An Overview of Crime and Punishment

by

Edward L. Glaeser

Harvard University and NBER

March 10, 1999

Preliminary Draft

I. Introduction

Estimates of the social cost of crime vary, but there can be little doubt that throughout the globe,
crime is among the most damaging of social problems. Murder represents a squandering of life.
The quality of life for many individuals is considerably lower because of the threat of violent and
non-violent crime. Crime induces self-protection and these resources are an added cost of crime.

Property crime reduces investment, because individuals resist investment, if criminals reap the
returns. The time of criminals, which could otherwise be spent productively, is also a social loss.

These significant social costs imply that research on crime is among the most important
areas in economics. Furthermore, as economics addresses issues beyond its conventional
topics, work on economics and crime has indeed been among the most productive areas
for research. Over the past 30 years since Becker (1968), there has been a surge of
activity in trying to understand the economics of crime. Economists have brought tools
such as hedonic real estimate work, using the differences in real estate costs between high
crime and low crime areas to assess individual's willingness to avoid crime, and thereby
to measure the economic costs of crime. But this research extends far beyond just
estimating the costs of crimes. Economists have used sophisticated statistical techniques
to estimate the extent to which increases in punishment deter crime. Economists have
also investigated the link between crime and a rich variety of social factors.

In this brief essay, I review some of the recent work on the economics of crime and
punishment. I specifically suggest ways in which the World Bank's exciting new
initiative addressing crime can be connected with the most pressing issues in new
research. The World Bank's focus on crime is important both because crime represents a
major social problem, but also because most research on crime has heretofore been
centered on developed countries. Developing countries present an even more pressing
area for future research. Indeed, poorer countries often have the worst crime problems.

A new focus on crime research in developing countries offers the promise of both
significant policy impact and sizable scientific relevance.

I begin this essay by reviewing the basic Becker (1968) model of crime and punishment.
While this model is well known to almost all economists, it may be useful to present the
model to non-economists and policy makers to ensure that all readers are on the same
page. A common set of terms and intellectual framework is valuable in understanding
the determinants of crime.

In the next section of this essay, I review what I consider to be the three most important
current questions in economic research on crime. The first section reviews recent
advances in the efficacy of police action and incentives. Traditional economic research
tended to look for a correlation between policing and crime. Unfortunately, causal links
between crime and deterrence are almost always two sided. Often, researchers would
find a positive link between the level of crime and the amount of deterrence, which are
explained by the fact that localities often increase the amount of policing when the levels
of crime rise. Recent research, particularly that of Steven Levitt, has explicitly addressed
this causality problem. Using a variety of clever statistical techniques, Levitt has been
able to identify the purest estimates of the causal link between deterrence and crime.
Ideally, similar estimates of the power of deterrence should be able to be done in
developing countries as well.

A second current question takes the reverse side of this causality problem seriously.
What determines the size of anti-crime efforts and their nature? One of the most
important advances in all of economics over the past 10 years has been the rise of
political economy. Government policies on welfare behavior and monetary policy are
now being understood as the outcomes of intricate political processes that require the
researcher to understood the subtle incentives facing government agents. Increasingly,
researchers are trying to understand the determinants of police behavior. This is
particularly important in developing countries where police officers often appear to be
only barely controlled by the electorates that they are supposedly serving.

A third major topic is the connection between social forces and crime. Traditionally, the
economics of crime has focused on estimating the impact of deterrence. While this
literature documents an almost undeniable impact of deterrence on crime, this literature
also finds that the bulk of the differences in crime rates across places and individuals
cannot be explained by deterrence related reasons. Indeed, factors relating to the
opportunity cost of time also can explain only a small amount of the variance of crime
rates over time and space. Researchers have therefore focused on a variety of social
forces ranging from peer effects to family structure to try to understand the variation in
the levels of crime rates. Lloayza and Lederman (1998) have shown the importance of
inequality in explaining crime rates across countries. Their work suggests that social
causes of crime are likely to be as important in developing countries as they have been
shown to be in more developed countries.

