Econ of Crime HWs

All questions are based on online resources under the corresponding lesson. An excellent answer should be 2-3 paragraphs long, as detailed as possible, and should include a REFERENCE to or a QUOTE from your readings, and a NUMBER or an EXAMPLE to support your point of view.  Answers to more than 6 questions count as extra credit.  Answers that are short and incomplete earn partial credit.

Homework 1   Answer any 6 questions 

1.  Study US Crime Statistics using links on the course webpage.  What are the main sources of US crime statistics? Give examples of data that can be obtained from these sources.

2.  Record 5+ recent numbers that you consider important for understanding the current crime and punishment situation in the US.  These can be murder rate, arrests, incarceration rate, expenditure on criminal justice, etc. Briefly explain what each number represents and what source it comes from.

3.  Examine some historical statistics. How did crime and punishment change over the last 30 years?

4.  Does crime situation vary by state?  To answer this question, you can name states with the highest and lowest crime rates. Be sure to mention what indicator of crime you are using.

5.  How does US compare to other countries in terms of murders per capita, police per capita, number of prisoners and any other indicator of your choice?  Quote numbers in your comparisons.

6.  Find 3 recent news articles related to crime and punishment.  Comment briefly: what issue, problem or trend does each article describe? Possible issues include gun control, white collar crime, public spending on police, corruption, racial profiling, etc.

7. Explain why it is better to use crime rates rather than crime counts when comparing different countries, states, cities and  years. Give examples.

8.  Describe how crime is a social contract that can be changed.


Homework 2            Answer any 6 questions 

1. Find a definition and an example for any 4 terms below:

  • Victimless crime
  • Violent crime
  • Organized crime
  • Property crime
  • White collar crime
  • Aggravated assault
  • Crime rate
  • Public criminal justice spending
  • Criminal justice system
  • Economics
  • Rational choice
  • Murders per capita

2. Opportunity cost is the next best alternative. What might be the opportunity cost of the following decisions:

  • a. You taking this course.
  • b. A 20-year-old steals a car and spends a year in jail.
  • c. Local government decides to hire 10 more police officers.

3. The central assumption of economic theory is that humans are rational.  Rational people make choices by comparing costs and benefits of various alternatives and selecting the one with the highest net benefits. Give one example of a cost and benefit decision you made recently.  Compare costs and benefits. Are you a rational person?

4. David Friedman’s book chapter on “Rational Criminals” illustrates how a criminal makes choices by comparing costs and benefits, and how a potential victim can increase the cost of a crime or reduce the benefit and thus prevent a crime from happening.  Outline the main ideas of this article.

5.  Using cost and benefit analysis, explain why a particular individual would be more likely to steal from someone they don’t know than they would be to steal from someone they know and like?  Hint: compare costs and benefits in each case and prove that stealing from a stranger has higher net benefit.

6.  A trip to Las Vegas would cost me $200.  There is a 5% chance that I will win $10,000 and a 95% chance that I will lose $300.  Calculate expected gain or loss, do the cost-benefit analysis and help me decide:  Should I take the trip? Hint: yes, if expected benefit is higher than expected cost.

7.  Suppose a thief stole a car valued at $20,000 from your neighbor’s driveway. The thief spent $100 on tools in preparation for his act. During the day the thief works as a laborer and earns $20,000/year. The thief understands that the probability of being caught is 10%, in which case he will spend $2,000 on court fees and 6 months in jail.  What are the benefits and the costs of this crime for the thief?  Is this thief a rational criminal? (compare costs and benefits; do benefits exceed costs?) .  Suggest a prevention policy or strategy that could change the thief’s cost-benefit decision to steal a car.  Remember that a good policy should either reduce benefits or increase costs for the criminal.

8. From the point of view of a student, consider costs and benefits of cheating. You are deciding whether to buy a final research paper for this course online, or write your own original paper.  Describe your benefits of buying a paper, and your immediate and potential costs. Compare the benefits and costs in term of money.  What factors make students cheat more?  How can a school encourage good behavior and discourage this kind of cheating?

9. Explain how the marginal cost of crime has changed in recent decades and why this probably has been the most critical factor in declining rates of criminal activity.


