost by seller supplied (in ounces) ($/ounce) ($/ounce) ($/ounce) (in ounces)
15,000 10,000 8,500 7,500 6,000 5,000 2,500 50 100 150 200 250 400 500 100 100 100 100 100 100 100 50 0 50 100 150 300 400 0 0 2,500 5,000 6,000 9,250 10,000

interaction. The demand and supply schedules are simply schedules that hold everything else constant except for price. They show how quantity demanded or supplied will change in response to changes in price. But what determines the demand and supply schedules? In other words, what determines demand or supply other than price? We will begin by examining demand. In addition to transaction costs discussed earlier, we will look at six basic, though non-exhaustive, factors that determine demand: preferences, income, prices of related goods, anticipated changes in quantity, number of participants, and the demand for output goods. First, though there is some dispute in economics over this since many economists argue preferences cannot change (discussed further in the section on rational addiction), there are the preferences (or tastes) of consumers and suppliers. Changes in fashion, age distribution of a population, advertising, or any of a myriad of things cause a change in the desirability of a product or service. When something is made illegal, this may drive people to desire it, especially if the perceived chance of being caught is low. In such cases, we see an increase in both the price and the quantity sold (Figure 1.3). Second, there is income. As income changes, so does demand for various products. Demand to an economist is effective demand as opposed to simple desire. It must be coupled with wherewithal to purchase. A drug addict may prefer, if the price were the same, the crystal form of

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

17

Price

D1

D0 Quantity

Figure 1.3. Increase in demand.

methamphetamine, which is higher in purity, to powdered methamphetamine but lacks the ability to purchase it. She, therefore, purchases the powdered form. When her income rise, she moves on to crystal meth, reducing her consumption of powdered meth. Goods for which demand increases with increases in income are normal goods, and goods for which demand decreases with increases in income are inferior goods. While inferior goods are often of lower quality, this is not really part of the denition and may not be true. Things can also get a little difcult when one tries to apply the denition. Crime falls with income but is this due to the change in income or the change in the price? The price of committing crime rises with income as jail time has a higher opportunity cost for the wealthy (due to higher loss of income) than for the poor. It is only when the punishment for the infraction is paid exclusively by ne and does not require a court appearance that the cost is the same for both the rich and the poor. The cost of a parking ticket is the same for both rich and poor but the cost of murder is appreciably higher for the wealthy. While these are described at the individual level, if the general level of income rises or falls, we will see these changes reected in overall demand. If we are dealing with an inferior good and the overall level of income rises in a society, we will have a decrease in demand (Figure 1.4). Third, there are prices of related goods. Both marijuana and hashish are made from the cannabis plant and have similar physiological reactions.

18

THE ECONOMICS OF CRIME

Price

D0

D1 Quantity

Figure 1.4. Decrease in demand.

Individuals reasonably see the two goods as competitors for their funds. If we raise the price of hashish relative to marijuana by increasing penalties for hashish while leaving penalties for marijuana possession unchanged, we will see an increase in the demand for marijuana as hashish users switch. Marijuana and hashish are substitute goods. As the price of one good rises, demand rises for the good that does not change in price. Complementary goods are goods with the property that as the price of one good rises, demand falls for the good that does not change in price. This is usually because the two goods are consumed together. Thus, hashish and tobacco are complementary goods because hashish is often smoked in combination with tobacco to mitigate its increased potency when compared with marijuana. A rise in the tobacco tax lowers demand for hashish (and, by extension, raises demand for marijuana, so raising cigarette taxes increases marijuana consumption). Just because two goods are complementary goods does not mean one can decide to raise the price on either good with equal effect. Guns and bullets are complementary goods but doubling the price of bullets is likely to have a different impact on gun sales than doubling the price of guns. Increasing the cost of a good only affects its future sales. If you want to decrease sales of bullets to existing gun owners, you have to increase the price of bullets and not guns. With legal goods, increasing the price of a complementary good is not as effective as raising the price of the good itself. When looking at illegal goods, however, it is more effective to limit the sales of those legal, but complementary, goods because

