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Economics of Crime Homework #6: Game Theory & Public Policy Game Theory 1. How does the Mafia’s “code of silence,” which promises r3etribution against family members of Mafia members who “rat” on other Mafia members, work to prevent the prisoner’s dilemma? What must the government do to counter this? 2. You and a stranger witness a person bleeding to death. You both know the other person has seen it as well. Design a static (simultaneous) game that models whether you call 911. 3. The United States tries to get other countries to follow its lead in the “war against drugs” using trade sanctions. This policy does not consider the rights of foreign governments to set their own policies. The government of Jamaica, knowing that legalization of marijuana would be beneficial from a public policy standpoint, if all other things remained the same, would like to change its laws so that marijuana possession and production are allowed. The payoffs to both countries are presented in the game below. Determine all Nash equilibria for this game. USA Jamaica Grow Marijuana Criminalize Impose Sanctions (0, -50) (-100, 50) Free Trade (200, -25) (0, 0) Public Policy 4. Describe the difference between statistical discrimination and preference-based discrimination. How can hit rates be used to determine the difference? 5. What is the incapacitation effect discussed in the lecture? What are the policy implications of the research findings related to the incapacitation effect? 6. Imagine you are a judge presiding over a racial discrimination case. The plaintiff is a man of Middle Eastern descent accusing the United States Customs Service of discriminatory practices in their non-routine searches (x-ray and/or strip searches) at John Wayne Airport. He claims that the airport employees were biased in their selection of him and other people that appear to be Middle Eastern. You have the most recent annual data on non-routine searches conducted at John Wayne airport in the table below as supporting evidence. Based on the data, what do you conclude? White men Black men Hispanic men Middle Eastern men Asian men # of successful searches 10,000 27,000 13,200 15,600 5,700 Total # of searches 50,000 90,000 60,000 120,000 30,000 Racial bias, Social Conditions, and Public Policy Options Crime and Race We have briefly discussed racial discrimination in applying the death penalty, which is one of the most prevalent topics when discussing crime and race, but there are other aspects of race and crime in the criminal justice system with topics such as racial profiling, discrimination in sentencing convicted criminals, discrimination in setting bail, how criminal background checks affect the employment opportunities of minorities, and even spatial discrimination of certain laws. We will only discuss racial profiling in this lecture. Racial Profiling This is a term that most of us are familiar with, but probably has not been clearly understood. It is an empirical fact that when police stop motorists to determine if they are carrying illegal drugs, African-Americans are far more likely to be searched than are White motorists. For example, in a study done in Maryland over the last half of the 1990s African-Americans made up 63% of police searches but only accounted for 18% of motorists on the road. At first glance this appears to be very troubling and shows support of racial bias on the part of the police, but there may be an alternative explanation at play here. If the objective of the police is to maximize successful searches, and if race can be used as a predictor of criminal behavior because it is correlated with other more difficult to observe predictors (which would be what? Namely, education and income levels, which lead to lower opportunity costs of crime), then racial profiling by police may be an efficient tactic used by police. In the economics literature, racial profiling used to predict criminal behavior is referred to as statistical discrimination, while racial profiling that is motivated by prejudice is referred to as preference-based discrimination. The question becomes, is there a way to distinguish between the two? The Basics of the Economic Model of Racial Profiling Setup: Consider two groups of people – Group A and Group B – that can be distinguished by some easily observable characteristic, such as race. In both groups, a certain percentage of individuals carry illegal drugs. The objective of police is to maximize the number of successful searches, commonly referred to as “hits”, while taking into account the cost of searching. Here we are assuming that both criminals and police are rational, meaning they weigh the costs and benefits. Let’s begin with assuming the police are equally likely to search both groups. In that case the group with the higher percentage of individuals who carry illegal drugs (let’s say group A) will yield more successful searches. Equally likely searches then, can yield different hit rates. Hit Rate = # of successful searches / total # searches for that group 1 If the police are NOT racially biased, a more efficient use of resources would be to search group A more intensively relative to group B to increase the number of hits. But how will the criminals in each group respond to the change in search rates? Since we assume criminals are rational, as the police intensify the search of group A there will be a greater deterrent effect and less criminal activity in that group (Why? expected punishment costs increase since probability of being caught increased for group A), but a smaller deterrent effect and more criminal activity in group B (decreased exp. punishment costs). As the hit rate in group A begins to decline and the hit rate in group B continues to rise, eventually these two hit rates will become equal. If not, the police will continue to have an incentive to move more resources to searching the group with the higher hit rate. Thus, if criminals respond to the changes in deterrence, equal hit rates between the two groups are an indication that the police are NOT racially biased, even if the search rates between the two groups are different. If the police ARE racially biased, however, we can expect to see a lower hit rate associated with the group that suffers the prejudice. In other words, the lower hit rate indicates that police are inefficiently over-deterring that group, suggesting that an additional explanation such as racial bias is partly motivating the searches. **Hence, the numerator in the hit rate formula does not determine bias – this measures efficiency in police doing their job. The denominator is the indicator of racial prejudice since if police are over searching a particular group relative to the expected criminality of the group and/or other groups this will cause the hit rate to be lower. A real world example may help solidify this theoretical model. In the late 1990s a case was brought against the United States Customs Service and some of its employees for allegations of discriminatory practices at O’Hara airport. It was filed by a group of black women who were subjected to non-routine searches, such as x-rays and strip searches, yet