Economics of Crime Final

Corruption

- A phenomenon involving many different aspects, and it is therefore hard to give a precise and comprehensive definition. - However at the core of most definitions is the idea that a corrupt act implies the abuse of entrusted power for private gain. - Classic examples include bribery, clientelism, and embezzlement. Other, often more subtle and sometimes even legal examples include lobbying and patronage. - There is a strong correlation between unpaid tickets and more general perceptions of corruption. Diplomats from countries where corruption perception is low (Denmark) seem to be less likely to break parking rules abroad.

Panama Papers

- An unprecedented leak of 11.5 million files from the database of the world's fourth biggest offshore law firm, Mossack Fonseca. - Mossack Fonseca is a Panama-based law firm whose services include incorporating companies in offshore jurisdictions such as the British Virgin Islands.

Money laundering

- Layering could involve transferring money between multiple bank accounts, often across different jurisdictions, using shell companies, or purchasing and selling various types of assets. - 3 Stages: 1. Placement - Signifies the point at which illicit funds first enter the financial system. 2. Layering - Aim is to create complex transactions to obscure the audit trail and make it difficult for authorities to trace the source of the funds. 3. Integration - Laundered funds are reintroduced into the legitimate economy. This can take the form of purchasing assets, or simply mingling the illicit funds with clean money.

Buyer-seller fraud

A seller intentionally deceives a buyer into purchasing something that's not what the buyer thought it was.

Insider trading

Buying or selling while having information that one has an obligation to disclose to one's counterpart in a market. - Martha Stewart avoided a loss of $45,673 by selling all 3,928 shares of her ImClone Systems stock at the end of 2001 after receiving material, nonpublic information from her broker at Merrill Lynch. - The day following her sale, the stock value fell 16%.

Treasurer

Manages the liquid assets of the group.

Runner

Performs the risky task of transporting large quantities of drugs and money to and from the supplier.

Fraud

Three basic requirements: 1. Lies must be "material" 2. Must act with "specific intent to defraud" 3. Something has to be the object of fraud (usually property)

Local gang leader

Three officers report to this person: 1. Enforcer 2. Treasurer 3. Runner

Hit rates

- (# of people with contraband from group A) / (# of people stopped from group A) - Police objective: Maximize the number of successful searches (hits) given the cost of searching.

Probability of searching

- (Value of drugs at the destination - mule wage for transporting drugs - value of drugs at the destination) / (fine paid by dealer + value of drugs at the destination) - (V^D - w^i - V^0) / (f^i + V^D)

Probability of carrying drug

- (search cost) / (fine paid by dealer - police cost if mule succeeds in delivering drugs) - o^i = s / (f - e) - The rate at which mules offend.

Gang

- 3 or more individuals who associate on a continuous basis, form an allegiance for a common purpose, whose members collectively identify themselves by adopting a group identity and are involved in delinquent or criminal activity. - The primary distributors of drugs throughout the US.

Mafia

- A criminal group similar to a gang. Extended families were the first to form these groups. - They engaged in illegal activities and extorted funds in exchange for protection. - The members of this organized crime syndicate prided themselves on being men of honor. - Type of gang.

Lojack

- A radio transmitter that is hidden in an automobile. If the vehicle is stolen, is is activated by police and the location can be determined. - It is hidden and the thieves cannot disconnect it. - Is it a detection expenditure because it increases the probability that the thieves will be apprehended.

Accounting fraud

- A reasonably safe and attractive capitalist economy requires that investors have faith in the numbers. The great reform of American securities regulations came as the cornerstone of the New Deal. - Investors will be better protected and more willing to advance their funds in markets if corporate numbers are both transparent and reliable. - Transparency was promoted by adopting uniform systems for corporate accounting and results. - Reliability was promoted by adopting tough new sanctions for fraud in financial reporting.

Pretrial detention

- After someone is arrested, the might be held in jail while awaiting trial. Cash bail may be set, and at least a fraction of that amount would need to be paid to secure the defendant's release. - Being held in jail while awaiting trial has substantial detrimental effects: - It increases the likelihood of conviction in the current case - It increases the subsequent criminal justice involvement. - It also increases court debt. - Reduces future employment.

Prosecution

- After the police arrests a suspect, a prosecutor decides whether to move forward with the case. - Prosecutors have wide discretion in how they decide initially to charge defendants. Of great importance is whether a mandatory minimum sentence is attached to the initial charge. - There has been a great deal of recent attention to the discretion that prosecutors have in determining the outcomes of individual cases. - This discretion makes room for racial bias to affefcft decisions.

Markowitz

- Alcohol, Drugs, and Violent Crime. - The author tested for effects of beer taxes, cocaine prices, and the availability of marijuana through liberal medical marijuana laws on assault, rape, and robbery. - Results: - Higher beer taxes decrease the probability of assault and alcohol- or drug-involved assault, but not rape or robbery. - Higher cocaine prices are associated with lower probabilities of assaults and robberies. - States classified as decriminalized for marijuana tend to have higher probabilities of assault and robbery.