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

19

regulating sales of legal goods is far easier than regulating sales of illegal goods. Since the decongestant pseudoephedrine can be made into methamphetamine quite easily (no, I am not going to tell you how to do it), the law has strict limits on the quantity of decongestants containing pseudoephedrine that individuals can buy. Fourth, there are anticipated changes in quantity or quality. When something is to be made illegal, demand often shoots up. President Kennedy reportedly sent Pierre Salinger, his press secretary, out to secure Cuban cigars immediately prior to imposing the Cuban trade embargo in 1962. In the early 1980s, the development of crack cocaine, a derivative of greater potency and purity that delivered a nearly instantaneous high, likely increased demand for cocaine in general. Fifth, we can look at the number of participants in a market. Immigration and births will increase demand for goods while emigration and deaths decrease demand. Sixth, there are prices of output goods. If a good is used in the production process, it is affected by demand for all goods created from that good. The cannabis plant is used to make both marijuana and hashish. Suppose marijuana and hashish are legalized. This would cause the price of marijuana and hashish to fall and demand to rise. Demand for goods used in the production process will rise. That means demand for cannabis plants will rise. This type of demand is known as a derived demand since people do not purchase cannabis plants except to produce marijuana or hashish, unlike other goods that have a value to the consumer from the product itself. Supply and demand depend on the perspective we are taking. Producers of marijuana demand cannabis plants and supply marijuana, while producers of cannabis plants demand seeds and supply cannabis plants. Changes in Supply Supply is affected by the following factors: number of suppliers in a market, prices of input goods, technology, and taxes. As suppliers increases in a market, supply shifts outward. Given a xed demand curve, price decreases. Additional prostitutes entering the market for prostitution depress prices due to competition and increase the quantity of sex sold. This is manifested by an increase in supply (Figure 1.5).

20

THE ECONOMICS OF CRIME

S0 S1

Price

D Quantity

Figure 1.5. Increase in supply.

S1 S0

Price

D Quantity

Figure 1.6. Decrease in supply.

Similarly, when prostitutes are arrested, supply of prostitutes will decrease, causing a rise in the price changed and a reduction in quantity of sex sold (Figure 1.6). We have shifted the supply curve to the right and the left and the demand curve to the right and the left, calling these alterations increases when the movement of the relevant curve is to the right and decreases when the movement is to the left. Another way to think about supply curve shifts is to consider production cost changes. Increases in taxes or the cost of input goods (such as cannabis plants) that cause the production cost to

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

21

increase result in an upward shift in the supply curve. Better technology or decreases in taxes or the cost of input goods that cause the production cost to decrease result in a downward shift in the supply curve (Figure 1.7 and Figure 1.8). Making a good illegal tends to steepen the demand curve and make it more inelastic. That means increases in price due to efforts to control them via policing, nes, and other mechanisms have less of an impact on demand for these goods than for legal goods.

S1 S0

Price

D Quantity

Figure 1.7. Increase in cost of production.

S0 S1

Price

D Quantity

Figure 1.8. Decrease in cost of production.

22

THE ECONOMICS OF CRIME

Institutional Analysis
Up to now I have emphasized the individual as an autonomous agent in society. But what about society? Doesnt it have a role to play in determining the level and extent of crime? Absolutely. In economic theory, institutions provide the legal and social framework within which individuals act. Thus they provide constraints and incentives that work on individuals to advance common aims. Society is not merely the sum total of individual preferences: it has a historical legacy and there are certain dening characteristics about societies that make it easier or more difcult to affect change. According to institutional economics, within each society, there are several institutions, religious political, social, and education to name a few, which dene and alter preferences in individuals. Advertising, for example, acts to redene wants to make individuals desire things that they have not had before. This approach is in contrast to the neoclassical economics claim that preferences are static. This distinction is a sharp distinction between institutional economics and neoclassical economics, the dominant school of thought in economics and which we spend the better of this book describing. Institutional economics examines how organizations change and how individuals both react to and precipitate those changes. Instead of individuals deliberating over a decision, making it as a result of a clear calculus of the benets and costs, institutional economics supposes that individuals display only bounded rationality: the world is too complex to handle all possible solutions so that only some are considered and analyzed. We can accommodate this criticism within a neoclassical framework. Cognition takes time and effort so we economize on it when it is not worthwhile to engage in such tasks. Institutions also affect behavior by altering property rights and thus both the distribution of income in a society and the decisions individuals make. Property rights might legitimize past illegal behavior (the Kennedys were not forced to give back bootlegging prots after Prohibition ended) or they might force certain individuals to begin life with a limited endowment (freeing slaves after the Emancipation Proclamation did not give these individuals claim to the goods and services of their former masters). Each of these institutional changes will create a different society: more able to react