no contraband was found on them. The claim was that the employees acted biasedly against black women compared to other groups including white women, white men, and black men when conducting these searches. To support their claim they presented the following sample of national data on the searching of airline passengers: 6.4% of black women were subjected to x-rays, compared to only 0.73% of white women, 0.53% of white men, and 4.6% of black men. Based solely on the search rates, black women were searched more than the other groups (substantially higher compared to whites). Is this evidence of racial bias? We cannot tell with this data alone! We need to look at the hit rates. For the same sample, contraband was found on 27.6% of black women, 19.5% of white women, 25.1% of white men, and 61.6% of black men (these are the hit rates). What do you gather from this? The plaintiffs claimed that the substantially higher search rates of black women were not matched by higher hit rates, implying the excessive searching was ineffective and biased. What do you think? Were they right? Based on our model, the similar hit rates between black women, white women, and white men actually suggest a lack of bias between these three groups. If it was biased we would see a lower hit rate for black women, since bias would be causing a large number of innocent people 2 to be ineffectively searched. Actually, based on the hit rates it suggests that black women, white women, and white men are being biased against in comparison to black men and that with such high hit rates, a more efficient use of resources should be to intensify searching this group and reduce the intensity of the combined three groups. Recall that differentially low hit rates imply bias, and in this case it is white women with the lowest hit rate, which may imply they are the group suffering the most bias. Some studies have challenged the theoretical model that assumes if hit rates are equal then no bias is present. Meaning it is possible to have equal hit rates, but still have racial bias present. One study that looked at this looked at the race of both the individuals searched and of the police. If police are not racially biased then a white and black cop should approach racial profiling in similar ways, meaning if there is an efficient but unequal search rate among groups of people the cops should employ the same technique (statistical discrimination). However, if the race of the officer affects the search, then racial bias may be present. They are looking to find if white officers excessively search black individuals? And/or do black officers excessively search white individuals? One study that looked at this concluded that if the race of the officer differed from the race of the individual, there is a higher probability they will be searched. This was true for both white cops searching blacks and black cops searching whites. Overall, there is racial profiling that occurs – but what is important that economics tells us is that the search rates, even when substantially different for different groups, is not indicative of racial bias. Some studies conclude that racial profiling is an efficient police technique using statistical discrimination while others conclude that it is racial bias from preference-based discrimination, it may very well be both of these types of discrimination occurring at the same time. Policy officials then face the difficult task of determining if the benefits of racial profiling as an effective police search and deterrent technique outweighs the costs associated with racially biased police behavior. Social Conditions and Reforms Though the core body of economic research on crime focuses on the costs and benefits of traditional deterrence policies affecting the certainty or severity of punishment, there is growing focus on other policy options to reduce the crime rate – these include things like labor market conditions, education, juvenile behavior, family background, and so on. Since each dollar spent on one of these programs is a dollar less on the others it is important to know all the pros and cons of each when distributing our resources. Unemployment and Crime Since we know criminals behave rationally, they are making calculated choices about participating in the illegal market as well as the legal markets. Based on this, it would seem right to assume that during times of high UE we would see high crime rates (since fewer legal options available) and during times of low UE we would see lower crime rates. If this is true, policy then should focus on improving job opportunities to reduce crime. Do you think this 3 positive relationship holds for UE and crime? No, it is far more complex than that, just like we discussed with the macroeconomic effects of economic growth. For example, there is some evidence to suggest that alcohol, drugs, and gun consumption decreases during higher levels of UE. What can explain this? The income effect – which causes the purchase of these goods to decrease when our income decreases and vice versa. So here UE and crime may be inversely related, furthermore when income levels decline there may be less attractive items for criminals to steal as well and vice versa. Another difficulty is determining causation which may be simultaneous in both directions. We often are quick to conclude that unemployment leads to more crime, but crime may lead to more unemployment. Why would this be? Because of criminal background checks, and criminals having a hard time finding employment. Also, businesses might not want to locate in areas with higher crime rate, reducing job opportunities in that area. Another complication is that participating in crime or in a legitimate job may not be mutually exclusive, meaning some people do both. It is common for drug dealers to also hold a valid job, which even may provide a market of clients for them. Also, for white collar crimes like embezzlement of stealing from employers it requires the criminal to be hired in a legitimate firm. Many studies have tried to tease out the effects of UE on crime with mixed results. They do seem to find it has more of an impact on property crimes and not much on violent crimes. However, what does seem to be true is that since UE is a short-term issue (due to its cyclical nature) it has a much smaller effect or impact on crime compared to wages. Wages may be a better measure of labor market conditions to explain the crime rate because a decline in wages tends to have a longer-lasting impact on individuals. One study found that a 20% decline in the wages of unskilled men between 1979-1997 (since unskilled men are most likely to participate in criminal behavior, better than taking whole population which washes out the results), led to property crime increasing by 20% and violent crime increasing by 35% over this same period and approximately 50% of that change they attributed to the change in wage. The conclusion here then is that to help deter long-term crime trends improvements in the wages paid to unskilled workers are likely to be more effective than improvements in employment opportunities. *Note this must be a sustained change/increase in wage and not just a one-time payment like we often see during recessionary times, which does not change criminal behavior. Juvenile Crime One undisputed fact of criminal behavior is that young individuals, particularly young makes, commit a disproportionate amount of crime. For example, in 1997 individuals aged 15-19 accounted for over 30% of property crime arrests but made up only 7% of the population. Similar numbers hold for violent crime arrests. The most common juvenile crime (in a proportional sense) is arson with juveniles making up 49% of all arrests. 