American Bar Foundation, Wiley American Bar Foundation Research Journal

American Bar Foundation
Review: Crime, Criminal Justice, and Economics: Phillips & Votey, Schmidt & Witte
Reviewed Work(s): The Economics of Crime Control by Llad Phillips, Harold L. Votey and ;
An Economic Analysis of Crime and Justice: Theory, Methods, and Application by Peter
Schmidt and Ann D. Witte
Review by: Richard McGahey
Source: American Bar Foundation Research Journal, Vol. 9, No. 4 (Autumn, 1984), pp. 869-
887
Published by: Wiley on behalf of the American Bar Foundation
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Review Essay
Crime, Criminal Justice, and Economics:
Phillips & Votey, Schmidt & Witte
Richard McGahey
LLAD PHILLIPS & HAROLD L. VOTEY, JR., The Economics of Crime Control.
Sage Library of Social Research, Vol. 32. Beverly Hills, Cal.: Sage Pub-
lications, 1981. Pp. vi + 312. Cloth $25.00; paper $12.50.
PETER SCHMIDT & ANN D. WITTE, An Economic Analysis of Crime and Jus-
tice: Theory, Methods, and Application. New York: Academic Press,
1984. Pp. xiv + 416. $60.00.
Is criminal behavior economically rational? Can we analyze criminal jus-

tice institutions in the same way that economists analyze the production and
business decisions of private firms? What is the best mix of spending on po-
lice, courts, prisons, and social programs to achieve crime control? How
much crime control is enough-what are the limits on public and private
spending to avoid crime? Although policy analysts are now accustomed to
asking such questions regarding crime and criminal justice, posing issues in
this way has been central to the American debate on criminal justice only
since the late 1960s, when economists began to study crime using their partic-
ular theoretical perspective and empirical techniques. Two recent volumes by
economists-Llad Phillips and Harold Votey's The Economics of Crime
Control and Peter Schmidt and Ann Witte's An Economic Analysis of
Crime and Justice-illustrate economists' contributions to this debate and
also underscore the difficulties with using the economic framework to ana-
lyze crime and recommend policy.
Both books are collections of diverse work by their authors over the past
decade or more. Both books also summarize the authors' assessment of
economists' contributions to the study of crime. Phillips and Votey provide a
Richard McGahey is an economist and a research associate at the Urban Research Center, New York
University. B.A. 1974, Franconia College; Ph.D. 1982, New School for Social Research.
My thanks to Howard Erlanger, David Greenberg, and Jim Jacobs for helpful comments, and Yesmeen
Sarkes and Linda Wheeler for manuscript preparation. This paper was made possible in part by funds
granted by the Charles H. Revson Foundation. The statements made and views expressed, however, are
solely the responsibility of the author.
? 1985 American Bar Foundation 869
870 AMERICAN BAR FOUNDATION RESEARCH JOURNAL 1984:869
strong defense and endorsement of that approach, while Schm

are more concerned with difficult questions of empirical techn
solved theoretical conundrums. Taking the two books together
opportunity to assess economists' interventions in the study
criminal justice.
Economists and the Debate Over Anti-Crime Policy

Sociological theory has offered a variety of perspectives on c
havior and crime control institutions, variously emphasizing m
social order, conflict, the workings of bureaucratic structures,
chological factors. Important approaches to crime include st
portunity theory, subcultural and culture of poverty perspect
theory, differential association, control and conflict perspectiv
retical empiral studies.1
Many of these perspectives overlap, and many contain signific
cal and policy-oriented subdivisions. But although much sociolo
in the 1960s was used to justify policy interventions, reported
ued to rise. Politicians became impatient with their inability to
trol crime, leading some to seek other theoretical and policy an
Q. Wilson attributed the shift from sociological theory to i
recommend policy:
Sociological theories of crime, widely known and discussed in the 1
certain features in common. All seek to explain the "causes" of crim
linquency, or at least their persistence. All make attitude formation
able. All stressed that these attitudes are shaped and supported
groups-the family and close friends. All were serious, intelligent e
constructing social theories, and while no theory was proven empir
were consistent with at least some important observations about
none could supply a plausible basis for the advocacy of public po
But much of sociological theory had explicit uses for poli

work on youth gangs and antipoverty and deterrence progr
claims about a lack of policy plausibility may in fact reflect a br
vative turn in American domestic politics, fueled not only by ri
by urban riots and civil rights militance.3
Whatever the mix of reasons, the failure to control crime crea
economic analysis, which drew heavily on prior theoretical wor
welfare economics. In the late 1960s, economists entered the
bate, drawing on their discipline's intellectual and policy legaci
viewing criminals as rationally choosing between crime and law
1. Orlando Rodriguez & Richard McGahey, The Dual Labor Market and Property C
sented at the 1979 American Sociological Association meetings, Boston).
2. James Q. Wilson, Thinking About Crime 53 (New York: Vintage Books, 1977) (e
inal).
3. I am indebted to David Greenberg for this observation. It is reinforced by considering George Wal-
lace's political popularity in the 1960s which drew several of these strands together: appeals to racism,
tough talk on crime, and attacks on "pointy-headed intellectuals."
No.4 CRIME, CRIMINAL JUSTICE, AND ECONOMICS 871
expressed most strongly by economist Gary Becker in his