Mark to market

- An accounting method whereby assets and liabilities are recorded at their current market value. - Will adjust the value of assets held on a balance sheet or in an account based on the current market value of those assets.

Brock (2012)

- Argued that models supporting hit rate testing make implicit assumptions about the nature costs of stopping and searching individuals; and the way the cost vary across officers. - This supports the use of natural experiments to assess profiling.

Model of rational criminal behavior

- As searches for group A increase, larger deterrent effect and less criminal activity. - As searches for group B decrease, smaller deterrent effect and more criminal activity. - The probabilities of carrying contraband continue to change until eventually they will be equal (20%) across the two groups. - The police have 20% chance of finding contraband on the next stop regardless of the group (hit rates are equal). - Equal hit rates between the two groups would support police not being racially biased, even if the search rates are different. - If police are racially biased, the group with the lower hit rate suffers prejudice (preference based discrimination)

Dorning and Bureau

- Black Women Most Likely Targets of Airport Searches. - Based on government report on airline searches, the rate at which passengers were selected for additional x-rays: - 6.4% of A-A women - 0.73% of white women - 0.53% of white men - 4.6% of A-A men - From the same sample, contraband was found on: - 27.6% of A-A women - 19.5% of white women - 25.1% of white men - 61.6% of A-A men - It could be argued that white women are searched "too much" and A-A men "not enough."

Conviction and sentencing

- Black men face significantly longer sentence lengths versus white men with similar backgrounds who commit the same crimes. - These disparities were found even after controlling for a wide variety of sentencing factors like age, education, citizenship, weapon possession, and criminal history. - Previous work has demonstrated that sentencing decisions- by experienced judges- are routinely affected by: - temperature - media coverage of crime - the order in which cases are heard - emotional shock caused by a football team - It seems likely that this variation will disproportionately harm disadvantaged defendants.

Ponzi scheme

- Can maintain the illusion of an investment as long as new investors contribute new funds, and as long as most of the investors do not demand full repayment and still believe in the non-existent assets they are purported to own. - Most pyramid schemes are not Ponzi schemes. If people are not purposely misled, a pyramid is not typically a fraud. It's a business that is destined to fail, and just a bad investment. - The collapses of Charles Ponzi's scheme brought down six banks that had invested in him. Investors received less than 30 cents to the dollar, and collective losses were around $20 million in 1920.

Categories of private enforcement efforts

- Classified into three groups based on their effects on the market for crime: 1. "Displacement" expenditures 2. "Secondary" expenditures 3. "Detection" expenditures

Deterrence versus Displacement

- Crime is redistributed to people who cannot afford the private investment (crime rate does not change) - Private benefits do not translate to social benefits. - From a public policy standpoint, we care because resources are used to stop crime but without any actual reduction in the crime rates. - If investments are unobservable to criminals, then this raises the potential cost of crime, which would mean private investments are good for individuals and society. - Examples include: safe in home, silent alarms (no sign), GPS tracking devices, concealed weapons. - Taken together, from a social perspective it can be argued that private individuals overinvest in observable security measures ("displacement expenditure"), but underinvest in unobservable ones ("second and detection expenditures").

Displacement expenditures

- Designed to direct offending from one potential victim to another. - Offenders can readily detect these private enforcement efforts and avoid them by selecting another victim. - Examples: improved lighting, bars on windows and doors, making transactions in a secured form, etc. are all readily apparent and may even be advertised so that offenders recognize and avoid them.

Knowles, Persico, and Todd (2001)

- Developed a model to analyze the behavior of an unbiased police force undertaking to search some portion of the public. - The central finding of this study was that non discriminatory policing results in identical hit rates for minorities and non-minorities. - Racial Bias in Motor Vehicle Searches: Theory and Evidence - Hit rates are almost identical across two groups: 34% for Blacks and 32% for Whites. This suggests no preference based discrimination.

Sindelar

- Drug Treatment as a Crime Fighting Tool - They analyze changes as the difference between offending during the 30 days before treatment started and for the 6 months after it started. - Results for the entire sample of individuals who entered treatment showed: - 18% reduction in property crime associated with the decrease in heroin use with treatment. - 33% decrease de to the decline in other drug use. - 9% decrease associated with the reduction in alcohol use.

Harm to vulnerable population

- Economics of crime suggests setting the penalties and enforcement effort to maximize welfare while considering externalities (including harm to vulnerable populations) and enforcement costs. - A comprehensive cost-benefit analysis is recommended, but in practice, economic analysis has minimal influence on substance restriction decisions. - Government criteria primarily focuses on a drug's potential medical applications as a formal benefit. - Classification of controlled substances is generally left to Food and Drug Administration. - A five-schedule classification has been developed to indicate the level of control, ranging from schedule I substances for which manufacture, distribution, or possession are subject to harsh sanctions, to schedule V substances, which are restricted to sale over-the-counter to adults.