4 When applying our economic model of crime to juveniles, it may be the case that there is a strong deterrent effect of punishment for young criminals, but actual punishment levels are too low to greatly affect their behavior – meaning they are acting rationally based on knowing that they get a less harsh sentence because they are under 18. One study found that the average rate of return for a single property crime to juveniles is $200 per day and that the average number of days incarcerated per crime is 0.6 days. In other words, a juvenile considering committing a property crime is facing a half-day prison sentence for a $200 gain. The same sentence for an adult under this scenario would face an average sentence of 2.6 days in jail. Therefore, a juvenile may find that committing a typical property crime yields a decent rate of return compared to other crimes and compared to an adult offender. Thus, applying differential punishments for adult and juvenile offenders may be an important contributing factor in explaining youth crime. What is the policy implication here? It is simple enforce harsher punishments for juveniles. However, another explanation is that it may be the case that the deterrent effect is just really weak for young criminals. Meaning it is not the low severity of punishment accounting for juvenile crime but the inability of any punishment to change juvenile behavior. Thus, if the deterrent effect does not exist then we need alternate methods besides jail or fines to reduce juvenile crime. So we really need to have information on if the deterrent effect exists for juveniles – meaning do they actually fit the rational crime model and weigh out the benefits and costs including the probabilities and severity of punishment when deciding to commit a crime or not? One study attempted to answer this by looking at survey data in 1995 from 15,000 individuals ages 13-17 with several control variables for individual and family characteristics: age, race, ethnicity, religion, parents education level, etc. as well as county variables like population density, unemployment rate, poverty measure, and racial compositions. They used a change in the arrest rates for violent crime to measure deterrence effects and found that increased arrests did lead to less juvenile crime for males selling drugs and committing assaults and for females selling drugs and stealing. There were other factors that influenced the crime rate of juveniles. They found that as UE rate increases so do some types of juvenile crime. Other factors that affect juvenile crime were parents education level, religious beliefs, and family structure (single or double parent household). Another study looking at the severity of punishment as a person transitions from juvenile to adult found a sharp decline in crime rates for individuals aging out of the juvenile system, which shows that juveniles are at least as responsive to changes in severity of punishment as adults are. There are other considerations as well, such as from a cost standpoint it is more expensive to incapacitate/house juveniles in detention centers than adults. Also, even though there does seem to be a deterrent effect present there may be public sympathy involved that encourages policy officials to be less effective in deterring juvenile crime. Based on these issues, perhaps the best social policy to implement is to reduce the likelihood that juveniles become criminals in the first place. 5 Education as a Crime Deterrent Providing educational opportunities to inmates is not the only way to reduce the crime rate. Improving education of youth, especially high school students, may lead to reduced future criminal behavior. The relationship between education reduced crime is straightforward, increased education leads to an increase of legitimate job opportunities and higher wages which reduces the financial attraction to criminal activities (opportunity cost of crime is increased, so education is indirectly linked to severity of punishment). Also, being imprisoned has a social stigma to it and acts as an additional deterrent. This stigma is likely to be greater for more educated individuals. Also, increased education may lead to individuals risk preferences and be cause them to be less near-sighted in their decisions (more consideration for their future) and led them to be less prone to carry risk, reducing likelihood of criminal behavior. Calculating the effect of education on crime is challenging because of reverse causation issues between education and criminal behavior. We usually predict that less educated people will commit more crime, but it may also be the case that people with a greater propensity to commit crime are less likely to stay in school. So, is it less education that is accounting more for crime? Or is it criminal behavior that is accounting for less education? Also, it may not always be the case that less education leads to more crime, specifically for white collar crime which is usually done by educated individuals in positions of power. One study that has focused on finding out if the causal link is as predicted – that less education leads to more crime- found that more education does reduce the crime rate, and an additional year in high school significantly reduces the probability of arrest and incarceration. This finding is likely best explained with the improved job and wage opportunities of educated individuals. Furthermore, the study finds that an increase in high school graduation rates not only has private benefits for the individual but also social benefits from reduced social costs of crime. They find that a 1% increase in the male H.S. graduation rate leads to a $1.4 billion dollar per year savings in the social costs of crime. School and the Incapacitation effect In addition to providing increased job and wage opportunities to deter crime, schooling may provide another avenue to reduce crime and that is through incapacitation. Though students are not in school 24 hours like people in prison are, they are required to be in school for a certain number of hours five days a week in which during this time they are less able to commit crimes. This suggests a potential policy option for reducing juvenile crime may be to increase the duration of the school day. There are two studies that try to address the school incapacitation effect to see if school attendance reduces juvenile crime. What do you guys think the results were? First, since students have ample time outside of school hours (evenings, weekends, holidays, etc.) it is important for this kind of study to look at juvenile crime committed when they should have been