While these are the three most important topics for future research, there are also a
research number of secondary topics that are getting increasing attention in the literature.
Ideally, this research can also present some evidence on these topics as well. While I
would hope that all papers would make some attempts to address the three major topics
(the elasticity of crime with respect to deterrence, social causes of crime and the
endogeneity of policing), I would imagine that these minor topics will only be addressed
sporadically by individual papers.

Two interrelated topics are the social costs of crime and the returns to crime for
criminals. The first question is important because it enables us to gauge the extent to
which resources should be allocated to fighting crime. Understanding the returns to
crime is also important for understanding what determines the prevalence of crime over
space. For example, one reason why inequality might influence crime (above the role of
poverty alone) is that the presence of the rich may increase the returns to crime. The
topics are closely related because it is often thought that goods stolen by criminals should
be included in the social costs of crime. This is not technically correct, but to the extent
that the value of goods stolen relates to the returns of crime, then the value of goods
stolen helps us to understand the social losses in terms of the criminals' time spent.

A third minor topic is the function of prisons. Prisons have the capability of serving, like
fines or corporal punishment, as a deterrent against crime. Prisons also incapacitate
criminals and this may also be advantageous. Finally, prisons may also rehabilitate

criminals, but this is less clear in theory and empirically. Evaluating prisons is an
important topic for future research.

A fourth topic, which has particular relevance in Latin America, is the role of narcotics
and drug gangs. New papers (Akerlof and Yellen, 1994, Levitt and Venkatesh, 1998)
have begun to try to understand gangs within the United States. The role of gangs in
Latin America is likely greater, especially because of their political power in some
countries.

Finally, there has been a recent debate in the United States on the function of weaponry.
Criminals of course use guns and the presence of weapons may indeed increase the
numbers of homicides and the overall level of crime. However, guns are also used by
law abiding citizens to protect themselves and may in fact deter crime (see Lott, 1998).
Theory and U.S. empirical work are both ambiguous. Perhaps research in developing
countries will be more effective at resolving the issue.

The final section of the paper gives a blue print for each of the papers. I emphasize the
importance of creating analysis of victimization studies for each country and trying to use
community level characteristics in analyzing these studies. Of course, this blueprint is
meant to serve as a minimum for each study and hopefully these studies will go far
beyond these blueprints. In summation, the new interest of the World Bank in crime in
developing countries offers a tremendous opportunity for understanding crime in general
and the particular forces that drive crime in developing countries.

II. The Becker Model-A Quick Review

I here quickly review the basic Becker model where individuals decide whether or not to
commit crimes. There are several different versions of this model. In this case, I review
the model where individuals are making an occupational choice of the legal vs. the illegal
sector. One can write down an extension of this model where individuals can choose on
both the extensive and the intensive margin. In other words, career criminals choose the
amount of crimes that they want to commit and legal sector workers may also decide to
commit some crimes. However, for simplicity in this case, I just consider the discrete
choice of legal vs. illegal sector in this review.

In this model, all potential criminals have a benefit of crime (denoted B) which is meant
to include both the financial and any potential psychic benefits of crime. An individual
commiting crime faces costs from law-enforcement activities. If individuals are riskneutral, these costs will just equal the probability of punishment (denoted "p") times the
costs of punishment. The costs of punishment come from the length of sentence and are
denoted "C". Thus, the net expected returns from crime equal B-pC. This return will
compared with the returns from the legal sector, which are denoted "W". Thus, an
individual will become a criminal:

(1) B-pC>W

If everyone were identical, then everyone would choose either the legal or illegal sector.
To create a realistic situation, we assume that wages equal W +w, where w is distributed
throughout the population with a cumulative distribution function F(w) and a density
f(w).

The marginal criminal is found so that W=B-pC, which means that w*=B-pC-W, where
w* indicates the idiosyncratic wage of the marginal criminal. The total number of
criminals will be F(B-pC-W) which represents the total number of people whose legal
returns are less than W+w*. Of course, in reality there is heterogeneity in B (and
possibly C as well), so that criminals are not strictly the members of society with the
lowest wages in the legal sector.