Limitation on proposed profiling tests

- Economists have recognized that the treatment of individuals stopped by police depends on a number of factors that cannot be observed by an econometrician attempting to test for discimination. - They created tests (hit rates) to detect preference based discrimination in police behavior.

White-collar crime

- Edwin Sutherland defined it as "crimes committed by a person of respectability and high social status in the course of his occupation." - With this definition, he connected two distinct elements: 1. The social status of the offender 2. The occupational mechanism by which the offense is committed.

Organized crime

- Engages in regular economic activity, the production and distribution of a wide variety of goods and services that are typically both legal and illegal- from construction and restaurant services to drugs, gambling, and prostitution. - For most normal businesses, perfect and costless enforcement of property rights (a government) are the foundation of their ability to exist. When the state is weak or property rights are costly to enforce, organized crime can emerge and offer protection.

Police are equally likely to search both groups

- Equally searches can yield different hit rates. - Key assumption: assume 25% of individuals in group A carry contraband, but only 15% of individuals in group B are carrying contraband.

Dube

- Examine how the expiration of F.A.W.B impacted criminal behavior in Mexico. - When the federal ban was lifted, this made it easier to obtain assault weapons in Arizona, New Mexico, and Texas, but NOT in California. - In Mexican areas close to Arizona, New Mexico, and Texas, but not California, there was a substantial increase in the homicide rate (60%) in Mexican municipalities within 100 miles of the US border states, compared to Mexican municipalities further than 100 miles away.

Mast, Benson, and Rasmussen (2000)

- Examine the effect of asset-seizure laws on the extent of police drug enforcement effort. - They find that in jurisdictions where police are allowed to keep a portion of the assets, there is a significant increase in drug arrests. - More drug arrests may appear to be evidence of effective drug enforcement, but if resources are being drawn away from other criminal deterrence efforts, the asset-seizure laws are providing poor incentives for the authorities to consider the efficient use of resources from a social perspective.

Bernie Madoff

- Former NASDAQ chairman. - Orchestrated through his own hedge fund, and swindled investors with promises of double-digit returns. - He deposited investor proceeds into a bank account, then made withdrawals whenever clients wished to make a redemption. - He was unable to satisfy the vast amounts of redemptions during the 2008 Financial Crisis, and in 2009, was given the maximum penalty of 150 years in prison.

Cook and MacDonald (2010)

- Found evidence that, when there is cooperation across firms in a given location, these efforts can become more effective and perhaps even have a detection component. - Business improvement districts (BIDs) are organized cooperative arrangements among firms in a relatively small geographic area. - Their findings indicate that the BID expenditures for private protection were 20 times more effective in reducing losses than individual private expenditures.

The reality of profiling

- Fourth Amendment protects people from unreasonable searches and seizures by the government. - Enforcement practices can create substantial externalities.

RICO Act

- The head of a crime organization can be prosecuted even if he has never been personally engaged in any criminal activity. - Apart from a long prison sentence, a convicted person forfeits all interests and claims over the criminal enterprise, as well as over the property that constitutes the racketeering activity or what was obtained from the racketeering activity.

Federal Assault Weapons Ban (F.A.W.B)

- From 1994 to 2004, prohibited the sale and manufacture of semi-automatic weapons (in which each pull of the trigger fires one shot) with various military features such as large-capacity magazines and pistol grips. - It was still legal to keep previously owned weapons. - Because the expiration of this ban was clearly anticipated, gun manufacturers were prepared to supply the previously banned weapons soon after the ban was lifted.

Economic consequences

- Greater competition implies that more resources are used on fighting and fewer are used in production which reduces efficiency. - Just as crime can be prevented by adjusting the probability of detection and severity of punishment, public policy should be able to reduce the prevalence of organized crime by adjusting those probabilities. - An organized crime group can protect their members against potential punishment by bribing government officials, threatening potential witnesses, and employing violence against judges.

Gun control laws

- Gun control's impact on crime rates remains a complex and unresolved public policy concern. - The crucial aspect often overlooked in the debate is that guns are like any other consumer products- they are purchased because they are valued by consumer. - Given that the large number of guns in the US are valuable to the consumers: net value (willingness to pay - gun's price) is huge. - If society cares about this value from a social welfare perspective, any gun control policy that restricts the ownership of guns will involve the cost of lost value to gun owners.

Mocan and Tekin

- Guns and Juvenile Crime - Easy access to guns may increase the juvenile crime rate or allow juveniles to better protect themselves. - Survey data set from juveniles who are asked about the availability of guns at home and rich demographics. - The study finds that gun availability at home leads to: - An increase in juvenile crime (including robbery, burglary, theft, and property damage) - But it does not reduce the probability of being a juvenile victim of crime.