in school but were not. Second, it is important to know if crime is actually reduced 6 from being in school or is it just displaced to other times when not in school. This way policy makers will know if extending the school day doesn’t prevent crimes and instead only changes the occurrence of crimes to the evening hours. The two studies attempted to do this in different ways. One compared the juvenile crime rate on school days compared to in-service days, which are paid days off for k-12 educators to have professional development and planning time away from the students. The other study used teacher strike days instead for the reason students are not in school. Using strike days is a bit better since there is usually no forewarning about a strike compared to in-service days, which are typically planned and announced well in advance and gives parents more time to plan for child supervision. The studies had similar and mixed results. First, they found that being in school does provide a significant incapacitation effect for property crimes. Not only was there less property crime on days where school was in session, but also there did not appear to be a displacement effect across other days – meaning that school attendance actually reduces total crime and not just displaces it. The total property crime rate was reduced between 15-30%. However, this was not the only finding. They also found that violent crimes between juveniles increase with school attendance, by an amount between 30-37%. Here it tells us that when juveniles are forced to spend more time with each other violent crimes between them are more likely to occur. With these opposing results, it is difficult to evaluate the effectiveness of policies meant to increase school attendance. The main take away seems to be to that one way to reduce juvenile crime is to provide adequate distractions for them, but in a setting where you are not placing a large amount of juveniles together at one time. After-school enrichment programs like YMCAs, gang intervention programs, career development programs, etc. would be good solutions to this. Crime in the City It is a fact that crime rates in cities, especially large metropolitan areas, are larger than crime rates in rural areas. There are three main reasons for this. The first is that there are higher monetary returns to criminals in dense urban areas than in smaller suburbs or rural cities. This can be explained by greater access to wealthy individuals in large cities as well as a greater density of potential victims. The second reason is that criminals face a lower probability of arrest in a large city, this is because for many crimes here the police are going to confront a much larger suspect pool making it harder to apprehend the criminal. The last and most significant reason is that the greater the percentage of female-headed households, the greater the crime rate. Why? This is likely due to less supervision of youth, more financial hardship in the household, and lack of a strong male role model. Unfortunately, it is hard to say whether single-female headed households are attracted to large urban areas to live or if being in a large urban area creates more female headed households. Either way we can conclude that family structure is an important determinant to the crime rate in large urban areas. This suggests the importance of other policies beyond the traditional deterrence policies affecting certainty or severity of punishment are important. What type programs may be needed to help reduce the 7 incidence of female-headed households or to reduce the propensity for members in such households to commit crime is still an open and difficult question. Prison verses Social Programs With most social issues there are several policy options that can be implemented to resolve whatever problems are at hand. In deterring crime, there are two such policies are 1) to devote more resources towards apprehending, convicting, and punishing criminals or 2) devote resources towards social programs, especially aimed at the young to discourage future criminal behavior. This leads to an obvious economic question: what is the optimal trade-off between devoting resources to each of these deterrence options? Based on economic theory, when do we know we have optimized the distribution of resources to each? The answer is to devote resources to each one until the last dollar spent on each policy option brings the same return in deterrence benefits – gives us the same “bang for our buck”. Conversely, if one more dollar spent on either policy would bring us a reduction in crime then we are not at the optimal allocation of resources. This all sounds very simple, and is in theory, but doing this in the real world is very difficult – mainly because it is extremely difficult to calculate the marginal value of a dollar in different settings. There was one study that attempted to measure the trade-off between allocating resources toward increasing the prison population verses expanding social programs in the U.S. They claim, based on their results that by cutting spending on prisons and reallocating those savings to social programs that crime can be reduced. Meaning that without increasing the current amount spent on policies, crime can be reduced which implies that currently too many resources are being spent on prison as a crime deterrent. Their conclusion relies on many assumptions in their study, so we can take this with a grain of salt in whether it is actually true or not, but their method to going about this is important to understand how economists attempt to measure difficult trade-offs. First they consider two policy options 1) to increase the current prison population by 50% over the current level or 2) maintain the current prison population and spend the saved resources from the first policy option on potential crime-reducing social programs. To evaluate the benefit of the first option, they rely on estimates for how sensitive crime is to changes in the prison population, empirical studies predict doubling the prison population leads to a reduction in crime by 10-30%. Because option 1 is to only increase the prison population by 50% they can then estimate that crime would be reduced by half of this or 5-15%. Also, if the incarceration rate is held constant in option 2, then they can expect crime to be 5-15% higher under this policy compared to policy 1. This gives them an important benchmark, if additional resources saved with option 2 can be reallocated into social programs that reduce crime by more than 515%, that reallocation can be considered efficient. The next step is to calculate the dollar value of resources saved by not increasing the prison population. Taking into account not only the cost to house criminals, but also their lost 8 legitimate job earnings they estimate it would cost between $5.6B-$8B dollars to increase the prison population by 50%, this is the amount of money that can be devoted to social policies instead. These may include programs like preschool and early childhood education (i.e. Head Start), family-based therapy, treatment programs for juvenile delinquents, job skill enhancement programs, and so on. The