ABSTRACT
This Chapter begins with an overview of the economic theory of crime – explaining how crime can be analyzed using traditional economic concepts such as supply and demand and the scarcity of resources. Potential offenders are assumed to weigh the expected cost of committing crime against its expected benefit, while potential victims weigh the cost of precautionary expenditures and avoidance behaviors against the benefit of reducing the risk of victimization. Government policy makers can take these private incentives into account in determining the appropriate mix and magnitude of taxpayer expenditures on prevention activities, police, courts, and corrections - ultimately leading to an ‘optimal’ level of crime. The Chapter continues with a non-technical discussion of important economic concepts used throughout the book, such as “opportunity costs,” external versus social costs, tangible versus intangible costs, average versus marginal costs, and discounting to present value. Finally, a brief introduction is given to the various methodologies used to estimate the cost of crime – although more detailed discussions are reserved for Chapters 7 and 8.