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

23

in certain circumstances; less able in others. Certainly, the decisions the Kennedys can make given their past gains are markedly different from those available to the grandson of a sharecropper who never received his promised 40 acres and a mule. Efciency cannot be abstracted from its institutional environment. We often take for granted that a particular distribution of property rights is correct and proper, the best possible world in which we live. This is simply not the case. Optimization takes place within the sphere of a property rights regime and it is entirely possible we would be better off with a different set of laws but are unable to know without altering the legal landscape. The fact institutions matter was shown in the Stanford Prison Experiment of 1971. Students were divided into two groups: prisoners and guards. Even though it was an experiment and not a real prison, individuals quickly adopted postures more consistent with actual prisoners and guards in a prison environment. Similarly, the 1963 Milgram experiment supposedly tested the validity of punishment on memory. Instead it was an experiment on obedience. A participant was asked to deliver electric shocks to actors hidden behind a wall and increase their intensity every time an incorrect answer was given. As the shocks increased in voltage, the actors began rst to plead for them to stop and then they screamed in agony. When participants questioned whether they should continue to increase the voltage, the experimenters told them that everything was alright and nearly two-thirds of the participants ended up agreeing to administer what would have been fatal levels of electric shocks. Social conditioning is a powerful motivator. Institutional analysis brings into question moral, philosophical, and ethical issues that are not found in neoclassical economics. Its concern with dening an institutional matrix that provides the best possible solution to todays problems is a broader conception than economics traditionally allows. However, it tends to complement as opposed to replace the neoclassical analysis we provide. Societies that preach control and obedience have better luck controlling crime than those that do not but this is to be expected from using the economic approach to human behavior. After all, such societies are merely increasing the benets of compliance and raising the costs of non-compliance. Rationality would dictate the effect of such actions would be to reduce criminal activity.

24

THE ECONOMICS OF CRIME

Economics in the neoclassical tradition is about doing the best we can within a legal framework or about making incremental and marginal changes to existing law. It isnt about wholesale alternation of the underlying institutional structures of society. Some societies will simply be safer because of their underlying nature but safety from criminal activity is granted often by a corresponding reduction in liberty. Economics is incapable of dictating what that balance ought to be. It can only inform us as to the costs and benets of each approach, leaving to us the difcult decision as to whether such sacrices are worth the resultant reduction in crime.

For the Economist: Indifference Curves and Crime

In this section, I assume you have an understanding of indifference curves. If you do not, you may freely skip it. Most standard textbooks provide examples of when one has an economic bad and an economic good. One will accept more of the economic bad, only if one receives more of the corresponding economic good. Pollution and transportation as well as income and work may serve as examples of such tradeoffs. Both result in upward sloping indifference curves and the direction of preference line always points towards the economic good and away from the economic bad, meaning we want more of the economic good and less of the economic bad (Figure 1.9).

Pollution

Direction of preference

Transportation

Figure 1.9. Indifference curves between pollution and transportation.

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

25

We can also look at the choice between two economic bads. Some individuals derive utility from engaging in violations of societys norms. Conformity to civil society is an economic bad for them. Similarly, punishment is undesirable as well. If we have two economic bads, punishment and good behavior, the direction of preference points inward towards the origin. What may not be clear is these bads also have corresponding goods, reward and bad behavior, for the criminal. We can actually represent all four possible combinations (punishment/good behavior, punishment/good behavior, reward/bad behavior, reward/bad behavior) on an indifference map that represents each of the possibilities in a different quadrant (Figure 1.10) The indifference curve for the two economic bads is concave. We rotate the previous diagram 180 degrees and eliminate the quadrants not applicable to the two economic bads for the criminal to arrive at the following, a series of concave indifference curves, instead of convex, and with the direction of preference moving inward (Figure 1.11). The budget constraint normally limits us from going to higher indifference curves but, in this case, it stops us from getting to lower indifference curves that provide more utility. We have a budget constraint of punishments and rewards used by society to increase good behavior and reduce crime. The slope of the budget constraint is the persons tradeoff between
Reward

Good behavior

Bad behavior

Punishment

Figure 1.10. Indifference map.

26

THE ECONOMICS OF CRIME

Punishment

Good behavior

Figure 1.11. Indifference curve for two economic bads.