last step is to calculate the deterrence benefits of these programs. Here the data is extremely limited on the effectiveness of these programs in reducing crime. Here they use what little evidence there is and also add a limiting assumption that only half these benefits are achieved to be conservative, and still find that it is likely that resources can be used more efficiently to reduce crime if reallocated away from increasing the prison population and put towards social programs. Lastly, they point out that this is not likely to be an attractive option for politicians. This is because we see a more immediate drop in the crime rate from the increase in prison population than we do for investment in social programs, which typically have large (current) upfront costs and a long time period to see it pay off (future benefits). Most politicians tend to favor programs that they can take credit for while they are still in office (principle-agent problem). Overall, resources are scarce and trying to carefully think about where resources can best be used is what economic policy analysis is all about. There is more to policy analysis than just believing one policy is better than another and even where cost-benefit analysis is very difficult or seems impossible, it is always a good place to start to at least identify some key trade-offs. If there is time, discuss with each other: What did you learn this lecture? What was most interesting to you? 9 © Urban Crime: Issues and Policies Housing Policy Debate • Volume 7, Issue 4 Fannie Mae Foundation 1996. All Rights Reserved. 731 731 Urban Crime: Issues and Policies Ann Dryden Witte Florida International University, Wellesley College, and National Bureau of Economic Research Abstract Research suggests that some social and criminal justice policies can affect the crime rate. This article considers the major criminal justice and social policy issues related to urban crime, such as drugs, domestic violence, property values, and the underground economy. Family disruption, drugs, limited economic opportunities, and unoccupied and unsupervised youth are all found to be associated with urban crime. The article concludes that major reductions in crime are likely to result only from increased economic and social opportunities for families and youth, particularly for young males. Intensive programs directed at families and at-risk youth are more likely to lower crime than are programs directed at people already heavily involved in illegal activities. It costs less to keep young people in education and training programs than to imprison them, and such programs are more likely to produce productive and well-adjusted adults. Keywords: Policy; Crime; Education Introduction Urban crime is a major issue for Americans. This is true even though the most reliable evidence available, data from the National Crime Survey, indicates that the level of crime is lower today than it was in the late 1970s and early 1980s. The amount of crime is less for the most feared offenses, including rape, aggravated assault, burglary, and larceny, as well as for less serious offenses.1 The composition of crime has changed. While the overall murder rate in the United States has declined since the late 1970s, the murder rate for young males, particularly young black males, has increased. Beginning in 1985, the murder victimization rate for blacks ages 15 to 24 began to increase substantially. In the late 1980s, the victimization rate for young blacks exceeded the previous record levels of the early 1970s, and it has continued to 1 See Donohue and Siegelman (1994) for a compilation of crime statistics and a well-informed discussion of various types of data on crime. 732 Ann Dryden Witte increase during the 1990s. Murder victimization rates for white males ages 15 to 24 began increasing only in the late 1980s, and by the early 1990s they had returned to the rate of the late 1970s (Flanagan and Maguire 1994). Between 1981 and 1990, arrests of those under 18 for murder and nonnegligent manslaughter rose by more than 60 percent. By 1990, 14 percent of all murders were committed by people under age 18. It appears that although we are not experiencing more violent crime, we are experiencing unusually high levels of violent crime committed by young males. In 1990, 70 percent of the people arrested in the United States were ages 16 to 34, and more than 80 percent were male (Flanagan and Maguire 1994). The political response to the urban crime problem has been erratic and uncoordinated. During the 1980s, the federal government vigorously pursued a “war on drugs.” Both states and the federal government passed laws that mandated long prison sentences without parole for many offenses. Three-strike laws (mandating severe penalties for offenders after three convictions) are the latest example of stringent sentencing policies. To house those sentenced under these tough new laws, state governments went on a prison-building spree, roughly tripling the number of jail cells between 1970 and 1990. Getting tough on crime probably bought us a somewhat lower overall crime rate, but it did not secure an urban environment in which most citizens feel safer. The level of violent crime committed by urban youth increased substantially. The overall reduction in crime was bought at a high price. Many careful observers are now calling for a change in policy.2 Police are better educated and older; more diverse in gender, race, and ethnicity; and more unionized. They make increasing use of modern technology. Spending on police increased by approximately 50 percent in real terms between 1970 and 1990, but the number of police officers barely kept pace with the population (Flanagan and Maguire 1994). Police were increasingly assigned to communities rather than to patrol cars as “community policing” spread widely. Under community policing, police returned to walking a beat, but their range of activities was wider than that of the beat cops of the 1950s. The police in many 2 The outline of one possible direction is reflected in the Violent Crime Control and Law Enforcement Act of 1994. A quite different outline appears in the congressional Republicans’ Contract with America (Gillespie and Schellhas 1994). Urban Crime: Issues and Policies 733 urban areas became spokespeople for the neighborhood through local government bodies and assumed some roles normally reserved for social workers. They helped to clean up neighborhoods. They intervened in potentially crime-producing situations (e.g., mediating family disputes, closing down crack houses for code violations). They encouraged citizens, local businesses, and neighborhood social and educational institutions to become involved in crime control. Policy issues arising from urban crime Drugs and crime In urban areas, it often appears that drugs and crime, particularly violent crime, are inextricably linked. Drugs are typically expensive and often reduce the user’s eligibility and motivation to hold a job. The combination results in an increased proclivity to commit crimes, which may turn violent. Because drugs are traded in an underground economy, those who feel cheated in transactions have no legal