Standard differentiation tells us that the number of criminals rises as B rises, falls as p, C
or W rises. These basic comparative statics are the central elements of the economics of
crime and punishment. Crime reduction can occur through reducing the benefits of crime
or raising the probability of being caught or the costs of punishment conditional upon
being caught. Raising the wage in the legal sector is also predicted to reduce the number
of criminals.

In this framework the effect of increases in the probability of arrest or the punishment,
conditional upon arrest, will be the same. This implication leads to the famous result of
Becker's that as long as the government has access to socially costless means of
punishment (perhaps fines), then optimally the government should save on policing costs

and reduce the probability of arrest simultaneously increasing the size of punishment.
There is a fair amount of evidence in the U.S. (Grogger, 1991) that increases in the
probability of arrest tend to be more effective than increases in the time spent in prison.
In principle, this might occur because criminals are not risk neutral or because criminals
are very impatient. Finally, in this model the role of arrest and punishment comes
exclusively through deterrence. If these factors are operating through incapacitation (i.e.
locking up particularly dangerous people), then the probability of arrest and the size of
punishment might not have equivalent effects.

III. Three Critical Questions in Law Enforcement

In this section, I overview what I consider the three most important questions in current
research on the economics of crime and punishment.

a. The Efficacy of Deterrence

The previous section discussed some potential policy tools that are available to the
government to restrict crime. In principle, the government might attempt to limit the
benefits to crime or raise the legal wage. However, historically the most important
weapons against crime have been the direct tools of arrest and punishment. Before the
19th century, serious crimes were generally punished with death or other forms of severe
corporal punishment (see Foucault, 1995). Lesser crimes were punished with public

humiliation and lesser forms of corporal punishment. In some societies, fines were also
used (even occasionally for murder).

After 1800, prisons became the standard form of punishment for almost all crimes,
throughout Europe and the U.S.. There are several possible explanations for the
evolution. Some theorists credit the increasing distaste of the public for painful, public
physical punishment. Alternatively, other theorists have argued that the use of prisons
was part of the common movement to restrict the power of the state in imposing
punishment. This vein of thought emphasizes that the restrictions on cruel and unusual
punishment were part of the Bill of Rights, which are generally meant to restrict the
powers of government. A final theory is that incarceration makes more sense as
professional criminals replace amateurs. When crimes are committed as random acts by
generally productive persons, it is very costly to engage in incarceration. However, as
crime became more professional, incarceration leads to social gains as criminals are
incapacitated.

The modern economics literature on the efficacy of forms of punishment began in the
1970s. Exemplars of this literature include the early work of Isaac Ehrlich (1973, 1975),
which generally found quite significant deterrence elasticities. The critical parameter
being estimated is the elasticity of the quantity of crime with respect to expected size of
punishment. Ehrlich (1973) estimates this elasticity at -.5 using ordinary least squares.
Mathieson and Passell (1976) examined sub-city geography and found a particularly
large elasticity of -3. This literature represented an advance over previous empirical

work, which generally used case studies and performed empirical exercises like
comparing neighboring states which had differences in the level of punishment. The
new economic literature used both cross-sectional and time series regressions and
controlled for a rich variety of control variables, on top of deterrence variables.
However, as early as the mid-1970s, Taylor (1978) was focusing on the problem that
punishment levels are endogenous with respect to the level of crime.

There is a particularly rich literature from this period on the impact of capital
punishment. Ehrlich (1975) gives results suggesting a major impact of capital
punishment using variation from U.S. states. Archer and Gartner (1984) examine cross
national evidence and find no negative impact of capital punishment on murders. Given
the endogeneity problem, we are unlikely to have a compelling finding on the impact of
capital punishment any time soon.

