Debating the economic basis for punishment theory

I've argued before that the criminal justice system suffers from inappropriately basing its (often false) assumptions about human behavior on an economic price-theory approach, by which I mean the idea that punishment is a "price" for criminal behavior and so increasing punishment will lower "demand" for crime (i.e, reduce the crime rate). So I was interested when a couple of readers pointed me to this New York Times piece by economist Robert Frank arguing that the price theory model might work better if the likelihood of immediate punishment is increased.

LAW enforcement policy in the United States rests implicitly on the “rational actor” model of traditional economics, which holds that people take only those actions whose benefits exceed their costs.

This model says that crime will be deterred if the expected punishment is strong enough — a prediction that has not been borne out in practice. Although long sentences are now common and the incarceration rate is five times what it was during most of the 20th century, the crime rate is still two and a half times the average of 1950-62.

Mark Kleiman, a professor of public policy at the University of California, Los Angeles, says there is a better way. In a new book, “When Brute Force Fails,” he argues that instead of making punishments more severe, the authorities should increase the odds that lawbreakers will be apprehended and punished quickly.

First, a few background points:

Most crimes in the United States are committed by long-term repeat offenders, a majority of whom are eventually caught. One of every 100 adults in the United States is now behind bars; many are serving lengthy sentences. The crimes they committed clearly did not “pay” in any objective sense of the term.

Why, then, did they commit them? The short answer is that most criminals are not the dispassionate rational actors who populate standard economic models. They are more like impulsive children, blinded by the temptation of immediate reward and largely untroubled by the possibility of delayed or uncertain punishment.

The evidence suggests that when hardened criminals are reasonably sure that they will be caught and punished swiftly, even mild sanctions deter them. But not even the prospect of severe punishment is effective if offenders think they can get away with their crimes.

One way to make apprehension and punishment more likely is to spend substantially more money on law enforcement. In a time of chronic budget shortfalls, however, that won’t happen.

But Mr. Kleiman suggests that smarter enforcement strategies can make existing budgets go further. The important step, he says, is to view enforcement as a dynamic game in which strategically chosen deterrence policies become self-reinforcing. If offense rates fall enough, a tipping point is reached. And once that happens, even modest enforcement resources can hold offenders in check.

Consider violent crimes committed by drug gangs. In many cities, such gangs are too numerous for police to watch them all closely. Knowing that they are unlikely to be caught and punished, members can violate the law with impunity. In such situations, Mr. Kleiman argues, the police can gain considerable leverage just by publicizing an enforcement priority list.

It is an ingenious idea that borrows from game theory and the economics of signaling behavior....

Considerable evidence supports Mr. Kleiman’s emphasis on the efficacy of immediate sanctions. Experimenters have found, for example, that even long-term alcoholics become much less likely to drink when they are required to receive a mild electric shock before drinking. Many of these same people were not deterred by their drinking’s devastating, but delayed, consequences for their careers and marriages.

Several notable law enforcement successes, like a crackdown on gang homicide in Boston and strategic drug market disruptions in High Point, N.C., and Hempstead, N.Y., provide further testimony to the effectiveness of focused deterrence.

I wholeheartedly agree with Prof. Frank that the price-theory-based notion that "crime will be deterred if the expected punishment is strong enough " is a "prediction that has not been borne out in practice." But he and Professor Kleiman want to insist the price theory approach to crime could be valid, if only it could be tweaked. I'm not sure I understand why.

Certainly immediate and certain punishment is more effective, when it's feasible. But without dramatically expanding financial resources dedicated to criminal justice by many orders of magnitude, the suggestion cannot be scaled up to apply to the millions of people processed through the justice system.

And besides, there are MANY other ways besides the lack of price certainty in which economic theory fails to stand up to scrutiny in a criminal justice setting. From Wikipedia, here are the basic assumptions required for classical economic market theory to operate:

1. People have rational preferences among outcomes that can be identified and associated with a value.
2. Individuals maximize utility and firms maximize profits.
3. People act independently on the basis of full and relevant information.

Let's start with the final assumption: Full and relevant information. Who ever has complete information about anything? With 2,324 separate felonies on the books in Texas (and that was before the Lege created 40 new crimes in last spring's legislative session), it's impossible even to know what's illegal, much less what will be the penalty or what the statistical chances are of being caught and facing punishment. Crimes are committed by people with limited and often skewed information.

As for the second assumption regarding maximizing utility or profits, that rarely applies to crimes committed on impulse - from the shoplifter stealing small items at the checkout counter to the cuckolded killer who murders his wife's lover upon finding them together in bed. For that matter, it would be easy to catalog a long litany of offenders whose actions were driven by essentially self-destructive motives, not a desire to maximize their own self interest.

That same observation ties in to the first assumption that people are "rational actors." But as Frank said, people are often more like "impulsive children, blinded by the temptation of immediate reward and largely untroubled by the possibility of delayed or uncertain punishment." Many people make irrational choices driven by addiction, alcoholism, mental illness, pride, anger, lust, or a variety of other non-rational motives. The prisons and jails are full of them.

There are other economic assumptions behind price theory, like a lack of coercion among parties entering contracts, that just don't play out in reality. And for the same reasons that price theory can fail in economic settings when these assumptions aren't true (all the way up to the recent Wall Street fiascoes), traditional punishment theories about deterrence frequently fall apart except under very particular and usually unachievable circumstances.