Lajous

- How does a Drug Cartel become a Lime Cartel? - In Michoacan, Mexico, lime production value almost doubled from 2003 to 2011 due to increased US demand. The Templarios cartel enriched itself by seizing lime farms from owners and keeping the profits.

Group A has a higher percentage of carrying drugs

- If police are not racially biased, they should divert more resource to searching group A and increase the overall number of hits. - How would criminals respond to the change in search rates?

Monoplistic organized crime group

- If the group has a monopoly in the area, it offers a protection service-price package that maximizes its own profit subject to the condition that is just acceptable to the shopkeeper. - For multiple shopkeepers, the monopolistic organized crime group could either offer one level of service at a given price or it could price-discriminate and offer dedicated packages to each shopkeeper that is just accepted by every shopkeeper. - Either outcome would be economically inefficient, because in the first case, the price is too high and the level of protection too low whereas in the second case different customers face different prices. - Each gang has the local monopoly of protection within a certain area and this local monopoly is maintained by the gang's capability of mobilizing and using force against other gangs.

Why rely on gangs for protection?

- In principle, shopkeepers and residents within a few city blocks could agree to form community policing groups against common crime. - Forming self-governing protection groups involves coordination costs and as group size increases, the free-rider problem becomes more serioues. - These problems can be overcome with a small enough group of residents and shopkeepers who know one another.

Supply side controls

- Increased punishment for dealers - Choke supply - Seizure of drugs

Benson

- Is Property Crime Caused by Drug Use or by Drug Enforcement Policy? - While the study does find a link between drug use and property crime, it concludes that only approximately 20% of the population of drug users commit a substantial amount of property crime. - This may be a large enough number to suggest that the link between drugs and property crime is worth considering when enacting supply-side controls. - On the other hand, the study argues that it may be drug enforcement policy that leads to increased property crime. - As the authorities devote more resources to combatting drug crimes, there are fewer resources available to combatting property crimes. - This study concludes that if there are drug users who resort to property crimes to support their habit, perhaps the authorities can kill two birds with one stone by devoting more resources to deterring property crime..

Ayres and Levitt (1998)

- It is likely that adoption and expansion of Lojack in a city was influenced by levels of automobile theft. - The authors use an exogenous variation (dates when Lojack entered the individual markets) to estimate the effect of Lojack on auto theft. - Each additional year that Lojack was available in an area, automobile theft decreased by between 10-20%. - Marginal private benefit of Lojack < marginal social benefit of Lojack. - MPB is the lower insurance cost due to the likelihood of the vehicle being recovered with less damage if stolen. - Lojack did not prevent theft, so the private benefit was based entirely on faster recovery. - Authors reported that the total social benefit from Lojack was more than 10 times the private benefit. - This demonstrates that they marginal social benefit from private expenditures that raise detection probability may be much larger than private benefits. - Private detection expenditures may be far below the level that maximizes social welfare. - Subsidies would increase the private expenditures. However, the government did not subsidize or promote the Lojack. - Over time, a number of competing technologies for remotely detecting or disabling stolen vehicles have entered the market without public sector subsidy or encouragement.

Ayres and Waldfogel (1994)

- Look at 1,366 defendants in New Haven, CT for 1990. - 19% white men - 53% A-A men - 11% Hispanic men - 17% women of all races - Most common offenses were drug related, assault, disorderly conduct, and larceny. - Average bail amount was $3,466. - A-A men face 35% higher bail than white men. - Hispanic men face 19% higher bail than white men. - If defendant uses a bondsman, the bondsman pays the bail and charges the defendant a percentage fee. - Because possible omitted variable bias, the authors look at bail bond rates charged around town. - Bail bonds companies charged lower rates to minorities implying that there is a judicial bias in the setting of bail.

Comparative advantage

- Mafiosi and gang members need to demonstrate the ability to use force and have sufficient ruthlessness in using it. Members of organized crime groups tend to be recruited from those who have a certain comparative advantage in violence. - Levitt and Venkatesh (2000) report an annual death rate in their data sample of 7%. Once inside the gang, promotion may be based on other skills.

Criminal background checks

- Many argue that criminal background checks should be prohibited, or at least severely restricted, so that ex-offenders can be given a better chance to find legitimate employment. - The problem may create a chance for statistical discrimination: - About 12.8% of all men serve time in prison during their life. - 33% of African American men. - 9.5% for other men. - If employers are concerned, but cannot gain access, they may discriminate based on race. - Allowing for criminal background checks may improve the job prospects of minorities who have no criminal history. - If background checks are EASY to perform: - Fewer minorities with criminal records may find employment. - Minorities without records may face better job prospects. - If background checks are HARD to perform: - Minorities with criminal records will face better job prospects. - Fewer minorities without records may find employment if employers use race as a proxy.

Child Access Prevention (CAP)

- Many states have adopted laws that require gun owners to safely secure their guns within their homes. - Benefit: make it more difficult for children to gain access to guns, which in turn can reduce the incidence of juvenile violence, accidental shootings, and suicides. - Drawback: if safe storage reduces quick access to guns in the face of crime, this may dampen the potential deterrence effect of gun ownership.