P* Punishment

G* Good behavior

Figure 1.12. Determining optimal punishment.

punishment and greater good behavior. The optimal choice for punishment (P*) and good behavior (G*) is derived where the budget constraint touches the lowest indifference curve (Figure 1.12). Raising sentences will cause an outward shift of the budget line whereas making them more lenient will cause them to shift inward. However, altering the sentence so as to reduce the credit individuals receive for good behavior will cause a rotation of the budget constraint in a manner consistent with altering the slope without altering the vertical intercept. While both will unambiguously reduce crime, raising sentences will reduce it more for some criminals, while altering the tradeoff will reduce it more for others.

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

27

Questions for Review

1. If some people are irrational, does this mean that the economic approach to crime is useless? Absolutely not! Irrationality means simply individuals do not respond to incentives and disincentives. Incentives and disincentives would be useless only if everyone behaved irrationally. So long as some individuals are rational, the economic approach to crime has the potential for lowering crime rates. 2. Suppose that the law against speeding were no longer enforced. What would happen to average speeds on the freeway? What about if the police took a zero-tolerance rule toward speeders and they used photo radar? If the police failed to enforce laws against speeding, speeding and average speeds on the highway would increase. If this were not the case, the law would be ineffective. A law that sets the speed limit at 200 mph would be ineffective because no one drives that fast (we would hope!). However, enforcing a speed limit at 50 mph on the freeway would reduce average speeds. Therefore, if one were to stop enforcing the law, one would expect average speeds would increase (but not by as much as if the law itself were abolishedsome people will follow the law simply because the law exists). Similarly, if police took a zero-tolerance rule towards speeders and used photo radar, we would expect a reduction in average speeds. 3. (a) In 1934, the kidnapping and death of the Lindbergh baby caused a major change in the law. Prior to that date, kidnapping in New Jersey was a misdemeanor and there was no federal law on the books. After that case, the federal Lindbergh Law provided for the death penalty for kidnapping that caused the transportation of the victim across state lines or for which the ransom note was sent via the U.S. mail service. What do you think was the impact of the law on the number of kidnappings? What about murder of kidnapping victims? The kidnapping rate dropped dramatically but the percentage of kidnapping victims who were subsequently murdered by their kidnappers rose. (b) In 1968, the Supreme Court of the United States invalidated the death penalty in such cases. What do you think happened to the number of kidnappings? What about murder of kidnapping victims?

28

THE ECONOMICS OF CRIME

It went up but the percentage of kidnapping victims subsequently murdered went down. In 1997, according to the National Incident-Based Reporting System, only 1 murder of a juvenile kidnapping victim was recorded out of 1,214 kidnappings in the 12 states participating in the system3. 4. What happens to the crime rate if we eliminate parole and impose mandatory sentencing? What about the cost of achieving that crime rate? What about good behavior? Use indifference curves in providing your answer. Elimination of parole, coupled with mandatory sentencing, effectively makes the budget line a horizontal one at the point where the punishment is determined. While eliminating parole and providing mandatory sentencing reduces the crime rate, it does so in a less effective manner than judicious use of parole because we end up with a corner solution. Since parole reduces costs dramatically (parole costs roughly 1/10th the cost of prison), costs will probably increase and good behavior decline precipitously. By increasing sentences but maintaining parole, we achieve the same rate of criminal activity at lower cost (Figure 1.13).

Punishment

Good behavior

Figure 1.13. Graphical solution for question for review 4.

Questions for Discussion

1. How would an economist respond to someone who claims that the only acceptable amount of crime is zero?

WHAT DOES ECONOMICS HAVE TO DO WITH CRIME ANYWAY?

29

2. Suppose marijuana were legal. Would this increase or decrease its consumption? 3. The author claims changing the slope of the supply or demand curve can cause an increase or a decrease in quantity demanded or supplied and the direction of change will depend on the specic price of the item. Thus, at high prices, one might see an increase (or decrease) while at low prices, one might see the opposite. Using a supply and demand graph show this and explain why such an alteration in slope might occur. Why might this be important from the standpoint of studying the economics of crime? 4. What happens when we require sentences to be fully served but reduce the time served because of prison overcrowding? Use indifference curves in providing your answer. 5. In China, authorities can sentence someone to a suspended death sentence, to be carried out if the person fails to exhibit good behavior in prison. If the prisoner exhibits good behavior the sentence is commuted to life imprisonment. Discussing whether sentencing someone to death with the hope for commutation, in a manner similar to what occurs in China, would improve the behavior of those on death row.