Review of Literature
2.2 Studies using economic approach to explain criminal behaviour
The inspiration for analyzing crime determinants through economic approach came after the pioneering work of Becker (1968). His effort was to evolve a conceptual paradigm in analyzing the issue of crimes in terms of incentives. Becker through his distinguished paper on the behaviour of a criminal had talked about looking at a criminal as an individual with rational economic behaviour. Thus Becker‘s model is in relation to a rational choice to see how the potential criminal weighs costs and benefits before making a decision to commit crime, thereby providing a theory of criminal behaviour that was just an extension of economists‘ choice analysis and not dependent on notion of anomie or lack of appropriate psycho-physical traits .
In fact in Becker‘s study and in the analysis of Ehrlich (1973) potential criminals are assumed to be guided by the economically rational behaviour of utility maximization. For Ehrlich (1973), a potential offender‘s participation in criminal activities would depend on his return on earnings whether legally or illegally, the probability and severity of penalty as well as his chance of remaining out of employment in legal market.
Thus their efforts led to the initiation of a framework based on economic understanding for assessing the criminals‘ response to incentives arising out of the factors affecting costs and benefits which may be in terms of rate of unemployment, income level, unequal distribution of income, demographic components, chance of getting apprehended, and severity of punishment (Han Lu, 2009 ; Oliver, 2002). One can understand how law enforcement and socio-economic factors affect criminal behaviour by examining the significance of the above
mentioned determinants. All these led to the conclusion that if ‗prices‘ for committing crimes are made higher through more efficient policing, it would be possible that the criminal behaviour is lessened through lowering of incentives. It is also demonstrated that there is an inverse relationship between the labour market opening and criminal behaviour because it is expected that the lower the employment possibilities lower will be the opportunity cost of committing a crime by a potential offender. This cost-benefit approach has been the mainstay of economists' focus on crime study where the special focus is based on rational seeking behaviour.
Lau and Hamzah (2012) have noted that Ehrlich (1973) improved Becker's model in several ways. First, the criminal can now make a comparison between costs and benefits from legal and illegal initiatives. Moreover, the model brings in the issue of participating in illegal actions vis a vis general occupational alternatives. Also it is important to note that the model has introduced the difference in effects of deterrence and prevention through imprisonment as a means of punishment.
While discussing the distinguishing features of this approach, Levitt et al (2006) have identified a number of characteristics which make it stand distinctively from other approaches of social scientists. The economic approach focuses on the role of incentives with regard to the question of how an individual behaves. It is said that individual behaviour based on his choice and expected outcomes would explain the crime rates through aggregation of such individual behaviour (Stephen Machin et al 2014). The basic point here is how a criminal or a victim of the crime or a member of the law enforcers behaves in decision making would be based on incentives. This points to one of the basic assumption in economic theory that human behaviour would like to go for utility maximisation subject to constraints while deciding its behaviour. That is the individual would make a comparison between the expected costs and expected benefits from a potential crime and he could commit the crime only when the expected benefit outweighs the expected costs of the crime situations. Thus for an economist, the crime is like any other economic activity which when performed would necessarily require that time has been spent in the effort yielding tangible benefit. Therefore economic theory of crime begins from the basic assumption that crime is not the result of individual character or culture, but it results from the decisions they make on the basis of the response to the available choices (Cook & Ludwig, 1976).
As mentioned by Lauridsen et al (2013) the decision to purchase a commodity and committing a crime is identical which means the inverse relation between quantity demanded of a good and price holds good in case of crime too i.e. if the ‗price‘ of crime is increased, ceteris paribus, the crime rate would be decreased like in any other economic decision. This led to the conclusion that if ‗prices‘ for committing crimes are made higher through more efficient policing, it would be possible that the criminal behaviour is lessened through lowering of incentives. It is also demonstrated that there is an inverse relationship between the labour market opening and criminal behaviours. Because it is expected that the lower the employment possibilities lower will be the opportunity cost of committing a crime by a potential offender. This cost-benefit approach has been the mainstay of economist' focus on crime study where the special focus is based on rational profit seeking behaviour.
