THE INFLUENCE OF A COST-BENEFIT FUNCTION ON THE SUPPLY OF ECONOMIC CRIMES: A SPECIFIC TEST OF THE PROFIT MAXIMIZING THESIS

ABSTRACT

Most utilitarian theories assume that people are rational and tend to favor activities which maximize profits and minimize losses. Hence, when the gains associated with illegal behavior outweigh the costs, the volume of crime is expected to increase. Most macro-social research based on this perspective examines the effects of only one piece of information that informs the decision to violate the law, namely the probability of experiencing negative sanctions. To the extent that prospective offenders simultaneously consider both the gains and losses associated with selecting a particular course of action, the failure to take into account gains accrued from illegal activities in analyses of criminal behavior is likely to produce an omitted variable bias. Moreover, utilitarian theories of crime specifically discuss the effects of the gains from crime relative to costs. Hence, properly specified models should include cost-benefit functions. The present study seeks to extend previous macro-social research by examining the influence of the relative costs and benefits of engaging in illegal behavior on the volume of economic crime (i.e., robbery, burglary, larceny, and auto theft). The lime-series analyses indicate that as the pecuniary gains from crime increase relative to the risks of apprehension, the aggregate levels of auto theft, robbery, and burglary increase. However, the gains from crime relative to risks are not related to the level of larceny-theft. The implications of these findings for utilitarian theories of crime control are discussed.