Duggan

- More Guns, More Crime - It's hard to get state variation because the best data for gun ownership is available at the national level. - The sale of Guns & Ammo magazine has subscription data at the county level and focuses on handguns, which are the major source of crime. 1. Using magazine sales as a proxy, higher gun ownership is associated with an increase in the overall homicide rate, but does not impact other crime rates. 2. Eliminates the reverse causality (more homicides drive a higher demand for gun ownership). 3. Open carry laws do not affect either gun ownership rates or crime rates, thus do not decrease crime rate.

Extra economics costs

- Neighborhood gang generates a variety of extra economic costs not associated with drug dealing: 1. The periodic gang violence results in large externalities. 2. The toll that gang membership takes on its members, even if they survive, is significant as they are incarcerated and/or suffer large losses in labor market productivity. 3. The central gang buys protection, and this corrupts local politicians and/or the local police.

Detection expenditures

- Not observable to the offender and aid the police in identifying and convicting the offender, that is, they raise the probability of conviction. - May also lower the return to offending because police can retrieve stolen property at the time of the arrest. - The benefits from detection are primarily due to increased probability of conviction. - Computer equipment can have hidden ability to either broadcast a geographic identifier when it is energized or to send out locational information when it is connected to the Internet. This information then leads police to the offedners.

Secondary expenditures

- Not readily apparent to offenders and have the effect of lowering the return from offending. - Keeping valuables in hidden secure areas, recording distinguishing characteristics making them difficult to resell, or making it difficult or impossible to reuse equipment all lower the return to offending but are difficult to observe when selecting a victim. - Computer equipment that can be disabled when it is turned on by sending a signal over the Internet is an example of a secondary private-sector enforcement effort.

Shall Issue concealed-carry legislation

- One argument is that unobservable crime prevention investments can deter (not just divert) crime as they raise the potential cost of crime. Thus, some argue in favor of concealed carry laws. - The effect of shall-issue laws on crime rates is ambiguous: 1. There is the possibility that shall-issue laws will divert criminals from committing violent crimes toward committing nonviolent crimes. Thus, while there may be fewer muggers, there may be more burglars and car thieves. 2. The easier it is to secure a legal gun permit, the easier it may be for criminals to get guns, even with purchasing safeguards in place. 3. The more guns there are in circulation, the greater the possibility of gun-related accidents, suicides, and spontaneous acts of rage that turn deadly. 4. To the extent that there are more armed potential victims, criminals may decide to escalate the use of violence themselves when committing crimes. - This legislation appears to create a situation like arming victims in which the general expectation is that offending should decrease. - However, if offenders are not armed but choose to carry guns in response to concealed-carry legislation or to use those guns more, it is possible to have an increase in gun violence and no effect on general levels of offending.

Causal link between drugs and crime

- One possible social cost of drug addiction is that users may support their habit by resorting to committing property crimes. - If supply-side controls reduce drug use but enhance property crime, this presents a potentially serious shortcoming to such controls. - If increased drug control enforcement makes it more costly for drug users to obtain drugs, it is possible that drug users will commit MORE property crimes to support their more expensive habit. - If there is a physical and psychological relationship between drug use and property crime, social policies to limit drug use may indeed lower property crime.

Internal organization of organized crime

- Organized crime groups are typically hierarchically organizations. - Some youth gangs, like Chicano gangs in East Los Angelos have a flat organizational structure with leadership that is only informally recognized. - Others, like many New York and Chicago gangs, have a formal hierarchical structure with considerable differentiation of duties among its members.

Dimico, Isopi, and Olsson

- Origins of the Sicilian Mafia: The Market for Lemons - Mid 1880s, it was 60 times more profitable to grow a hectare of lemons in Sicily than to grow other crops. - Many growers began contracting "protectors" to watch their trees and enforce their contracts. - The peculiarities of the citrus market may indeed have provided a strong demand for Mafia services, and boosted its activities.

Holzer, Raphael, and Stoll

- Perceived Criminality, Criminal Background Checks, and the Racial Hiring Practices of Employers. - The study collects data on 3,000 firms: 32% of firms always perform criminal background checks, 17% sometimes perform checks, and 51% never perform checks. - Results: Employers who perform criminal background checks are more likely to hire Black workers compared to employers who do not perform background checks. However, those with criminal histories may find it difficult to find employment. - Results: Making it difficult for employers to perform criminal background checks may exacerbate racial discrimination in hiring. - The improved job prospects of Blacks who have no criminal history are found to more than offset the worsened prospects of those who have criminal records.

Searching-for-contraband model

- Police perform traffic stops and distinguish between only two groups: A and B. - Objective: maximize the probability to find contraband when they make a stop. - Assumptions: - Police can determine the group before they make a stop. - Police is completely unbiased. - Key assumption: assume 25% of individuals in group A, carry contraband, but only 15% of individuals in group B are carrying contraband. - How should police achieve their goal?