All of these estimates suffer from a basic identification problem and recent empirical
work on deterrence has focused on solving this identification problem. The problem is
that the level of punishment is rarely determined randomly. Instead, governments choose
the level of policing and the level of punishment in response to local factors such as the
amount of crime. Thus, for example there is a very high positive correlation between the
number of police per capita and the amount of crime per capita. Should we infer from
this that police cause crime? Probably not. A better interpretation is that localities vote
more on police when they have a higher crime rate. This problem exists with almost all

deterrence variables. As arrest rates and punishment levels should be a function of the
level of crime, all coefficients are expected to be biased.

In the mid-1990s, Steven Levitt has revolutionized the field of deterrence elasticity
estimates by writing a series of papers on the impact of deterrence. Levitt uses clever,
exogenous sources of variation that should determine the level of policing, but should not
themselves be a function of the level of crime. For example, Levitt (1996) uses ACLU
cases against prison overcrowding to look at the effects of releasing criminals from
prisons. These ACLU cases are filed against prisons and if they succeed, they generally
lead to a significant release of criminals. In this paper, he finds that increasing flow of
criminals out of prisons due to these cases significantly increases the crime rates.

Levitt (1997) uses the fact that politicians tend to spend more on policing during election
years. He uses the variation created by electoral cycles across cities (correcting for
general time effects and city effects) to assess the impact of more police on the levels of
crime. He fields modest, but quite significant impacts of policing on the level of crime.
Elasticity estimates generally range between .1 and .5, which are in line with the findings
of Grogger (1991). Ayres and Levitt (1997) examine the introduction of Lojack across
cities. Lojack is a technology that emits electronic signals from stolen cars and enables
police to catch auto thieves. Again there is a substantial amount of crime reduction
created by the introduction of Lojack.

These papers demonstrate both the basic approach and the difficulties in doing work on
the elasticity of crime with respect to deterrence. In principle, the best forms of
identification can come with the aid of government. If governments can actually be
convinced to randomly allocate policing resources across areas of a country, then very
convincing estimates of the effects of policing can be estimated. While it will certainly
be useful to estimate elasticities in the classic manners discussed above (i.e. regressions
run across space of the level of crime on the level of policing), the results will be stronger
if exogenous sources of variation can be found. Furthermore, given the endogeneity
problem it is crucial that ordinary least squares estimates be treated skeptically.

b. Endogenous Law Enforcement and Punishment

The principal behind the identification problem is that law enforcement responds to the
level of crime. This is one example of the many reasons why we must stop viewing law
enforcement as a black box that just serves the needs of the people, or maximizes some
social welfare function that we have in mind. Increasing, research is focusing on the
behavior of the various actors in law enforcement, which can subvert even the most wellmeaning policies. This is not to say that these law enforcement officials are in any sense
evil, but they respond to their own incentives which are not necessarily the incentives that
benevolent social planners would want them to have.

If this issue is severe within the United States, it is far more so in developing countries.
Many police forces in developing countries are either corrupt or committed to their own,

occasionally brutal policies. Anecdotes (and survey evidence) documenting extremely

high levels of police extortion abound. Judges are often unreliable in developing
countries. In many of these countries, it would do great justice to the truth to just assume
that the police force and judiciary will simply obey the policy dictates handed down from
on high.

The U.S. economics research on the objective functions of police and the judiciary is
much more limited than the research on the efficacy of deterrence. Posner (1994) wrote a
pioneering article attempting to understand what it is that judges maximize. Kessler and
Piehl (1997) examined the extent to which juries and judges undo mandatory sentence
guidelines (a typical on-high policy rule) by changing the charges the criminals face.
Glaeser, Kessler and Piehl (1997) show the Federal prosecutors, who have more authority
than state prosecutors, prosecute criminals with more income and higher levels of human
capital. We argue that this relates to the career concerns faced by prosecutors who want
to distinguish themselves by prosecuting high profile criminals.

