Forschungsgruppe ORCOS
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Economics of Crime

In a seminal paper, Becker (1968) asked how many resources and how much punishment should be used to enforce different kinds of legislation. The decision instruments are the expenditures on police and courts influencing the probability that an offender is convicted, and the type and size of punishment for those convicted. The goal is to find those expenditures and punishments that minimize the total social loss. This loss is the sum of damages from offences, costs of apprehension and conviction, and costs of carrying out the punishment imposed. According to Becker, the main contribution of his essay is to demonstrate that optimal policies to combat illegal behavior are part of an optimal allocation of resources. Or, as Becker put it equivalently, although more strongly, how many offences should be permitted and how many offenders should go unpunished.

One main purpose of the research field described on the following pages is to study efficient intertemporal trade-offs between the damage generated from the offences and the costs of the control instruments. Or, to put it in other words: We are looking for those mix of policy variables, like prevention, treatment and law enforcement which minimizes the discounted stream of total social loss. Quite often, e.g. in illicit drug consumption, corruption or violence, the system dynamic is governed by specific feedback effects or prevalence on incidence rates. The resulting epidemic patterns of uncontrolled processes require to allocate the policy instruments in a specific way over time.

To summarize, our efforts can be seen as decision support for public policy making. More specifically, we develop dynamic cost-benefit analyses. Among the new and specific issues to be dealt with we mention

  • feedback effects from a reference group to individual behavior (like density dependence)
  • age-structured multi-type models
  • dynamic games (rather than unilateral decision-makers) to cope intertemporal strategic interactions like the symbiosis between dealer and addicts, bribers and bribees. 

As in fact, our project includes several topics in application and theory, you can find a description of these sub-projects on the following pages:

Applications:

  • Dynamics of Corruption - the dynamics of economically motivated illegal transactions between a member of an organization, e.g. a bureaucrat, and an agent outside of it.
  • Control of Drug Consumption - illicit drug consumption, drug related crimes, optimal prevention and treatment expenditures
  • Cycles of Violence - dynamic control model of the evolution of the level of crime committed by high rate offenders

Theory:

  • Age-specific Control Models - Many important processes in economics are age-dependent, so considering the age structure in population models brings up new opportunities in modeling.
  • DNS Thresholds - The outcome of the optimal policy depends on the initial state, specifically the magnitude of the initial state relative to some critical threshold.