cle on crime. After outlining the "economists' usual analy
its application to the study of crime, he stated: "I cannot
many general implications of this approach, except to rem
behavior becomes part of a much more general theory, an
ad hoc concepts of differential association, anomie, and t
hand dismissal of several central concepts in criminologic
theory reflected the impatience, noted by Wilson, w
sociological explanations for crime.
The theory of criminal behavior sketched by Becker wa
ual utility maximization model, based on a time allocation
vidual behavior. Economists have long analyzed market ph
of the allocation of scarce resources. Becker's insight was
ual's time-the 24 hours in a day-as a fixed and scarce r
cated rationally among different activities. This seemi
gave economists a way to model many diverse social e
people stay in school to raise their level of education a
larger incomes during their working lives even though t
wages by staying in school. Women with favorable econom
childbearing because of the income they would lose by all
rearing of children. And those who commit crimes do so b
ative costs and benefits of lawful and unlawful options.
But in spite of the novelty of thinking about crime
among competing time allocation options, it was not Beck
tion to develop a new theory of criminal behavior. Instea
crime had an explicit policy purpose: "This essay uses e
develop optimal public and private policies to combat
Given a "supply" of crimes, Becker focused on social p
crime, or at least contain it. The stress was on finding th
law enforcement, a tradeoff between public safety and p
The criminal justice system was treated as a production p
public safety, a process that must compete for scarce resou
cial needs. As with any other production process, higher
incurred after a certain point, in order to obtain each succ
put (in this case public safety). But this approach requ
"supply" of crimes-to be processed. Thus, to account
crime and as an adjunct to his theory of crime control po
develop a theory of criminal behavior.
In defining this "supply of offenses," Becker offered th
tional cost-benefit basis for human activity: "a person com
the expected utility to him exceeds the utility he could get
and resources at other activities."6 The "costs" of commit
4. Gary S. Becker, Crime and Punishment: An Economic Approach, 76 J. P

5. Id. at 207.
6. Id. at 176.
a function of the probability of arrest and punishment. If punish

curred, earnings would be forgone during imprisonment, and inc
tunities would be reduced over a lifetime, due to the stigma of a c
ord and failure to accumulate legitimate work skills, habits, a
ence-in economics jargon, "human capital." The potential crim
also involved weighing lawful opportunities, although Becker seem
these as relatively fixed. The model concluded that an increase in
bility of punishment would deter more crime than an increase in
sentences, although this conclusion was reached entirely at a f
Later empirical studies attempted to confirm this proposition
much of the controversy about the existence and efficacy of dete
Note that Becker's emphasis was not primarily an explanation o
ual behavior so much as an argument about appropriate polic
source allocation to contain that behavior. Further, all his policy
were about enforcement mechanisms, as the structure of lawful
ties is seen by Becker and many other economists as largely determ
dividual supplies of human capital. Optimal crime control po
down to an increased probability of punishment and the use of f
most cost effective form of punishment. But the focus on fines as
mal was rapidly lost, and later studies of crime focused on increa
the severity and the probability of punishment, usually in the for
sentences.
Most research by economists on crime and criminal justice continues

direction established by Becker. But the approach, which seemed so pr
ing at first, now shows severe signs of strain. Rather than providing
biguous policy recommendations stemming from theoretically inform
search findings, much economic research on crime appears to have pr
what one reviewer characterized in 1978 as an "inconclusive and
mass of data."7
Empirical studies are plagued by formidable problems in the quality
relevance of data, choice of statistical technique, and policy inference
on research results. And the model of individual criminal behavior, ba
the standard economic theory of rational choice and individual labor s
cannot predict how behavior will change in response to changes in pun
ments and rewards. In other words, no predictive theoretical model un
girds the mass of empirical work ostensibly testing that theory. Policy
aimed at altering criminal behavior have also produced ambiguous e
whether those efforts were directed at raising lawful income through e
ment programs or at deterring crime by raising the risks and severity
ishment.
7. Richard Tropp, Suggested Policy Initiatives for Employment and Crime Problems, in Leon
ed., Crime and Employment Issues 24 (Washington, D.C.: Institute for Advanced Studies in
Washington College of Law, American University, 1978).
But Becker's legacy continues, both in the analysis of th

system as a production process that could be made more ef
cost and public safety and in the analysis of criminal beha
mizing conduct. The two books by economists under revi
the variety and depth of this work, but they also illustrat
with this economic approach to crime and criminal jus
present years of research in theory, empirical studies of
and analysis of criminal justice policy and institutions
provides a useful opportunity to examine how the eco
crime has developed and what its strengths and weaknesse
too much to say that these volumes signal an end to what
"first generation" of economic approaches to crime an
They are thus not only of interest and importance in them
an opportunity to consider what has become of the bright
Becker's 1968 article that economic theory would hel
public and private policies to combat illegal behavior."8
Elaboration and Support of the Economic Model-Phill
Llad Phillips and Harold Votey are two economists wh
central in advancing the economic approach to crime. The
on crime appeared in 1969, only a year after Becker's lan
have since written (separately or together) on youth u
crime, drunk driving, narcotics control, deterrence polic
rections, the effectiveness of police, female participation i
other issues.
The Economics of Crime Control presents much of th
along with some new material. But the book is not only a
cles. In a passage echoing Becker's initial objective, Phillip
that their book is "about how public funds and human re
cated to optimize the control of crime in a modern democr
to that end, they want to "build a cohesive model of crim
control that provides insights into the alternatives for soc
of the two paths branching out from Becker's work-e
the criminal justice system and the study of individu
ior-Phillips and Votey are more interested in the former
glect criminal behavior, but like Becker, their model of c
somewhat of an adjunct to their major concern-the design
This focus provides them with a number of strengths,
grapple with a central problem in the economic approach
turn to this problem below, but it should be noted here. T
of criminal behavior that Becker pioneered, and that Phil
ploy with some modifications, has encountered serious th
ties-for example, only unrealistically simplified mode
8. Becker, supra note 4, at 207.
legal employment or more certain punishment will clearly reduce c