There is also a literature on the determinants of punishment. Friedman (forthcoming)

argues that one reason why punishments are not more severe (recall that Becker, 1968,
suggested that extremely high penalties would be optimal) is that policemen can't be
trusted with too much power. High penalties enable the police to extract high bribes and
terrorize the populace. As a result, less severe penalties are optimal when the behavior of
police are taken into account.

Glaeser and Sacerdote (1999) examine the factors that are associated with higher levels
of punishment for murderers in the United States. We find that people who kill AfricanAmericans get shorter sentences. Murderers of women get more severe punishments.
This is true even of people who are guilty of vehicular homicide where the victim is
presumably random. The tendency to punish people who kill African-Americans less is
lower in those counties with demographics that are associated with more pro-Black
attitudes. These behavioral patterns presumably illustrate the tastes of Judges who make
most of these sentencing decisions.

The total U.S. research in this area is newer, less comprehensive and less convincing than
the research on deterrence. However, this is clearly a particularly hot area for new
research and hopefully the World Bank's research on developing countries will
particularly focus on this area.

c. Social Explanations of Crime

The Becker model of crime suggests that the opportunity cost of time will directly effect
the propensity to engage in criminal activity. As such, we expect there to be an increase
in the amount of crime as the opportunity cost of time declines. There is a long literature
on the connection between either unemployment or wages and the amount of crime.
Early work on this theme includes Witte (1980) which finds that crime declines as
unemployment rises

Freeman (1986) looks at the National Longitudinal Survey of Youth and examines the
factors that determine the probability of going to jail. He finds that youths in poverty are
more likely to end up being arrested or going to jail than youths who are wealthier.
Surprisingly, he finds that church attendance is a particularly strong predictor of the level
of crime. Indeed, this result echoes a basic finding of the crime literature. Measures of
the opportunity cost of time do predict crime, but not as effectively as other more
sociological variables.

Even with the basic opportunity cost of crime variables, there is always a problem in
interpreting the coefficients. There may be a negative connection between an individual's
wages and his proclivity to crime, because higher wages mean a higher opportunity cost
of time. Alternatively, more successful people might just have a lower proclivity towards
crime because they are healthier emotionally or are better-integrated into society. At the
community level, higher wages may create less crime but on the other hand higher crime
may deter economic development and lower wages. As such there is an endogeneity
problem with the level of wages. Gould and Weinberg (1999) address this problem and
show that even dealing with this causality problem there is still a negative connection
between wages and crime.

However, increasingly there is a body of work documenting the importance of social

factors in explaining the level of crime. As mentioned earlier, Freeman (1986) shows a
strong connection between church attendance and crime for disadvantaged youths.
Glaeser and Sacerdote (1999b) show that the most important variable which explains the

variance of crime rates across cities within the United States is the percent of single
parent families in the population. This survives instrumenting for this variable with
welfare payments in the states.

Case and Katz (1991) examine criminal activity (among other things) in a survey of
disadvantaged Boston inner city youth. They find that individuals' tendencies to engage
in crime increase substantially when peers are also engaging in crime. This survives
instrumenting for the crime rates of peers using exogenous characteristics of those peers.

Glaeser, Sacerdote and Scheinkman (1996) address the issue of the high variance of
crime rates across space. We argue that these crime rates are evidence for the existence
of social interactions between criminals. In other words, if one person's criminal
activities increases the benefits (or decreases the costs) of his neighbor engaging in crime
then we should expect to find a high variance of crime rates over space. We present a
methodology for using the variance of crime rates over space to estimate the extent to
which there are social interactions in crime.

IV. Other Important Questions

This section briefly surveys some of the other important issues in the economics of crime
literature.

a. Measuring the Costs of Crime

For policy purposes, it is frequently important to understand the costs of crime.

Generally, there are two approaches. One approach is an accounting exercise where
researchers just try to add up all of the losses from crime. Donohue and Siegelman (1998)
is an example of this sort of exercise. The largest loss category is usually the values of
lives lost due to murder. Other straightforward costs include the amount that is spent on
crime prevention. These costs would include the amount that is spent by the government
on police and the judiciary. Crime cost estimates have generally been unable to quantify
the social costs that accrue from underinvestment in the legal sector because returns are
appropriated by criminals.

