Economic Crime: Theory

A number of psychological, sociological, and criminal decision theorists and researchers have challenged the theoretical accuracy and empirical validity of the neoclassical approach (e.g., see Cornish and Clarke; Gottfredson and Hirschi). The most prominent critics argue that a theory grounded too deeply in instrumental rationality misrepresents people's basic nature. Some commentators argue that rationality is simpler than suggested by the neoclassical approach. They maintain that it is "bounded" or limited in ways unrecognized by neoclassical theory (e.g., by cognitive dissonance) and that people typically select from a few alternatives rather than considering a larger set of options (i.e., they use a "satisficing" rather than optimizing approach). Others argue that rationality is more complex and involves morals, norms, and forms of rationality other than the purely instrumental type. Critics also note that the neoclassical approach mistakenly portrays people as making decisions as individuals, independent of the influence of others.

Neoclassical theorists respond by reminding commentators that they do not assume that people necessarily always make explicit, rational cost-benefit calculations. Rather, they contend that one can make useful predictions by assuming that people act "as if " they made such calculations. For example, Milton Friedman argues that neoclassical theory should not be judged on the accuracy of its central assumptions of how cost-benefit calculations are made but on how well it predicts behavior. By this criterion, Friedman concludes that it performs quite well indeed. He maintains that we gain valuable and accurate insights into human behavior by assuming that actions, in general, occur "as if " they were governed by the rules of rational decisionmaking. By trial and error, people generally internalize such rules in the same manner that pool players eventually learn to play the game as if they understood the laws of physics.

Notwithstanding Friedman's optimism, the available evidence on the neoclassical or economic approach to crime is inconclusive. For example, Gary Lafree notes that longitudinal studies of postwar crime rates in the United States generally confirm that high levels of punishment reduce crime rates, as do some programs that increase the rewards of noncriminal behavior (also see Zhang); however, the effects on crime are not as large as predicted by the neoclassical approach, nor do they apply equally to all groups (e.g., members of racial minorities). Moreover, although the neoclassical approach is consistent with analysis of data in some other countries it does not explain criminal behavior equally well in others. For example, Tsushima's analysis of Japanese data is fairly consistent with the neoclassical perspective, whereas Reilly and Witt's analysis of data from England, and Scorcu and Cellini's (1998) study of Italian data, reveal several inconsistencies between the data and neoclassical predictions. The limits to the neoclassical approach are also evident in an analysis of aggregate data from several countries for the years 1979–1995 (Gould, Weinnberg, and Mustard in Fagan and Freeman). Consistent with the neoclassical approach, increasing wages and lowering unemployment reduced both property and violent crime rates; but in contrast to neoclassical predictions the effect was larger for property crime, specific to young and unskilled men, and varied considerably over time.

Researchers have also identified a variety of "anomalies" in which a significant proportion of subjects make decisions that appear to contradict the basic assumptions and predictions of neoclassical theory. For example, many decisions to offend appear to be made on impulse without any apparent rational calculations (Cornish and Clarke; Shover). In other settings, offenders' decisions appear to be based on limited knowledge and little or no effort is made to gather additional information. Research also suggests that most offenders have only the vaguest notions of the likelihood of being apprehended or of the probabilities of receiving different penalties if convicted. As well, many decisions are inconsistent with the notion of simple self-interest and for all intents and purposes appear to be irrational (i.e., inconsistent with the decision-maker's preferences), as for example when people make contradictory choices.

Several sociologically oriented criminologists sympathetic to some aspects of the neoclassical approach have suggested modifications to the economic perspective. In the following we review several of these advancements.