Homework 3    Answer any 6 questions 

1. Define any 4 of the following terms. Illustrate it with an example, where appropriate.

  • Capitalism
  • Market
  • Supply
  • Demand
  • Equilibrium
  • Normal goods
  • Inferior goods
  • Substitutes goods
  • Complementary goods
  • Competitive market
  • Monopoly

Use your knowledge of supply and demand to answer the following 5 questions (questions 2-6). Predict what will happen to prices and quantities sold/bought in each case.  Start by drawing a graph that shows an X-shaped intersection of supply and demand P0 Q0 in the corresponding market before the event. After the event, one of the curves, either Supply curve of sellers or the Demand curve of buyers, moves left or right resulting in the new equilibrium P1 and Q1. Draw the new curve, label your graph. Correct answers without graphs will earn half-credit.

2. Suppose that market for marijuana is legalized leading to higher supply and no change in demand. How will this legalization affect the amount of marijuana sold and its price?

3. As marijuana became legal, some users substituted it for cocaine, so the demand for cocaine decreased in NY. How will this impact the market price and quantity of cocaine?

4. Suppose there in an increase in burglary crimes in your town. If nothing else changes, what will happen to insurance rates and the number of insurance contracts sold?

5. Suppose crime rates drop sharply in the US. What will happen to price and sales in the market for security equipment?

6. The State of Nevada, where prostitution is legal, imposes licensing rules that require the prostitutes to obtain an annual license at a cost of $10,000. What will happen to the price and quantity of services?

7.  How would the following events impact the number of crimes committed by potential criminals? Explain briefly, especially where the answer is ambiguous.

  • More crimes carry death sentences.
  • The unemployment rate goes up during recession.
  • Prices of car parts a thief can obtain on the second hand markets decrease.

8.  Give an example of technology making it easier to commit a crime and an example of technology helping to prevent a crime.

9. Read the article by a Nobel price economist Gary Becker “The Economics of Crime”.  Describe the economists’ approach to crime and punishment as explained in this article.


Homework 4                  Answer any 6 questions 

1.  Give examples of activities that generates positive externalities. Explain how incentives can be used to encourage people to do more of these activities.

2. Give examples of activities that generates negative externalities. Explain how incentives can be used to encourage people to engage less in these activities.

3. Read Anderson (1999) “The Aggregate Burden of Crime”. The author writes: Beyond the expenses of the legal system, victim losses, and crime-prevention agencies, the burden of crime encompasses the opportunity costs of victims’, criminals’, and prisoners’ time; the fear of being victimized; and the cost of private deterrence. What is meant by each of these types of costs? Explain with examples.

4.  When a car is stolen, from the society‘s perspective this is simply an involuntary transfer from one person to another. Overall the society is neither worse off nor better off. True or false?  What additional external costs does a victimless crime like theft impose on society?

5. Explain the broken windows fallacy.

6. Explain why economists are unsympathetic to the claim that “life is priceless.”  Describe a circumstance in which policymakers must decide how much a life is worth. Could risking death be a rational choice?

7. Watch a documentary about gang violence in Chicago.  Explain the full cost of gun violence including direct costs to participants and their families, plus negative externalities for other people inside and outside the communities involved in violence.

8. Explain how an increase in crime can create a multiplier effect that creates even more crime.  Use this crime multiplier effect to explain the continued violence in Colombia.

9. Read Fagan & Freeman Crime and Work, 1999. The authors write:  “Crime and legal work are not mutually exclusive choices but represent a continuum of legal and illegal income-generating activities.  The links between crime and legal work involve trade-offs among crime returns, punishment costs, legal work opportunity costs, and tastes and preferences regarding both types of work.  Rising crime rates in the 1980s in the face of rising incarceration rates suggest that the threat of punishment is not the dominant cost of crime… Market wages and job opportunities interact with social and legal pressures to influence decisions to abandon crime for legal work.” How does a typical individual decide to allocate her time between crime and legal employment?   What can cause her to change her position — opting for more legal work and less crime?


Homework 5                  Answer any 6 questions 

1. Watch the TED talk about the drug cartels.  Describe the business model of a cartel.  Can you suggest a policy that may help diminish the power of a cartel?

2.  On the one hand, drug manufacturing industry benefits a lot of people as it employs millions or workers worldwide.  On the other hand, it damages other people in other ways.  Imagine that you are on economist charged with a task to estimate the aggregate cost of illicit drug use for the world economy.  What categories of direct and indirect costs would you include into your calculations?   Without referring to particular numbers, try to name as many costs as you can (The UN World Drug report may help).