There is a debate about whether or not the dollar value of goods lost should be included
in the social costs of crime. If crime meant that the value of the goods lost exactly
equaled the value of the goods received by the criminal, then there is, in fact, no social
cost from the redistribution that crime creates. Of course, generally the goods are valued
less by the criminals who take them than by the people who lose them so there are social
losses. The value of goods taken should in equilibrium by equal to the opportunity cost
of the criminals time and the time of the criminals that is spent on crime instead of legal
activities does represent a real social welfare loss. For this reason, it may be correct to
include the value of goods lost as a social loss.

Another approach to estimating the social costs of crime is to examine housing price
hedonics. Housing prices reflect the willingness of individuals to live with community

level characteristics. Thus the difference in prices between a high crime and a low crime
community will reflect the willingness of consumers to live in a high crime area. A
pioneering paper in this area was Thaler (1975). Naturally, this type of research relies
upon good housing price data and that unobservable neighborhood and housing
characteristics are not strongly correlated with the neighborhood level of crime.

One advantage of the housing price data is that it can actually tell us about the value of
marginal reductions in the level of crime. Most reasonable policy interventions will
certainly never lead to a complete eradication of the level of crime. Therefore these
accounting exercises don't always make much sense, if they are trying to estimate the
total costs of crime. The goal of this type of research is to estimate the gains in social
welfare from a marginal reduction in the crime rate.

A final important issue is the extent to which criminal activities harm the career prospects
of young men. Freeman (1986) investigates the general problems of crime and the career
paths of young men. Grogger (1995) presents the strongest evidence on the career costs
of going to prison.

b. The Function of Prisons: Deterrence, Incapacitation and Rehabilitation

In principle, prisons can serve three functions for crime prevention. The literature on the
economics of crime has focused on the role of prisons as a deterrent. However, prisons
will also serve to incapacitate criminals and lastly prisons, at least in principle have the

capability of rehabiliting criminals. Rehabilitation can only be understood as serving to

change the costs and benefits of crime so that crime becomes less likely in the future.

The literature on deterrence has generally not found much support for the idea of
rehabilitation. Needels (1996) presents a particularly detailed survey of the amount of
recidivism and shows strikingly high levels of continued criminal activity for released
convicts. This is in line with previous findings which almost always show that the
propensity for crime does not fall with prison. Indeed, many others have suggested that
prisons act to train criminals and reduce their suitability for legal employment which
would suggest that prison sentences create criminals rather than rehabilitate them. The
only cases where we know that something like rehabilitation can occur is when criminals
get extremely long sentences. As it is well known that the propensity towards crime falls
sharply among older men, very long sentences can in some sense rehabilitate criminals.

The relative importance of deterrence and incapacitation depends in theory on the

heterogeneity among criminals. In a world of homogenous citizens, then imprisoning a
group of criminals will have little effect on the level of crime. New criminals will just
replace the old ones. When there is a great deal of heterogeneity then locking away the
particularly crime prone may indeed act to reduce the level of crime.

Levitt (1998) tests the relevance of deterrence vs. incapacitation by examining the impact
of arrest rates in different crimes. A higher arrest rate in one crime (say auto theft) would
tend to increase the crime rate in robberies if deterrence is important. The idea is that

criminals will tend to substitute out of auto theft into the now cheaper form of crime:
robbery. Conversely, if incapacitation is important then higher arrest rates in auto theft
will lead to lower levels of robbery as long as some auto thieves also engage in robberies.
Levitt finds much stronger evidence for incapacitation than for deterrence.

c. Gangs and Drugs

Gangs appear to be associated with a significant amount of crime in the United States.
The organization of young men into organizations that exist to protect territory, engage in
various crimes and sell drugs is a major feature of many American cities. While no one
has produced a definitive paper linking the level of gang activity with the level of crime,
two recent papers have come forth attempting to understand the level of gang activity.