problems do not vitiate the authors' analyses, but they do make th
contingent. For if the theory of individual criminal behavior is un
then analyses of criminal justice policy using that theory of indiv
fenders cannot provide clear-cut policy suggestions.
Like many economists who confront social institutions and co
haviors, Phillips and Votey develop an equilibrium model, which
fully label the "system of crime generation and control" (at 211).
to how crimes are generated allows consideration of factors outside
inal justice system, and explicit attention to the reciprocal effects o
in crime and changes in public policy. This reciprocity permits m
optimal framework for policy. For the noneconomist, it must be
that "optimal" does not mean the elimination of all crime. Rather,
controlling crime at a level that society tolerates, reflected in a lev
expenditure beyond which society does not wish to go. In this view
treated as an individual utility maximizer writ large, allocating
across a diverse range of alternatives.
Phillips and Votey present a clear articulation of this vision:
To formalize our scheme for the analysis of crime, we turn to the e
paradigm. In utilizing this paradigm, we must first specify the states of
tem (parametric relationships) in which crimes are committed and soc
sponds in predictable ways. That is, we must identify the inputs and o
and delineate the linkages that relate them. Next we must take accoun
values of these inputs and outputs so that their relative importance w
flected in the outcome. We must assign or, when implicit, impute pric
reflect society's preferences with respect to their use. Finally, having sp
the constraints within which the system must operate, and having tak
count of the way society values alternative outcomes, we can determine
timal operation of the system.
Under the best of circumstances, we can expect to find a substantial n
of communities that appear to be operating suboptimally, either spend
much or too little for control based on expressed or imputed values assig
crime. (At 14)
The authors, having participated in debate with renegade eco

scholars from other disciplines, and policy analysts, are well awar
nomic models "are based on assumptions that to some of us may se
sible and to others outrageous. They may appear to oversimplif
But their work reflects a theoretical predilection for the principle
Razor; the simplest of competing theories is preferable. As th
model should be no more complex than it need be for the purposes
is put" (id.).
This orientation reflects a problem that bedevils all social resear
do simplifying assumptions provide lenses that serve as a means of
clarification, and when do they turn into blinders that prevent seei
aspects of a problem? Phillips and Votey want to defend their app
the record-the variety of economically based analyses that are pre
this book. Taken together, these analyses provide the basis f

close they come to their goal of building a cohesive model tha
native policies for crime control.
After providing a basic derivation of their model, the autho
cial cost and social controllability, the two elements that the
govern the definition of criminal behavior and the provision
sources for crime control. "Expenditure of criminal justice e
only where behavior is both controllable and results in consi
others" (p. 42). Some conclusions from this perspective are r
troversial-for instance, a behavior that causes great social ha
easy to control is the proper object of criminal justice policy.
ings along the harm and controllability dimensions cut ag
policy and existing social norms. Events that are very harmf
control would still be defined as crimes but would not have a
sources directed against them; relatively benign events that
trol would be controlled; while easily controllable events tha
harmful would not be the proper objects of criminal justice
Although economists often consider such a framework t
tral, it is loaded with normative implications. This is not a f
not be possible, or desirable, to escape normative choices
especially in an area like criminal justice. But it is important
normative content of seemingly neutral assumptions.9
Even greater normative considerations arise when Phillips
to locate specific crimes along their social cost and contro
sions. For example, they consider street crime to be very har
able proposition) and highly controllable (a more questio
especially if control is seen as coming primarily from crimina
tions). Drunkenness, marijuana and tobacco use, and nude
amples of behavior they view as moderately harmful but con
lic and relatively benign and uncontrollable when done in
use, gambling, pornography, and prostitution are classifi
harmful and minimally controllable, and thus are candidates
zation.
This grouping is not an irrational classification, but neither is it value-free.
For example, there are significant controversies about the potential social
harm from and controllability of heroin use;'? gambling, both public and pri-
9. Modern economics has relied extensively on the notion of a value-free approach to social analysis.
For a provocative discussion and critique of this vision see Albert O. Hirschman, Morality and the Social
Sciences, in Essays in Trespassing 294 (New York: Cambridge University Press, 1981).
10. Chapter 6 pursues the question of heroin use and control in some detail. Believing that controlling
heroin use is almost impossible at any level of public expenditure, Phillips and Votey repeat their conclu-
sion that society should move to decriminalization. The chapter is a mix of hard analysis and strong advo-
cacy; e.g., they do not address the concern that decriminalization might lead to vast numbers of new ad-
dicts, with enormous and irreversible social costs. Cf. John Kaplan, The Hardest Drug: Heroin and Public
Policy (Chicago: University of Chicago Press, 1983).
vate; " and prostitution and pornography.2 Many segments of the