recourse and must take matters into their own hands, often through violence. Turf wars break out between drug providers operating in a regulatory and legal vacuum, so the distribution of even relatively benign drugs such as marijuana may precipitate violence. Not all crime is associated with drug use. For example, although the rise of crack cocaine during the 1980s appears to have increased the level of urban violence, the major rise in youth crime occurred after the crack epidemic had largely run its course. Empirical explanations for this low correlation include a report by Reuter, MacCoun, and Murphy (1990), who found that only about a quarter of the dealers they studied were committing property crimes and only 3 percent engaged in violent crime. Reuter and his colleagues estimated that regular drug sellers have only a 1 percent chance of being killed and a 7 percent chance of being injured during a year, but a 22 percent chance of being imprisoned. While the wave of imprisonments for drug use and possession that occurred during the 1980s has increased the riskiness of drug dealing and may have contributed to the decline in drug use that followed, this wave leveled off during the late 1980s (Flanagan and Maguire 1994). Imprisonment of drug users and drug dealers has bought us some decrease in crime, but at a high price. These expenditures have had no apparent effect on youth violence. 734 Ann Dryden Witte Drug-related crime remains primarily an urban problem. Even though many suburbanites use drugs at rates equivalent to those of urbanites, the distribution of drugs often remains concentrated in cities. Neighborhoods like New York’s Washington Heights, with access to the George Washington Bridge and the suburbs of New Jersey beyond, are plagued by visitors in search of drugs. Satisfying this suburban demand creates a major marketing opportunity for local drug dealers. Competition to supply the drugs can at times turn deadly and at the least erode the civility of community life (Williams 1989). Drug dealing, like most other criminal activity, is a young man’s game. For young men with poor educational and job prospects, dealing illegal drugs is an attractive high-risk, high-return way of making money. However, recent research (e.g., Reuter, MacCoun, and Murphy 1990) suggests that many of the stereotypes of drug dealers are incorrect. For example, drug dealing is generally not a full-time activity. Selling is most common in the evenings and on weekends. Reuter, MacCoun, and Murphy estimate that three-quarters of drug dealers have legitimate employment and that less than 40 percent sell drugs daily. The estimated median monthly earnings of drug dealers in Washington, DC, during the late 1980s were approximately $700 per month, the same as their earnings from legitimate employment (Reuter, MacCoun, and Murphy 1990). The distribution of earnings from drug sales is highly skewed. Most drug dealers earn little, but a few earn a great deal. The illegal drug industry is, however, big business. Carlson (1993) estimates that the illegal market for cocaine in the United States yielded income of more than $8 billion in 1991; the market for heroin, more than $6 billion; and the market for marijuana, almost $8 billion. Although “solving” the drug problem may help to alleviate the crime problem, it will not end crime. Moreover, we must have realistic expectations regarding the extent to which public policy can solve the drug problem and the degree to which solving the drug problem will lower the crime rate in urban areas. People will always use drugs. As long as we make some drugs illegal, illegal markets will arise to satisfy the demand. Public policy and social change decreased drug use during the 1980s, but substantial and lucrative markets for illegal drugs remain. Given current drug laws, public policy can hope only to control the size of the market and to mitigate the damage caused by the drug market and drug use. Urban Crime: Issues and Policies 735 Public debate regarding drug laws has ossified. Rather than carefully considering a broad range of drug policies, discussions tend to focus on the extremes of legalization and criminalization (e.g., see articles in Krauss and Lazear 1991). Fortunately, our choices are broader. Possible drug policies are arrayed along two spectra: 1. Tax treatment. Some drugs (e.g., prescription drugs and over-the-counter drugs) are subject to no special tax treatment, while others (alcohol and tobacco) are subject to excise taxes. Illegal drugs are, of course, untaxed. 2. Governmental restrictions. At one end are over-the-counter drugs that are subject to no restrictions on purchase or use. Next come drugs such as cigarettes and alcohol that have age restrictions on purchase. Other pharmaceuticals require prescriptions for purchase. Some drugs, such as marijuana, have either de facto or de jure freedom of use, but sale is illegal. Finally, there are drugs such as cocaine and heroin for which both use and sale are illegal. We would be well advised when considering policy options for particular drugs to consider a broad range of options for both taxation and regulation. The family and crime The O. J. Simpson case focused public attention on domestic violence. National victimization surveys indicate that more than 40 percent of violent crimes occur between related or romantically involved individuals (Flanagan and Maguire 1994). The link between domestic problems and crime has long been a concern of the police, but it has not figured prominently in discussions of urban crime. Violence within the family (e.g., husbands’ assaults on wives, parents’ assaults on children, children’s assaults on elderly parents) is a major contributor to the urban crime problem. Research suggests that higher levels of employment, particularly for men, lead to lower levels of domestic violence. There are no firm data on trends in the level of domestic violence (Tauchen and Witte 1995; Tauchen, Witte, and Long 1991). More incidents of domestic violence are now reported, but it is impossible to say whether the level of domestic violence or only the level of reporting is increasing. Since levels of violence tend to be lower in intact families, the increase in divorce and remarriage may have 736 Ann Dryden Witte led to an increase in domestic violence (Tauchen, Witte, and Long 1991). Contrary to conventional wisdom, domestic violence does not appear to be more common in low-income households if the amount of employment is held constant. The Simpson case reflects two other important characteristics of domestic violence. First, domestic violence is common even in high-income households. Second, assaults by men on their romantic partners appear to be more frequent when the partner differs substantially in race, ethnicity, income, or education. Couples of mixed race or ethnicity appear more likely to experience violence than other couples. Also, women who earn more or who are better educated than their male partners seem more likely to be victims, other things being equal (Tauchen, Witte, and Long 1991). Many police departments adopted a presumptive arrest policy for domestic violence during the 1980s because an experiment