Syringe Service Program (SSP)

- Provides access to sterile needles and syringes free of cost and facilitates safe disposal of used needle and syringes. - Combats the spread of blood-borne diseases like hepatitis C and HIV - Cut down on the number of needles thrown out in public spaces. - Connect more people to treatment.

Mustard

- Racial, Ethnic, and Gender Disparities in Sentencing: Evidence from the US Federal Courts. - Sample: 77,000 offenders sentenced under Federal Sentencing Guideline. - Guidelines take into account the severity of the defendant's offense and the defendant's criminal history to provide a range for sentence. - Judicial bias can impact sentencing because: 1. Sentence are ranges (judges have flexibility within range). 2. Guidelines are not mandatory (judges can go outside of range) - After controlling for defendants' offense level and criminal history: - Blacks face harsher sentences than Whites - Men face harsher sentences than women - Defendants with low levels of education face harsher sentences compared to better-educated - Defendants with low levels of income face harsher sentences compared to wealthier defendants - Non-US citizens face harsher sentences than US citizens.

Sanga

- Reconsidering Racial Bias in Motor Vehicle Searches: Theory and Evidence. - Hit rates are: 38% for Whites, 28% for Blacks, and 8% for Hispanic. This suggests preference based discrimination.

Foot soldiers

- Report to the enforcer and serve as street-level drug sellers and from whose ranks future officers and leaders arise. - Typically 16-22 years old.

Lott and Whitney

- Safe-Storage Gun Laws: Accidental Deaths, Suicides, and Crime. - Find that safe-storage laws have little impact on accidental gun deaths or suicide rates, but have a large effect on increasing property and violent crimes: - 309 more murders - 3,860 more rapes - 24,650 more robberies - 25,000 more aggravated assaults

Jensen, Melberg, and Jones

- Sequential Patterns of Drug Use Initiation- Can we Believe in the Gateway Theory? - Tested for the effects of drug accessibility, as well as individual background, and sequence of drug use in a study using survey results from Norwegian adults aged 21 to 30 years. - They found that all three factors explained subsequent hard drug use, but that early onset use of marijuana was most important. - Specifically, for a random Norwegian aged 21-30, early marijuana use increased the probability of using hard drugs from 8% to 36%.

Rosemary Heinen

- Set up an imaginary business, RAD Consulting Services, and began billing Starbucks for work that was never done. - She received nearly $4 million in fraudulent invoices. - Sentenced to four years in prison.

Packham

- Syringe Exchange Programs and Harm Reduction: New Evidence in the Wake of the Opioid Epidemic - SEP openings decrease HIV rates by up to 18.2% - SEPs are associated with an increase in rates of opioid-related mortality. - Effects are largest in counties that adopted SEPs after the influx of fentanyl, suggesting that SEP may be less effective during periods when illicit opioids are widely available and limited access to substance abuse treatment.

Statistical discrimination

- Targeting a group because they are likely to be carrying contraband. - It's easy to look at the data and assume there is bias, but if the objective is to maximize successful searches, and if race can be used as a predictor of criminal behavior, racial profiling may be efficient.

Grogger and Ridgeway

- Testing for Racial Profiling in Traffic Stops From Behind a Veil of Darkness - A vail of darkness hypothesis: If the police are racially biased in choosing who to stop and search, this bias can only occur if the police can observe the race of the motorist. - The bias is more likely to be present during the daytime than during the nighttime. - If police behavior differs between daytime and nighttime, this may be an indication of racial bias. - Results: The study does not find evidence of preference based racial profiling.

Cook and Ludwig

- The Costs of Gun Violence against Children - Downside of not requiring safe storage: guns are valuable for criminals. - The study finds that a 10% increase in gun ownership leads to a 3% to 7% increase in burglary rates as guns are an attractive item for criminals to steal, and then possibly use to commit further crimes.

Duggan and Jacob

- The Effect of Gun Shows on Gun-Related Deaths: Evidence from California and Texas - The study chooses to focus on gun shows in two states- California and Texas- during the years 1994 to 2004. - California has strict gun show regulations to eliminate the loophole. Background checks are required for all firearms purchased at gun shows, and individuals must wait ten days before receiving their guns. - Texas, on the other hand, has no specific gun show regulations, allowing buyers to take advantage of the loophole. - Does the number of homicides and suicides change in the weeks immediately following a gun show? - Focusing on 4 weeks and within a 25-mile radius of each show the study finds: - No evidence that gun shows affect the gun-related or non gun-related homicide or suicide rates. - No evidence that gun show regulation affects the four mortality measures: gun-related homicides, non gun-related homicides, gun-related suicides, and nongun-related suicides.