quite opposed to nude bathing and marijuana use. This opposit
on alternate perceptions of cost and controllability, as well a
frameworks other than the rigorous utilitarianism offered by Ph
Votey. The utilitarian, optimizing framework is only one possible
mative values for directing crime control and public policy; it may
good one, but it is not self-evidently the best or only one.
Another example is their discussion of white-collar crimes, whi
enormously costly, are very hard to detect and punish. Phillip
would seem to suggest that because this is so, we should abandon
attempts to curb these crimes. It may be that our society does not
pursue white-collar crimes because such pursuit is nonoptimal, bu
also be due to class bias in the criminal justice system,"3 a failure t
career incentives for agents and prosecutors to pursue such crimes
of street crime that is out of proportion to potential victimization
resources away from white-collar offenses.
The empirical material that makes up much of the book is meant
validity of the propositions generated by the authors' framework
measurement of the social costs of crime and law enforcement (o
two key dimensions), they present lucid chapters on the difficulty
ing dollar values and seriousness rankings to various crimes, on th
of extracting useful data from criminal justice sources, and on eva
efficiency of police services. Empirical data tested within thei
framework forms the basis for their criticism of such enforcemen
antiprostitution campaigns or arrests for public drunkenness as w
Such conclusions are in turn facets of a larger question, a questio
ten vexes economists who approach public policy with an optim
framework like the one presented in this book: how are public re
tually valued and distributed in the absence of an explicit market w
prices for different commodities, and what should that allocat
look like to correspond with the optimization approach?'6 Ph
Votey lay out their framework in chapter 5, "The Determination
11. Recent research suggests that legalized gambling in Atlantic City has enriched cas
real estate speculators while harming local taxpayers. George Sternlieb & James W. Hugh
City Gamble (Cambridge: Harvard University Press, 1983).
12. Feminist authors and others see pornography as contributing to discrimination and vi
women. See Laura Lederer, ed., Take Back the Night (New York: William Morrow &
13. Barry Krisberg, Crime and Privilege: Toward a New Criminology (Englewood Clif
tice-Hall, 1975).
14. Jonathan Kwitny, Vicious Circles: The Mafia in the Marketplace (New York: W
Co., 1979).
15. Fred DuBow, Edward McCabe, & Gall Kaplan, Reactions to Crime: A Critical Revie
ature (Washington, D.C.: National Institute of Law Enforcement and Criminal Justice, U
of Justice, 1979).
16. This problem often confronts economists who study law and public resource dist
many economists routinely recommend variable peak-load pricing by electric utilities or co
congestion by applying stiffer tolls during rush hours-recommendations routinely ign
makers. Ann Witte has suggested that policy makers understand quite well that existing po
monetary inefficiencies but higher priorities are placed on perceptions of fairness and
everyone ought to pay the same toll on a highway, no matter what time of day they trave
nity Priorities for Fighting Crime." The presentation in

chapters will be very tough sledding for readers unfamilia
mathematics and graphic representation of arguments. N
terial is worth struggling with, if only to further the rea
of the equilibrium optimizing approach to public resou
The question of public resource allocation relies on th
come constraint-how much is spent on crime control
Without some upper limit, or resource constraint, policie
from reality, because everyone will endorse spending
everything. Observing that the poor spend less on crime c
ing higher crime rates, Phillips and Votey analyze freedo
luxury good--"at lower income levels . . . [individuals
spend their resources on other goods (necessities) and, as
can be expected to devote a larger share of income to pub
78). Their data show that higher income cities spend mor
and have lower crime rates, underscoring a paradox th
more crime than the rich, but the rich are willing to spend
trol.
The ease with which the authors treat a social system as an individual writ
large, allocating resources to a basket of diverse commodities, sidesteps a va-
riety of theoretical and practical problems. The problems are illustrated by
the finding about varying anticrime spending levels between rich and poor
and among cities. Individual cities are themselves highly diverse mixes of
people, and substantial variation in their spending on crime control is likely
tied to complex political, social, and economic pressures. Treating a city, or
"society," as a single utility maximizer may strain the bounds of theory. Al-
though it is hard to measure the social cost of various policies when the analy-
sis takes account of political, cultural, and social class differences, we may
fail to understand the real workings of the criminal justice process without
explicit attention to such factors.
The material on the social costs of crime and alternative enforcement poli-
cies, as well as the discussion about variations between the rich and poor on
anticrime spending, presents half of the framework for defining and con-
trolling crime-social costs. The second major part of Phillips and Votey's
analysis focuses on the relative controllability of various crimes. Although
control of crime might be addressed in a number of ways (reductions in pov-
erty, strengthening of family structure, target hardening with better physical
security like locks and lighting, or other prevention strategies), Phillips and
Votey focus on what they correctly characterize as "a long simmering debate
that reaches to the heart of criminal justice decision-making: the empirical
question of the deterrability of crime" (at 17).
With this twin focus of social cost and deterrence, they place themselves
squarely within the tradition and framework pioneered by Becker."' Phillips
17. Becker's work, and most subsequent analyses of crime by economists, focused on altering the pun-
ishment side of the criminal's cost/benefit calculus. The best-known example is the work of Isaac Ehrlich
(a student of Becker's), whose claim that capital punishment has measurable deterrent effect on homicide
and Votey continue the trend of many economists to support d

our analysis, we invariably find evidence for a positive control
control encompasses the possibilities of deterrence and/or i
(at 17).
They are not blind to the possibility of using social programs to reduce
crime; one chapter is devoted to their early studies on the relationship be-
tween youth crime and unemployment, which concludes that for 1952-67,
"changing labor market opportunities are sufficient to explain increasing
crime rates for youths" (at 170). But most of their empirical work on control-
lability focuses on deterrence, including the effects of certainty and severity
of punishment on the use of firearms in assaults and homicide; the effects of
increased apprehension and numbers of law enforcement personnel on hom-
icide and property crimes; the relative deterrent impacts of longer sentences
versus increased apprehension (the severity/certainty problem again); and
technical problems involved in accurate statistical modeling of the criminal
justice process. They also include analysis of the best ways to achieve deter-
rence through allocation of criminal justice resources among police, courts,
and prisons, drawing on their application of the optimizing resource alloca-
tion approach.
The evidence they present on deterrence is provocative and carefully ar-
gued, but it is not as conclusive as the authors think. For them, the positive
findings on the deterrent effects of more certain and severe criminal justice
control fit neatly with their work on the social costs of crime, reinforcing
their claim that street crime is both costly and deterrable. It also supports
their more general claim that this body of work establishes "the empirical ba-
sis for the behavioral relations involved in our economic analysis of crime"
(at 9), allowing an optimal policy mix to be designed for control of costly and
deterrable crimes.
Like many economists, Phillips and Votey feel that the general question of
deterrence is settled. Other analysts disagree. Daniel Nagin's 1978 review for
the National Academy of Sciences' panel on deterrence concluded that "the
empirical evidence is still not suffient for providing a rigorous confirmation
of the existence of a deterrent effect .... Policy makers in the criminal jus-
tice system are done a disservice if they are left with the impression that the
empirical evidence, which they themselves are frequently unable to evaluate,
strongly supports the deterrence hypothesis."'"
Nagin's criticisms were focused mainly on the wide empirical range of esti-
mated deterrence effects. It is doubtless true that some higher level of punish-
ment will reduce some crimes by some amount, but the questions for policy
has been largely discredited. See Richard McGahey, Dr. Ehrlich's Magic Bullet: Economic Theory,
Econometrics, and the Death Penalty, 26 Crime & Delinq. 485 (1980).
18. Daniel Nagin, General Deterrence: A Review of the Empirical Evidence in Alfred Blumstein, Jac-
queline Cohen, & Daniel Nagin, eds., Deterrence and Incapacitation: Estimating the Effects of Criminal
Sanctions on Crime Rates 136 (Washington, D.C.: National Academy of Sciences, 1978).
are how much punishment, for what crimes, and how c