in Minneapolis showed that individuals arrested for domestic violence were less likely to repeat their offense. The experiment compared the effectiveness of arrest, counseling, and getting the perpetrator out of the house for a cooling-off period. Arrest was shown to be more effective than the other two responses to domestic violence (Sherman 1992). More recent work suggests that although arrest lowers the level of violence in some settings, it raises it in others. Individuals with strong ties to the community and more conforming lifestyles seem to be deterred by arrest, but individuals who are more alienated may increase their level of violence after arrest (see Garner, Fagan, and Maxwell 1995 or Sherman 1992 for details). Property values and crime Crime is one of the major negative externalities that depress property values in urban areas. Neighborhoods that experience large increases in either violent or property crime generally have declining property values. Housing prices also tend to decline in neighborhoods where markets for illegal goods flourish. Neighborhoods with depressed housing prices and abandoned buildings also frequently become havens for criminals and centers for the illegal drug trade. The flip side of this coin is that people are willing to pay for safe homes and neighborhoods. They do this by choosing to live in suburban areas and by paying high property taxes for good police Urban Crime: Issues and Policies 737 forces. They also increasingly do this by living in privately guarded compounds or “gated communities.” Expenditures on private security personnel have grown rapidly in the United States since the 1960s.3 Crime and the ghetto An important feature of U.S. urban areas is the existence of ghettos (generally inhabited by people of similar racial, ethnic, or national origins), where an underground economy tends to flourish. Indeed, in some cases underground economic activity is far more important than the legal economy in both the social and economic life of the ghetto. The underground economy in the ghetto, with its tenuous ties to legal institutions and its need for secrecy, provides a congenial environment for criminal activity. The underground economy can be divided into an informal sector and an illegal sector. In the informal sector, perfectly legal goods and services are bought and sold; however, the seller either is not properly registered or licensed or does not pay taxes. In the ghetto, such activity ranges from small factories producing clothing with the help of illegal Latin American or Asian immigrants to unlicensed barbers or beauticians cutting the hair of friends and neighbors. Such activity flourishes in distressed neighborhoods because the level of “unemployment” is high and because low incomes force ghetto residents to use low-cost providers. Inner-city markets are often wide open to informal suppliers because many firms in the formal sector do not wish to provide goods and services in low-income areas. The illegal sector of the underground economy consists of activities that are against the law, such as drug dealing, prostitution, or defrauding government benefit programs. Studies indicate that the majority of economic activity in the Watts area of Los Angeles is either illegal or informal. Studies of New York City suggest that the informal economy grew rapidly during the 1980s.4 An important part of the illegal sector is the drug trade, often organized around urban gangs. Gangs maintain a complicated relationship with the neighborhoods where they deal drugs. 3 See Flanagan and Maguire (1994) for police statistics and Long and Witte (1980) for a survey of the effect of crime on property values. 4 Pozo (1993, 1996) and Sassen-Koob (1989) discuss the underground economy in urban areas. 738 Ann Dryden Witte After a multiyear, multicity ethnographic study, Jankowski (1991, 210) concludes that “in those neighborhoods where gangs operate, the gang and the community have established a working relationship.” He further notes that “this relationship is predicated on a number of exchange relationships in which the gang and the community provide each other with certain services.” Gangs contribute countless dollars to local commerce and serve as local militias that attempt to control some of the spillover crimes associated with drug use, such as break-ins and muggings. Many inner-city communities, in turn, give gangs sanctuary from civil authority and often legitimize them by conferring status on their members. In short, the relationship between gangs and the ghetto may be more symbiotic than adversarial, and this relationship often hinders crime and drug prevention efforts. Public policies affecting crime Public policies that affect urban crime are of two distinct types. First, there is a whole set of social policies (e.g., drug treatment policies, child welfare policies, jobs policies) that affect crime either directly or indirectly. Second, there is criminal justice policy aimed at preventing crime when possible and apprehending and punishing criminals. Research suggests that some social policies and some criminal justice policies can reduce the crime rate. Among social policies, efforts to provide meaningful activities (e.g., jobs, schools, education) to young males, particularly minority males, and preventive or supportive programs, particularly programs directed to young children and their families, can reduce crime. There is also evidence that structured, community-oriented, and valuecentered schools can improve educational performance and lower levels of juvenile delinquency (Mandel 1995; Witte 1996). Among criminal justice policies, both police resources and police policies can deter crime, but the effect is not large (Tauchen and Witte 1994). Prisons can incapacitate offenders, but they do not appear to deter them significantly. The effect of this incapacitation on the crime rate depends on the rate at which new offenders take the places of incarcerated offenders on the street. While early intervention appears most successful, some intensive programs for at-risk youth have been shown to be effective, and research suggests that keeping young people busy with legal Urban Crime: Issues and Policies 739 activities can reduce crime (Witte and Tauchen 1994). The Job Corps, which places at-risk young people in residential, structured work and educational programs, has significantly reduced the level of crime of participants. Research suggests that good jobs, good education, and structured social (including religious) activities can lower the level of crime among the young. A strict, caring, value-centered learning environment such as that found in good parochial schools also seems to increase educational attainment and reduce juvenile delinquency.5 It is important to note that the term “criminal justice system” is a misnomer. No such system exists. Rather, there is a hodgepodge of criminal justice agencies at various levels of government. Crime prevention is largely a police function and the responsibility of local government. Punishment for crimes is meted out by the courts and correctional agencies, which are generally part of state government. The federal government has