Luca, Malhotra, and Poliquin

- The Impact of Mass Shootings on Gun Policy - Study defines mass shooting as an incident with 4+ firearm-related unlawful deaths in a single, non-gang, non-drug, non-criminal episode. - Mass shootings account for a small fraction of total gun-related deaths (less than 0.33%) between 1989-2014 in the US. - Despite their rare occurrence, mass shootings draw significant media attention, sparking intense public policy discussions on gun control. - Mass shooting lead to 15 p.p. increase in the firearm bills introduced. The more fatalities involved, the more new bills were introduced. Result does not depend on the political party that controls state legislature. - A gun related death in mass shooting has around 80 times greater impact on the number of bills introduced than other gun related death. - Republican party control of state: there is a significant increase in the number of bills that loosen gun restrictions. - Democratic party: there is no significant difference between bills that loosen or tighten gun restrictions.

Pudney

- The Road to Ruin? Sequences of Initiation to Drugs and Crime in Britain - The test for sequencing in drug use is based on the premise that all individuals are exposed to all drugs initially and then sequences in the probability of uptake are assessed. - Evidence for sequencing is statistically significant. For example, a 10% increase in use of the second-stage group of soft drugs would eventually lead to a 3% increase in the fourth-stage use of cocaine and ecstasy.

Problems with hit rates

- The marginal person stopped (inframarginality problem") is not the same as the average person stopped, so comparing averages across groups is not suitable for testing racial bias. - These studies highlight at least two additional issues with outcome tests: 1. Outcome tests may fail- thus implying racial bias- due to "omitted payoff bias." 2. Statistical discrimination may be based on inaccurate information. - Should police officers have incentives to equalize the hit rates? - One shortcoming is that researchers are still unable to observe the drivers'/civilians' behavior.

The competitive model of new entry

- The organized crime group can be thought of as providing protection to customers- say shopkeepers in their area- against crime in exchange for a fee. - Protection can vary in terms of quantity and quality: how often they check, how much knowledge they have of potential thieves, measures to prevent theft and restitution if theft occurs. - A profit-maximizing group tries to maximize profits by receiving the highest possible fee from the shopkeeper and providing the lowest cost of service.

Discrimination in bail setting

- The role of bail is to assure that the defendant appears in court when required. If a defendant does not appear, the bail is forfeited, either directly by the defendant or by a bail bondsman. - The reasoning is that the greater the amount of bail, the greater the incentive for the defendant to appear in court. - If there is no racial bias, different bail amounts should reflect only different flight risks.

Embezzlement

- The theft, misappropriation, or conversion of money placed in one's trust, or which belong to an employer. - In the American corporate system, and its regulatory structure, almost nothing is prohibited as a form of compensation as long as disclosure and approval processes are followed and everyone pays the taxes they owe. - In theory, as long as investors can see whether a company is wasting money on its executives, investors will be able to choose where they invest their money.

Collective action problem

- There is a conflict between the interests of the group and the interests of the individual. - Cartels need to ensure that their employees won't steal from them by distributing the power.

Petry

- Trading Apples for Oranges? Results of an Experiment on the Effects of Heroin and Cocaine Price Changes on Addicts' Polydrug Use. - Heroin addicts show an inelastic demand for both heroin and cocaine. - Cocaine addicts seem more responsive to prices. For this group, cocaine demand is very much affected by cocaine price changes, but their heroin demand is inelastic. - Heroin addicts seem to complement their heroin consumption with cocaine, marijuana and alcohol, but substitute it with Valium and cigarettes. - Cocaine addicts substitute heroin intake with cocaine, marijuana and Valium, and complement it with alcohol.

Impact of gang wars on gang finances

- Two aspects of gang finances changed dramatically during this war: 1. The wages of foot soldiers more than doubled, more foot soldiers were hired, and death benefit costs increased. 2. Each gang committed visible acts of violence on the other gang's territory.

Cook, Ludwig, Venkatesh, and Braga (2007)

- Underground Gun Markets - Estimate the supply of guns to those with criminal intent in Chicago: 1. Gun quality was often poor. The weapons were not of high quality initially and were often old, poorly maintained, inaccurate, and unreliable. Buyers generally could not test the weapons that they were purchasing. 2. Most guns were supplied to offenders in Chicago by a modest number of sources (perhaps twelve dominate the market). 3. Guns sell in the underground market for approximately three times their retail price, despite the efforts of the Chicago police to enforce laws against possession. 4. Large numbers of guns were stolen. 5. Gangs were a source of gun supply. Members borrowed guns as an added advantage of gang membership.

Heaton

- Understanding the Effects of Anti-profiling Policies. - Question: What is the impact on crime rates when the police are discouraged from using racial profiling? - Background: A traffic stop that turned dangerous when the troopers (in their opinion) felt threatened. - Policy: Governor enacted new procedures covering police behavior which would be heavily monitored and incidents of racial profiling could lead to disciplinary action. - Results: - 16% - 33% decrease in annual arrests of minorities for motor vehicles theft. - Small increase in motor vehicle theft in areas populated by minorities.