Akerlof and Yellen (1994) follow the ideas of sociologist Morris Jankowski and produce
a formal model of gang behavior. They suggest that gangs provide services for their local
communities and are protected by their communities from the police. They exist in part
to fill holes in services that might alternatively be produced by the government. For
examples, residents of some communities do not trust the police and gangs are seen as
more reliable providers of public safety.

Levitt and Venkatesh (1999) have acquired the finances of a particular gang's activities.
They find that there are large revenues acquired by the leadership of the gang but regular
members of the gangs only earn modest amounts. Furthermore, they find that gangs pay

more for soldiers during periods of gang wars, supporting further the economic concept
of compensating differentials. Most importantly they have provided an invaluable guide
into the inner working of a gang. Acquiring such information outside of the U.S. would
be particularly useful.

Research on gangs, and on drug trafficking, is really in its infancy within the economics
of crime literature in the U.S. However, given the importance of gangs and drug
trafficking in many developing countries this seems like a particularly promising area for
future research. At the least, work in this area should attempt to produce research along
the lines of Levitt and Venkatesh (1998 that gives us some idea of how these gangs
operate.

d. Guns and Weaponry

A major controversy is the extent to which the cheap availability of guns increases or
decreases the levels of crime. While relatively systematic research on this topic had been
done prior to the 1990s, since 1996 there has been a veritable explosion of research on
different gun laws. In a particularly controversial study, John Lott presented evidence
supporting the idea that a greater availability of guns reduced rather than increased the
level of crime. The bulk of his work, which has seen been published in a volume More
Guns, Less Crime, used laws which are passed requiring counties to allow individuals to
buy guns. Lott finds that the level of violent crime appears to decrease in counties that
have made guns more available.

The basic economics of the controversy rests on the idea that guns will increase crime
when they are made available to criminals. However, as guns are made available to lawabiding citizens, the law of crime may decline as criminals are afraid to prey upon armed
victims. Perhaps the most convincing piece of evidence in Lott's study is the relative
prevalence of "hot burglaries" in Europe relative to the U.S. "Hot" burglaries are defined
as burglaries that occur when residents are at home. Lott suggests that "hot" burglaries
are rare in the U.S. because burglars fear armed homeowners more than they fear the
police. Indeed, in this case anecdotal evidence (interviews with criminals) strongly
supports the importance of this idea.

However, there are many other cases where the presence of weaponry appears to lead to
more bloodshed. It is hard to imagine the deadliness of American inner city gangs
without the weaponry that they have recently acquired. Levitt and Donohue (1998)
present an elegant model where the increased presence of weaponry leads to more
conflict. While this have never been shown, it seems reasonable that weapons will act to
increase crime if they are made particularly available to crime-prone citizens. Weapons
may decrease crime if they are carefully made available only to those who are unlikely to
be criminals. Of course, such differential policies become tricky to enforce as long as
resale of weapons is a possibility.

Glaeser and Glendon (1998) suggest that the presence of guns in a culture changes far
more than just the level of crime. They suggest that areas of the U.S. where guns are

widespread have developed a tradition of private justice substituting for state justice.
This may be good or ill, but policies towards weaponry must face the fact that when
weapons are common the entire structure of the society often changes.

e. The Returns to Crime

A final area of research is to actually estimate the determinants of the returns of crime.
There is very little research in this area. Glaeser and Sacerdote (1999a) attempt to
understand whether big cities increase the returns to crime. We argue that proximity to
the rich may make increase the returns to crime. The evidence of Jarrell and House
(1990) shows the presence of strangers (who are presumably targets for crime) increases
the amount of criminal activity.

Indeed, there is a substantial connection between city size and the average value of goods
stolen in a crime. This fact appears in both the Uniform Crime Reports when the value of
goods stolen is regressed on average city size and in the National Crime Victimization
Survey. This research is limited because it only examines the role of city size and many
other factors might also influence the returns to crime.