many policy areas, criminal justice policy operates at the
dence for deterrence at the margin is quite mixed. Base
work, Phillips and Votey carefully attempt to impute c
alternative uses of criminal justice resources, but it is n
that their estimates are superior to the work of other an
suggest that their empirical work is done poorly; it is don
tion to data problems and empirical technique. But the c
control process encompasses so many variables that d
measure discrete parts of it in empirical models are nec
stantial variations in final estimates. The possibilities fo
at least uncertainty, multiply with each new theoretical
of data element, and choice of econometric procedure
For example, recent evidence tends to find little sig
from increased criminal justice severity. Variations in p
clearance rates, and career-criminal apprehension strate
tle impact on overall crime.20 Mandatory and determinat
often fail to have long-lasting or consistently observable
And rising prison populations during the last decade
function of changing crime rates, nor can recent reducti
attributed to harsher prison policies.22 Although deterr
the margin in some cases, its significance in a larger crim
open to doubt.
Furthermore, there is skepticism about deterrence and
proach not only on empirical grounds but also on theore
retical model of the rationally calculating individual cri
and benefits, has turned out to be a less sure guide for a
hoped. And without a firm understanding of the crime
optimizing system analyses like those of Phillips and Vo
supports. That is, it may be true that deterrence can be e
with some reduced crime at the margin, but we are uns
correlation might operate in practice and thus unsure ab
produce it through policy. The model of an individua
weighing costs and benefits cannot make predictions abo
a large number of unrealistic assumptions about how of
risks, whether there are strict monetary equivalents to t
19. See Richard McGahey, Labor Market Segmentation, Human Capital, a

ch. 5 (Ph.D. diss., New School for Social Research, 1982).
20. Mark H. Moore & George Kelling, "To Serve and Protect": Learning fr
Interest no. 70 (1983); David F. Greenberg & Ronald C. Kessler, The Effects
tivariate Panel Analysis, 60 Soc. Forces 771 (1982); Susan Martin, Catching
liminary Findings (paper presented at 1984 Law and Society Association m
21. On harsh drug laws, see Joint Commission on New York Drug Law
Toughest Drug Law: Evaluating the New York Experience (Albany, N.Y.:
York Drug Law Evaluation, 1977); on capital punishment, see McGahey, sup
22. Alfred Blumstein, Comment, In the Prison Overcrowding Crisis, 12 N
115 (1984).
of crime (e.g., thrill seeking or other psychological factors), and w

moral beliefs play as a restraint on behavior.23
Phillips and Votey seem perhaps too confident about the validity
er's approach, which they follow with relatively little change-a vi
criminal justice system as a production process that deters rationall
ing offenders and as capable of producing significant changes in c
trol through punishment policy. Phillips and Votey's work is insig
important, not only for the wide variety of careful analyses and
accumulated in over a decade's worth of research, but precisely fo
prisingly confident endorsement and continuation of the basic eco
proach to crime. The strengths of that approach are manifestly ap
this book, and it should be read for that reason. Readers looking f
cisms or substantial modifications of the economic approach w
look elsewhere.
Empirical and Theoretical Problems with the Economic

Model-Schmidt and Witte
When economists started to empirically test the propositions outlined

Becker, they quickly encountered a series of theoretical and practical pro
lems. Although formidable theoretical problems were encountered, the e
pirical side presented perhaps even more vexing problems. The first rese
on unemployment, deterrence, and crime used aggregate data such as nat
al or age-specific unemployment rates, changes in prison admissions leve
and overall crime rates reported by local police. It was hard to make infe
ences about individual behavior and policy options from these aggreg
data, but data with individually matched information about crime and em
ployment experiences were expensive to obtain and hard to analyze with
ventional econometric and statistical techniques. Problems with the theor
cal model of individual criminal behavior continued to complicate the issu
of what data to use and what techniques to employ.
Much of the work in these two areas-specifying and elaborating the th
retical model of individual criminal behavior, and using appropriate indiv
ual-level data and more sophisticated econometric techniques-has been
vanced by Peter Schmidt and Ann D. Witte, in a series of papers beginning
1973. In An Economic Analysis of Crime and Justice, we now have a volu
covering much of Schmidt and Witte's work that does not attempt to pres
or justify a broad optimization argument for policy. Instead, it is divided
to three relatively discrete parts: issues of statistical modeling and econom
23. An important theoretical paper showed that determinate predictions about the effects of change
rewards or punishments on criminal behavior could not be made without an extremely limiting se
priori assumptions. At least three constraining sets of assumptions were required: assuming mone
equivalents for all rewards and punishments; positing a particular attitude toward risk on the part of
individual; and projecting a lack of psychic or moral costs associated with activities like crime. The
thors concluded that policy recommendations about criminal justice "do not follow from theory
rather require empirical determination of relative magnitudes." Michael K. Block & J. M. Heinek
Labor Theoretical Analysis of the Criminal Choice, 65 Am. Econ. Rev. 315 (1975).
No. 4 CRIME, CRIMINAL JUSTICE, AND ECONOMICS 881
ric methodology, elaboration of the theoretical economic mo

