Cost and benefit for crime from Gary Becker

Crime and Punishment in Svalbard

Jul 11, 2014 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Thinkers, Government, Labor, Lifestyle, Thinking Economically • 169 Views    No Comments

Two times the size of New Jersey, Norway’s Svalbard territory has a single jail cell that was briefly occupied a year ago. Trying to decide why Svalbard has little crime, some cite its sparse population of 3,000 or the fact that it is an archipelago from which a criminal would have a tough time escaping.

The best reason, though, seems to be that unemployment and homelessness are illegal. A local newspaper, Icepeople, told of a Portuguese man who was discovered sleeping at a campsite. Jobless and homeless, he was deported. Actually, the only jobless group in Svalbard is retirees who can prove they have enough to support themselves.

This takes us to how Nobel laureate Gary Becker might have explained Svalbard’s lack of crime.

One of the first behavioral economists, Gary Becker used cost and benefit analysis to provide insight about everyday decisions. Describing why he looked at crime, Dr. Becker said, “I began to think about crime in the 1960s, after driving to Columbia University for an oral examination of a student in economic theory. I was late and had to decide quickly whether to put the car in a parking lot or risk getting a ticket for parking illegally on the street. I calculated the likelihood of getting a ticket, the size of the penalty, and the cost of putting the car in a lot. I decided it paid to take the risk and park on the street. (I did not get a ticket.)”

Breaking the law could mean you illegally parked, you robbed a house, or you played loud music. Very different violations, they all have one common denominator. Dr. Becker believed contemplating criminal behavior is a cost and benefit exercise that can involve the probability and severity of the punishment and whether the utility of the time spent breaking the law exceeds the utility of the next best alternative activity. Consequently, society can do its own cost and benefit analysis when it selects deterrents.

In Svalbard, violating the job and home requirement has a huge cost for an individual (deportation) and almost no cost for the town (just a ticket out that they do not even pay for if the violator has money and a tiny police force). As for other crimes, because all people have a job and a home, they probably perceive that a life of crime would have too great a cost.

Our bottom line: We can use a behavioral economist’s tools to understand why people commit crime and how society can best deter it.

Sources and more...After reading the NY Times article about Svalbard, and taking a look at Icepeople, I went straight to one of Gary Becker's early papers on crime. Meanwhile, we have looked at Gary Becker's ideas about marriage and work and, after his death earlier this year, at his life. Note: My title echoes the Gary Becker title, "Crime and Punishment: An Economic Approach."

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