Gateway-drug hypothesis

- Use of substances leads to more serious addictions to other drugs whose use produces even greater externalities. - Causal evidence for this hypothesis comes from surveys of individuals addicted to cocaine, heroin, etc. who indicate that they began using alcohol, tobacco, and marijuana and then later used more addictive substances.

Glaeser and Sacerdote

- Vehicular homicide occurs when drivers kill another driver with their car, often unintentionally. This is teh charge usually issued for driving under the influence of alcohol or drugs. - This means the victims are largely random, especially compared to victims of other violent crimes. - Other violent crimes may have complicated issues between the relationship of the criminal and the victim. - Vehicular homicide essentially erases that. - Different punishment can more confidently be attributed to bias. - Results: - Racial bias: drivers who kill African Americans receive sentences that are approximately 60% shorter than the sentences received by drivers who kill Whites. - Gender bias: drivers who kill women receive sentences that are approximately 60% longer than those received by drivers who kill men.

May issue

- What is we allow open carry instead. - If we allowed open carry, criminals would likely avoid engaging with targets who openly posse guns and instead focus on easier potential victims. - This is the displacement effect. Aggregate crime is not deterred with this policy.

Offshoring

- When a company moves its production overseas to save money and boost profits. - Cartels do exactly the same. - Corrupt governments, loosely enforced laws and weak governmental institutions create an ideal environment for drug cartels like Honduras. - National governments fight offshoring by publicly shaming the country in question for letting cartels have their way which would lead to less foreign investment. - Costa Rica has proven to be a better place to invest than Honduras.

Internal organization: human resources

- Where do drug cartels find their new recruits? - The Mexican Mafia, a US-based cartel, has its members reach out to new inmates not only to offer them jobs once they're out, but to provide them with work while they're still inside. - Tasks inside jail include extortion and threats of violence against other inmates. Once new recruits are released, they're set to work on trading and smuggling drugs.

Private vs Public Spending on Deterrence.

- Why should it matter to us how private individuals spend their money for deterring crime? - Their purchase may directly harm others. - Purchasing guns: harms someone in a fit of rage. - Bars on your window: neighbors may find them unattractive, increases the probability of your neighbors to be robbed.

Value that foot soldiers place on their lives

1. (earnings of foot soldiers - annual earnings of safe occupations) / (probability of a foot soldier's death) - The difference in earnings was only $2,000 per year and the probability of a soldier to die 6%, which implies a value of life of $2,000/0.06 = $33,333. 2. (foot soldier earnings before - foot soldier earnings after the war) / (probability of dying during the war) - This yields a value of life, assuming your side wins, or $120,000. Multiplying this by the 0.5 chance of winning gives an expected return to risking death during a drug war of $60,000. In either case, these estimates are alarmingly low.

What works and what does not to reduce bias

1. Changing the composition of decision makers 2. Training 3. Change the amount of information provided 4. Limit discretion in decision making 5. Increase oversight/accountability

Origins of organized crimes

1. Geographic distance and inaccessibility from the centers of power is a main factor that reduces state authority. 2. Another type of distance from the center of power that matters is that of ethnic and social distance. - American youth gangs have traditionally flourished in low-income areas often populated by a homogenous ethnic group. 3. A power vacuum can also be created by revolutions, wars, and major political change. There can be long periods of time during which people can face even basic physical insecurity from a lack of government.

Demand side policies

1. Increase expected punishment for users 2. Legalize and even subsidize a substitute drug 3. Drug treatments 4. Improving information about the cost/benefit of drugs

Rational Addiction Model

1. The increase in your past consumption increased your current consumption. 2. Past, current, and future consumption are all complements to each other. - This is known as the reinforcement effect. - As a rational addict, a cigarette tax will reduce your future consumption, and as a result, you will reduce your current consumption as well. - Addicts are not "trapped" by an addictive product. - They make a conscious decision to consume with the knowledge that their current consumption will impact their future consumption. - Implication: addicts can adjust their consumption levels based on current and future changes in the environment. - Rational addicts respond to changes in price, income, information, or costs.

Rank and file members

At the periphery of the gang who span all ages (14-40) and who have little formal responsibility for drug selling.

Gun show loophole

Refers to the group of non-licensed vendors who can legally sell firearms at gun shows without being required to perform any background checks.

Enforcer

Responsible for ensuring the safety of group members.

Preference based discrimination

Targeting a group because of animus toward them.

Franchise

The benefits of franchising for gangs allows them to: 1. Expand their territory and secure a steady stream of revenue (self-financing growth). - Gang leaders pay a fee to central leadership, but earn profits from their crimes. 2. Lower the risk of losing members and reduce money spent in that region. - In return to those fees, higher ranking leaders ensure that a local gang has sufficient protection. - The drawbacks of franchising for gangs: 1. Franchising often leads to competition within a territory, which results in a loss of revenue. 2. Franchising makes it harder to hold someone accountable for mistakes.