Furthermore, the equilibrium average level of goods stolen is a dubious measure of the
actual returns to crime. The average level of goods stolen is an equilibrium quantity.
There are certainly cases where an overall increase in the availability of victims means
that more and more marginal crimes are committed. Thus the average quantity of goods

stolen may in fact decline with the availability of victims. Alternatively, in cities where
crime is particularly hard, only the most professional criminals might engage in crime.
As such, in those cities the average value of goods stolen might be very high.

In principle, research in this area might be better if it focused on variables which clearly
predicted a greater availability of increased targets and examined the effects of these
targets on the amount of crime (and of the value of goods stolen). However, it is hard to
think of exogenous factors which would differ across space and would increase the
returns to crime. As such, this must remain an area of research that is truly in its infancy.

V. Overview of Data Sources

In this section, I review the basic data sources that are used in empirical work on crime.
The first type of data set is the victimization study. This is unquestionably the primary
workhorse of measuring crime. To the extent that a hot spots index will be created, at
least 50 percent of that hot spots index should be based on mini-victimization studies. To
be really useful, this sort of study must have geographic identifiers which enable the
research to link the individual to the community in which he lives and was robbed. Then
the researcher also needs to know attributes of that community. These attributes may be
drawn from broader national surveys or national census.

The second type of data set relies on official crime statistics. This data set is useful but
relies on the quality of arrest and reporting data. With this sort of data at the locality

level, one might run regressions connecting city level characteristics with the level of
reported crime. However, reporting (and recording) problems in many of the countries
that we are discussing is so problematic that this type of survey becomes difficult to use.

The third type of data set involves homicide (or intentional injury) data from hospitals
and morticians. This type of data is generally more reliable than official crime statistics.
It is also less sensitive to changing definitions of crimes across cultures. This should also
be part of the hot sports index. In principle, data on the victim (and the perpetrator when
the case is brought to trial) can also provide a rich set of stylized facts about the natural of
homicide in the country in question.

A final data source is the offender survey. This type of survey can both be taken through
traditional survey methods where respondents are asked if they have been arrested (or
less reliably if they have committed a crime). Alternatively, these surveys can be done at
the point of arrest. For that type of survey to be effective it must be assumed that the
police arrest a relatively random sample of the population of criminals. When this type
of data set is merged with data on the population at large, then it is possible to identify
how criminals differ from average cities.

The most interesting versions of these surveys have often been done with prison inmates.
DiIulio and Piehl (1991, 1995) have presented a fascinating series of facts about repeat
offenders and other aspects of criminal life through the use of prison inmate surveys.
Chaikin (1980) was an early, important form of this type of survey.

In addition, anecdotes and case studies may present valuable information on questions
where data is hard to come by. All of these data sets together help to form a picture both
of the level of crime and to identify potential causes of crime.

VI. Conclusion

In this essay, I have argued that there are three particularly important areas for research
on the economics of crime. First, the actual effect of deterrence on the level of crime
continues as a central question for research. All work on crime in developing countries
should at least attempt to address that question. However, since in practice the level of
deterrence responds to level of crime, raw correlations between the level of deterrence
and the amount of crime are unlikely to yield unbiased estimates of the impact of
deterrence.

Second, it is critical to understand the true nature of law enforcement officials and what
determines their behavior. It is wildly implausible in most developing countries to
assume that the police or the courts just act to implement the public will. Because these
officials must be used to stop crime, it is particularly important to understand what they
maximize and how they operate.

Third, the levels of crime are not just determined by the level of deterrence. Indeed, in
most studies deterrence is important but it can explain at best a tiny fraction of the overall

level of crime. In principle, social factors (such as family disorder) can explain a
significantly greater amount of the variance of crime across space. Research is
increasingly attempting to understand these factors.

It is particularly exciting that the World Bank is addressing the topic of crime, which is
so central to the quality of life of so many people. I suspect that this research will yield
results that are valuable not only in developing countries but in the U.S. as well. This is
an especially important and exciting prospect for research on the economics of crime.

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