and the use of a cost-production framework to analyze prisons.
Schmidt and Witte have two objectives: the presentation of
empirical results that are "in many cases unique," and the s
"further use and development of both advanced statistical te
mathematical modeling in areas related to law enforcement and
tration of justice" (at 365). They provide a much less ringing en
the basic economic approach, although they feel that econom
and advanced statistical modeling provide many benefits.24
Their first section, "Statistical Analyses of Recidivism," al
tween presentation of statistical techniques and applying those
analyses of recidivism. Readers should be forewarned that th
manding technically; familiarity with mathematical presentatio
cal and econometric arguments and with the reporting of empi
from multivariate analyses is needed to fully grasp the argume
Many criminal justice researchers are now familiar with th
niques of multiple regression analysis, a procedure for modeling
lationships that allows simultaneous statistical control of many
variables while measuring their compound relationship to som
variable of interest. Unfortunately, judging by most presentation
sion analysis in policy and criminology journals, many research
carefully considered the limits on these techniques. At best, ana
present single equation models of highly complicated social r
analyzed through the most basic regression procedure, ordinary
(OLS) linear regression.
While this technique is a readily accessible procedure (both in
derstanding and availability in computer software), its corre
depends on a number of constraints, such as using variables that
sumptions of the statistical model. For example, the dependent
quired for OLS should be continuous and normally distributed. H
Schmidt and Witte point out, many interesting criminal justice
either "qualitative (i.e., a series of discrete categories), limited (i
of values observed is restricted in some way), or not normall
(e.g., skewed). Variables with any of these characteristics cannot
analyzed using traditional multivariate statistical techniques tha
dependent variables have continuous, unrestricted normal distri
15). These statistical considerations may seem rather esoteric, bu
vital. While statistical inference cannot by itself solve many vex
24. But they call for "further development and widening of the models developed by
point out (rather appropriately for economists) that gathering good quality data on ind
advanced computer techniques "can be quite an expensive proposition" (p. 381). I am cu
with a large data set (N= 903) of felony arrestees that has matched labor market and cr
gathered by the Employment and Crime Project of the Vera Institute of Justice with the
tional Institute of Justice. When I consider the econometric and data problems presen
sets, I can only echo Schmidt and Witte's warning about costs and complexities.
logical issues, interpreting empirical findings about crime and p

difficult enough without worrying about whether particular res
improper use of statistical techniques.
Schmidt and Witte present several techniques for analyzing q
pendent variables (e.g., arrest/no arrest in some followup pe
dependent variables (e.g., using arrest rates as an imperfect pr
served crime rates, or studying a population of which some po
arrests), the timing of various events (e.g., the length of time un
which varies within a sample, or including in a sample those w
turn to crime during the study period), and the use of such tech
uate programs where no experimental design is possible.
Many of these techniques are known to labor economists, cri
and others, but Schmidt and Witte's presentation is well integr
cid. The discussion of the various statistical techniques is usefu
searchers, not just those studying crime. It is an excellent discu
tative and limited dependent variables, covering probit, logit, a
els, along with survival time analyses.25 Although use of these
constrained by their relative unavailability in software package
logit models are increasingly available, and other packages are b
oped that include the other techniques. These techniques will g
cation and importance in coming years, and Schmidt and W
very solid introduction to theoretical issues and empirical appli
is a particularly useful chapter that illustrates methods of pro
tion when no random assignment techniques can be used, using
of evaluating release procedures from correctional institutions
Most of the empirical work in part I focuses on recidivism iss
laps the material in part II, "Testing the Economic Model of Cr
addresses the theoretical problems with the rational cost-benef
criminal behavior. The presentation in part II, while complex a
ical, is worth the struggle. It provides an interesting contrast
Votey's endorsement of the economic model and deterrence pol
and Witte survey the development of the economic model of c
ior, ranging from the simplest through increasing complexity
develop "the assumptions necessary to imply that deterren
143), and it turns out that only a very simplified model, one that
ly characterize as "too simple to be very realistic" (at 152), yield
ward predictions about the crime-reducing effects of certainty a
punishment.
The model is made increasingly complex, realistic, and indete
successively considering factors such as the allocation of an
25. Probit and logit models are used with binary variables, such as arrest/no arrest; to
propriate for censored or truncated variables, such as arrests or incarceration time whe
ple has a zero value; and survival time can be used in analyzing the time elapsed until
such as the time from prison release to recidivism.
time, not just income, among activities such as lawful work

fects that increased wealth has on allocations of time to la
and leisure; the preference for or aversion to risk felt by d
the existence of monetary equivalents for factors like psyc
changes in the utility of some activities in response to chan
other options (e.g., transformations in the relative attract
with changes in lawful work opportunities); and t
preferences such as adherence to the law. When these fact
turns out that the predictions made by the original mode
biguous deterrent effect of more certain punishment) vani
in a world more like the real world, where the attractiven
tions is interdependent with the relative costs and benefi
as well as with harder to observe psychic costs and benefi
The noneconomist may ask if this trip has been nece
models provided any substantial insights that advance our
crime? Schmidt and Witte answer yes, on three grounds.
have forced analysts to consider that much of crime may b
correction to excessive reliance on deviance approaches for
Formal mathematical models have also "proved a useful cou
tradition of prosaic models with many unmeasurable co
point that overlaps the first. And the models, "even when
dicate the way in whch criminal justice policies and legal op
criminality, provide a badly needed formal guide to em
The first point is well taken; deviance approaches to crim
a rather ad hoc flavor, where variations in behavior can b
observed latent differences in morals. But the latter two
suasive. It is true that formal models ought to force re
about what variables go into an analysis and what data mig
ins for those variables. But in practice, economists are oft
their choices of empirical representatives for variables; th
pronounced in studies using aggregate data."27 And man
identified by formal economic models would be includ
sense analysis of crime: sanction levels, lawful opportuniti
and other sources of income are of interest, with or witho
As Schmidt and Witte themselves point out, the more re
model, the less it provides testable predictions. In the mor
crime is dynamically associated with changes in income, in
toward risk, and morals; everything depends on everythin
26. These issues do not exhaust the problems with the theoretical model of cr
models, the individual maximization approach does not adequately consider no
institutional factors, such as the age-graded nature of unlawful and lawful work
torical changes in the urban labor market for young men.
27. Thomas Orsagh, Empirical Criminology: Interpreting Results Derived fro
Research in Crime & Delinq. 294 (1979).
work that relies on an older scientistic methodology claiming to te