It is to be noted that the "cost" of crime to criminals in the economic approach consists of two aspects. First one relates to the income foregone by the individual while spending time during involvement in crime. In an economist‘s jargon this is what is known as the opportunity cost. The second type of the cost is in terms of the time he expects to be behind bars by the justice system because of the offence committed (Denny, et al 2004).An important point mentioned in their study is the distinction between the ―Expected punishment" and the actual amount of imprisonment the convict spends in prison. In practice lot of crimes do not result in arrest, and even there are cases where after arrest also prosecution does not take place due to many legal loopholes and faulty investigation. There are also possibilities of some convicts receiving sentences of non custodial nature. Therefore punishment, from the criminal's viewpoint, is a probability, that he would assign, not a certainty.
The criminal justice system tries to make the expected costs of committing a crime much higher than the commensurate benefits expected from the illegal activity. Thus, a crime will be committed when the criminal‘s willingness to pay exceeds the price that society charges. Thus in other words, there are three essential aspects in Becker‘s model - the supply of criminal activity, the quantum of punishment and the probability of arrest and conviction .The last two points refer to tools for deterrence of crime. If there is more likelihood of crimes being detected or being awarded heavy penalty the supply of this crime will be lower.
Thus the supply function has a negative slope in relation to the two deterrence factors.
Economic approach to crime study has drawn lot of attention from the policy planners. An important aspect of economic approach is that it would try to identify how a particular set of crime management policies have a causal impact on crime rates. This is because it is postulated by the economic model that criminal behaviour of an individual is not determined by underlying social conditions, but rather it is the outcome of individual choices influenced by perceived consequences. If a proper crime prevention policy of the government can change those consequences, then there would be behavioural changes for the individual (Cook et al 2013).Such a crime study would also explore the broad policy implications. The economist would like to use the cost benefit analysis so that the calculation of social desirability of a program is possible by looking at the cost-benefit aspects. The normative framework provided by the economists in their crime study approach encourages processes through which governmental interventions can be evaluated for its effectiveness. In their approach to crime study the economists have brought in sophisticated quantitative tools to explain the causes of crime in their normative framework that they used to analyse the various implications of relevant laws and the methods of crime prevention ( Machin, et al,2014 ,Cook et al 2013)
However it would be appropriate to mention that because of lack of micro data on individual behaviour it is difficult to validate Becker's model .Therefore, the model is put to test by macro data. Normally economists would construct a model based on micro foundations of a typical agent maximising individual wellbeing. However, if there is not much of heterogeneity in the data, then even aggregate data can be used without worrying much about aggregation bias (Allen, 1996, Repham et al,1999). Economic approach also assumes full information, but it has been mentioned by economists that the consequences of criminal behaviour along with the risks involved like arrests, punishment etc. ,may not be known fully to the offenders in many cases.
It is also felt by some authors that these approaches have not adequately analysed the causes and consequences of crime. ―Despite long years of study and research and the publication of tons of literature in some of the western countries, efforts to know the causes of crime have not been very fruitful, though some helpful insights have been acquired‖ (Nagpal H, 1976). It is also argued that these approaches to study of criminal behaviour are more influenced by the development in the western societies. They are of the view that all these explanations evolved from the social history of the developed westerns
nations which had seen rapid urban growth and social disorganisation. Since countries like India have markedly different social structure, culture and living which are seen to have developed into modernity with traditional components coexisting there is a need for separate approach to look at the motivations for criminal activity. They tried to look at the nature of criminality in India as the outcome of complex interplay of socio-cultural, political and historical variables. Their study was based on interviews of convicted offenders of Tihar Jail, Delhi. They found that reasons for criminal behaviour may be explained by variables like neglected childhood, poor education status, labelling effect arising out of criminal association, weakening of the traditional bonds etc. In fact, their study points to the need for a special approach to the criminal behaviour of people in developing countries like India different from the Western countries (Kumar et al, 2008).