3.  What is the difference between supply-oriented and demand-oriented drug policies.  Give  examples of each.  Which of the two types of policies is preferred?

4.  Explain current U.S. drug policy and explain the problems that it creates.

5. Why do crack dealers still live with their mothers?

6. Have prohibitions been effective in eliminating markets for illicit goods? Explain what have been the general consequences of drug prohibition.

7. Read one of the two articles on drug trading gangs by Levitt and Venkatesh. Summarize the main question and conclusion. What have you learned from this article?

8.  Explain why there are reasons to believe that criminal justice resource are not efficiently allocated in this country.


Homework 6          Answer any 6 questions 

1. What are the purposes of prisons and corrections? Is it an effective system? Does it fulfill its goals?

2. How large is the US prison population?  Explain why we jail so many people and comment of the demographic characteristics of prisoners.

3. Read David Friedman, “Why Not Hang Them All: The Virtues of Inefficient Punishment,” JPE 1999.  Summarize the author’s main ideas and conclusions.

4. Privatization of corrections has been suggested by some people as a means of improving the allocation of resources in correction.  The opposite point of view is that it makes more sense for the criminal justice system to be provided by the government than by the for-profit private sector. Explain the pros and cons of private prisons.

5. Explain why “getting tough” on crime might cause a shift to more dangerous crimes and give examples. Other than by imposing stiffer penalties, how might we effectively prevent crime?

6. What is meant by ‘prison industrial complex’?  Describe its structure, features and its size.

7. This lesson’s online resources include several videos and articles that describe problem and injustices in our criminal justice system.  Which problem do you think is the most pressing?  Explain.

8. Discuss causes and consequences of racial inequality in the US prisons. Why are minority men more likely to become inmates?  How does this system further deepens income inequality  in our society?


Homework 7    Answer any 6 questions 

1.  Listen to 2 TED talks about international crime networks. Describe what kind of activities the networks are engaged in. What is the connection between money laundering and the US Patriot Act?

2. What are some examples of behavior that at one time were victimless crimes that are no longer criminal?  What are the examples of behavior that were not crimes that are now crimes? Briefly comment on how you would explain these changes.

3. Review the FBI Financial Crime Report and explain what types of financial crimes are currently on the rise in the US. What may have caused this increase?

4. Use the Antiphishing website to research what types of illegal online activities are on the rise. How do these activities harm citizens and businesses?

5. Watch presentations by Goodman and Kaku about the crimes of the future. What types of crimes will become possible with new technology?

6. Listen to 2 presentations by Dan Ariely. Why do we think it is ok to cheat or steal? What influences our moral code? Are all our decisions perfectly rational?

7. Browse through the DOJ Antitrust Division website. Why was this agency created? What types of behavior by companies is illegal?  Give examples and explain who benefits and who is hurt by these activities.

8. Read the article by Levitt, “Understanding Why Crime Fell in the 1990s: Four Factors That Explain the Decline and Six That Do Not.” Which factors explain the decline in crime?  Briefly explain how each factor is linked to crime.  Which factors do not explain the drop in crime?


Homework 8   Answer any 6 questions 

1. Discuss the pros and cons of imposing a sin tax such as a cigarette tax. What groups of people benefits from this tax?  What groups are hurt?  Are there any unintended consequences of this tax? be sure to quote the study of NY experience under this module.

2. Discuss “three strikes and you are out” laws and their impact.

3. How can incentives be used to reduce recidivism? Describe the bonus system experiment and its results.

4. Suppose that you are elected to be a state governor. Your goal is to reduce crime in your state. What policy would you recommend?  (Harsher punishment for crime, more police or different policing methods, more legitimate work opportunities, or what?)  Explain why you choose a particular policy and how you are planning to finance it. 

5. (based on Gilbert’s TED talk) Explain why rational people can make bad decisions.

6. Explain the debate over gun laws in this country. What are the arguments of pro-gun and anti-gun groups?

7. What is intellectual property and why is it a crime to steal it?  Why is this issue controversial?

8. What do we mean by “optimal” or “socially efficient” level of crime? Why is it above zero? Explain why reducing crime to zero is the best use of society’s scarce resources. Why in a world without laws will individuals create more crime than is socially efficient?