fiability of static model-derived predictions is of little use with s
lems.28 Without clear testable propositions, empirical analysis
process of assembling and weighing evidence from diverse quantit
qualitative data sets and various disciplinary sources, looking to se
fects recur consistently across populations, and what specialized ef
sanctions, lawful work opportunities, or institutional factors migh
changes in levels and types of crime.
Schmidt and Witte illustrate this sort of research process by pro
eral empirical analyses on two samples of North Carolina priso
These data have the advantage that the samples were individua
on employment and crime variables and the disadvantage of being
ly narrow slice of the population of interest, a problem the author
edge. And although the two data sets can be used to illustrate diffe
cations of the techniques laid out in part I, seven chapters of the b
voted to various analyses performed with these two sets. Granted
taining such data is costly and difficult, this still may be excessive
two samples. At the very least, it makes the authors' claims about
utility of their results seem perhaps overstated.
To be sure, they obtain a number of interesting empirical findin
like age, previous drug and alcohol use, and previous convictio
good predictors of postrelease criminality and convictions but not
tors of new offense types. But their findings on racial effects ill
complex and sensitive these analyses are to models and data. When
the length of new prison sentences, they found that being unm
white was associated with longer sentences. However, this finding
to be unstable. Another analysis of prison sentence length for a s
ple found similar results to the first for most variables but not for rac
second sample, being black was associated with longer sentence
and Witte concluded that the first sample was skewed by includin
number of "habitual, white, misdemeanant offenders . . . who
numerous short jail sentences" (at 367).
This interpretation of the shifting effects of racial variables an
models for diverse subpopulations illustrates how empirical res
proceed in a world without unambiguous theoretical predictio
thors go on to estimate separate models for different age, race, a
populations, arrest frequencies and types, and single and multiple
models of crime and its relationship to lawful labor market oppor
Schmidt and Witte's major contribution here is the necessary el
and complication of the basic economic model, applying it to dive
lems. Unlike Phillips and Votey, these authors would restrict the
28. A lucid and telling article presenting the problems with this positivist vision from th
contemporary philosophy of science is Donald N. McCloskey, The Rhetoric of Economic
Literature 481 (1983).
economic explanations to income offenses; the deterrence

ported for some types of economic crimes but not for no
Work opportunities for offenders are found to affect cri
plex fashion than a simple cost-benefit economic model
portunities for prison releasees are constrained by nonind
such as those described by dual labor market theory, an a
labor markets as divided institutionally, with many of th
vantaged in a "secondary" labor market that does not rew
tion, productivity, and good work habits in a consisten
and Witte conclude that a wide variety of external and no
especially the job market conditions and drug and alcohol
citly included in economic models of crime. The interactive
cial and personal factors is "more complex than is reflecte
els" (at 378), and separate models for different types of o
both by demographic factors and by types and levels of
ment) are thus needed to provide more tightly focused ex
There is a third part of the book-an application of cost-
ry to the study of prisons. Like the other two parts, it is c
cal approach, meticulous in its analysis, and modest about
claims. Interesting results are again found. Larger priso
more cost-effective to build and operate, contrary to the
ward building smaller prisons with capacities of abou
Schmidt and Witte are not calling for large, harsh prisons
suggest that single cells with relatively large amounts of li
tually be cost-effective. The authors are wary about adapt
nomic models of private firms' cost-production behavior t
institutions like prisons. (There is some controversy in eco
well this cost-production theory even describes the operatio
tor firms.) As with their analyses of particular crime t
Witte call for "specific theories for particular types of pu
(at 381).
Throughout their book, Schmidt and Witte shy away from any broad
claims about criminal behavior or conclusions about the policy role of vari-
ous elements of the system in favor of a much more cautious reading of their
empirical results. In all their work, they call for specific theoretical and em-
pirical analysis based on the peculiarities of the problem at hand. This gives
their book a less far-reaching vision based on the economic approach than
Phillips and Votey provide. But although there is less sweep in Schmidt and
Witte's work, there is a stronger appreciation of the limits on the economic
approach to crime.
Assessing the Economic Approach

It is beyond the scope of this essay to provide a full discussion of where the
economic approach might go in the future. The books reviewed here encap-
sulate a history of the economic approach to crime, showing its strengths and
weaknesses in theory and empirical application. On the positive si

nomic approach has caused analysts to downplay deviance appr
explaining criminal behavior. But it may be that the rational mod
reached itself; certainly some criminal activity cannot be explaine
ence to rational individual calculation of costs and benefits, altho
of crime may be usefully understood in that way.
For policy guidance, most economists have assumed that their b
model fit nicely with deterrence policy, and many of their policy
dorsed swifter and surer apprehension and punishment. This f
economic approach has turned out to be more problematic than it
peared. Producing significant and consistent changes in rates of a
sion and severity of punishment is more complex than economist
for two reasons.
First, the institutional environment of the criminal justice "system" is in
fact a collection of highly autonomous organizations, each with its own in-
ternal tensions and conflicts.29 The other major constraint on deterrence is
cost, an economic factor, to be sure, but one often unexamined. Producing
deterrence through prison sanctions is a very expensive business-one that
doesn't provide much bang for the buck. Creative thinking is now being ap-
plied to the initial stages of the crime control process-prevention of crime
through more efficient use of police and involvement of community groups.
Prevention may turn out to be the most cost-effective strategy, but actually
achieving some higher level of prevention will probably be best accomplished
through unconventional uses of police in conjunction with community
groups. Such an approach will bump back against the first constraint-the
relative autonomy of various criminal justice institutions, such as police de-
partments, prosecutors, and the judiciary.
The other limiting factor for policy guidance is the increasing indetermi-
nacy and complexity of the economic explanation of criminal behavior. The
model of rational cost-benefit calculation is a powerful explanatory device,
appealing because of its simplicity. But that very simplicity also severely lim-
its the application of the model to complex phenomena. It is a truism that of-
fenders (and others) respond to incentives. Like all truisms, it is true, and
that counts for something. But it also doesn't get you very far. The individu-
ated economic approach has been notoriously hard to merge with other so-
cial science perspectives; rather than a cooperative venture, economic analy-
sis of social problems has often produced what Kenneth Boulding once called
"economics imperalism-the attempt on the part of economics to take over
all of the other social sciences."30
We have probably reached the point where this imperalism is no longer ef-
29. For an illuminating study of how judicial norms shape criminal sentences without explicit senten-
cing guidelines, see Douglas McDonald, On Blaming Judges (New York: Citizens' Inquiry on Parole and
Criminal Justice, Inc., 1982); on organizational tensions in prisons, see Eric H. Steele & James B. Jacobs,
A Theory of Prison Systems, 21 Crime & Delinq. 149 (1975).
30. Kenneth Boulding, Economics as a Moral Science, 62 Am. Econ. Rev. 1 (1972).
fective in the study of crime and crime control. The next

search on these problems needs to consider how to emb
fender model and the optimization approach to institution
weave of determination that makes up the crime gene
process. Experimental psychology, anthropological stud
borhoods and families, sociological analyses of criminal jus
and further formal extensions of the economic model all
The final contribution of economic research on crim
product, has been the increased sophistication of empirica
welcome contribution within its proper limits. But techni
suffice to answer the larger questions stemming from our
disarray. The study of crime and criminal justice is in a th
where insights and findings from different fields must be
and recombined in a creative fashion.
Does this mean that the swirl of ongoing research activity produces only
fog when it comes to policy? Current research does not provide unam-
biguous support for the expectation that increased deterrence efforts or
reductions in poverty will reduce crime. But the use of an economic perspec-
tive can still be of great assistance when considering alternative policies.
Microeconomic cost-benefit analysis is designed to address precisely the
questions posed by alternative uses of scarce resources. But as with the study
of individual criminal behavior, analysts must be careful; in their analysis of
prisons Schmidt and Witte point out that simply transposing the economic
framework to public institutions may obscure some critical issues. These em-
pirical considerations simply mean that the object of a researcher's interest
should determine the methods to be employed. This is especially true when
there is no agreed-on theory that undergirds the specific problems of interest.
The economic approach to crime and criminal justice has contributed a
great deal to our understanding of a complex social and institutional arena,
sometimes in unintended ways. But it has not, and in my judgment cannot,
provide the unambiguous design of optimal social control policy that was
promised in the late 1960s. The work of Phillips and Votey and of Schmidt
and Witte testifies to the rich diversity of the economic approach, with its
special strengths derived from careful empirical study. Theoretical models of
criminal behavior and of criminal justice institutions remain weak, but
modern economics is characteristically much stronger in matters of empirical
study and technique than in providing rich social theory.3' The economic
analysis of crime and criminal justice illustrates this uneven character of
modern economics, and the books reviewed here document both the empiri-
cal power and theoretical underdevelopment of the economic approach to
crime. They are thus useful and important for understanding what has been
accomplished and in illuminating the complex tasks still facing scholars and
policy makers.
31. Lester Thurow, Dangerous Currents: The State of Economics (New York: Random House, 1983).

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American Bar Foundation

Is criminal behavior economically rational? Can we analyze criminal jus-

? 1985 American Bar Foundation 869

strong defense and endorsement of that approach, while Schm

Economists and the Debate Over Anti-Crime Policy

But much of sociological theory had explicit uses for poli

expressed most strongly by economist Gary Becker in his

4. Gary S. Becker, Crime and Punishment: An Economic Approach, 76 J. P

a function of the probability of arrest and punishment. If punish

Most research by economists on crime and criminal justice continues

But Becker's legacy continues, both in the analysis of th

8. Becker, supra note 4, at 207.

legal employment or more certain punishment will clearly reduce c

The authors, having participated in debate with renegade eco

this book. Taken together, these analyses provide the basis f

vate; " and prostitution and pornography.2 Many segments of the

nity Priorities for Fighting Crime." The presentation in

and Votey continue the trend of many economists to support d

are how much punishment, for what crimes, and how c

19. See Richard McGahey, Labor Market Segmentation, Human Capital, a

of crime (e.g., thrill seeking or other psychological factors), and w

Empirical and Theoretical Problems with the Economic

When economists started to empirically test the propositions outlined

ric methodology, elaboration of the theoretical economic mo

logical issues, interpreting empirical findings about crime and p

time, not just income, among activities such as lawful work

work that relies on an older scientistic methodology claiming to te

economic explanations to income offenses; the deterrence

Assessing the Economic Approach

weaknesses in theory and empirical application. On the positive si

fective in the study of crime and crime control. The next

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