a limited role: It is responsible for interstate and international crimes, it supports research on the causes of crime and the operation of criminal justice agencies, and it provides funds and seeks to affect nationwide criminal justice policy. Local government policies affecting crime Many local governments have programs designed to keep young people busy, particularly during the summer. As far as I am aware, there has been no systematic evaluation of such programs. However, research suggests a number of reasons such programs might be successful and finds that young men who are busy working or going to school commit fewer offenses. The British are using such programs explicitly for crime control. For example, the local council in Lutton paid for youth clubs in its high-crime public housing and experienced a decline in crime while the rest of England experienced an increase. Bristol and Kirklees, West Yorkshire, set up summer programs for 11- to 16-year-olds in high-crime areas and found that crime declined about 30 percent from previous summers. A scheme in Bolton to encourage young street children to join sports, arts, or counseling groups greatly reduced nuisance calls to the police. In the United States, the Children at Risk (CAR) program keeps youth busy in after-school and summer programs that divert time and energy from delinquency. Preliminary results show significant 5 See Witte (1996) for a survey and Harrell (1995) for a preliminary report of a comprehensive program for at-risk youth. 740 Ann Dryden Witte decreases in juvenile arrests and convictions for the experimental group (Harrell 1995). The effect of police departments on crime depends on both the level of police resources and the way resources are used. Apprehension is more likely when the police respond rapidly, and rapid apprehension is a stronger deterrent than apprehension long after the crime has been committed. Modern technology allows 911 calls to be handled far more expeditiously than in the past. Still, the proportion of crimes solved by the police (the clearance rate) remains low. For example, the police make an arrest for less than one-sixth of burglaries (Flanagan and Maguire 1994). The 1980s saw a number of changes in policing: 1. As noted earlier, many police departments adopted community policing. Research shows that with community policing people feel safer and neighborhoods can improve. Yet community policing does not appear to decrease crime rates. 2. Computer analyses of police data identified “hot spots” from which there were frequent calls to the police. Police allocated more resources to those hot spots, and such calls declined. However, crime appears to have been displaced to other areas rather than suppressed. 3. As noted earlier, some police departments made arrest the presumptive response to domestic violence, but recent research has called this policy into question. State policies affecting crime The state generally provides substantial money for education, administers welfare programs, seeks to stimulate economic growth and development, regulates the provision of child care, decides what is illegal, and runs the courts and prisons. State social and development expenditures have not generally been aimed at reducing crime, and I am not aware of studies that assess their impact on crime. State governments can most easily lower the crime rate by legalizing some things. For example, a number of states have effectively decriminalized the use of marijuana, but the current political atmosphere makes it unlikely that legalization will be pursued on any substantial scale. Urban Crime: Issues and Policies 741 Legalization is not a possibility for violent crimes or major property crimes such as burglary, robbery, and larceny. The state tries to deter such offenses by running a court system that determines who is guilty; setting punishments for convicted offenders; and running probation, prison, and parole departments to carry out sentences that restrict offenders’ freedom. During the past decade, we have moved from a system dominated by indeterminate sentences that allowed early release for prisoners who behaved well in prison to a system dominated by long, determinate sentences. This change has swelled our prison population with inmates who have longer sentences and no hope of parole. Between 1975 and 1990, the number of prison inmates with sentences of one year or more nearly tripled (Flanagan and Maguire 1994). We have also radically changed the way we allocate the evergrowing number of prison spaces. In 1974, 52 percent of prisoners had been convicted for violent offenses, 31 percent for property offenses, and 10 percent for drug offenses. By 1988, 30 percent of new court commitments to prison were for violent offenses, 37 percent for property offenses, and 25 percent for drug offenses. We substantially increased the proportion of prison spaces allocated to drug offenders and decreased the proportion allocated to violent offenders. Although prison sentences do keep offenders off the streets, drug dealers, even at the wholesale level, are replaced quite quickly. Violent offenders are replaced more slowly. Allocating more prison resources to drug rather than violent offenders decreases the level of incapacitation obtained per dollar spent. Many states are now changing policy and reserving an increasing proportion of prison spaces for violent offenders (Flanagan and Maguire 1994). More worrisome still is the fact that an increasing proportion of state expenditures is going to prisons and a declining proportion to higher education. During the 1970s and 1980s, total public expenditures on education grew by a factor of four and one-half, while expenditures on the criminal justice system grew by a factor of six (Flanagan and Maguire 1994). During the same period, public expenditure on public colleges and universities grew by 78 percent, while expenditures on corrections grew by almost 900 percent. In 1990, it cost an average of $9,442 per year to send a young person to a higher educational institution and $25,496 per year to keep a young person in prison. The states increasingly emphasize imprisoning rather than educating young people. 742 Ann Dryden Witte Federal policies affecting crime The federal government provides substantial money for early childhood education and family interventions through its matching funds program and Head Start. Head Start has been expanded in recent years, but it still serves only 28 percent of eligible children, at a cost of $2.2 billion per year. Further, and more important from a crime control perspective, Head Start has not been shown to reduce juvenile delinquency, possibly because it is only a one-year program for many participants and because the family-support part of the program has been weak (Zigler, Taussig, and Black 1992). The federal government has also funded what might best be termed demonstration projects for juveniles, such as the Job Corps (discussed earlier). The federal criminal justice system deals mainly with interstate and international offenses that have little relevance to the urban crime problem. Under the auspices of the war on drugs, the federal government has used the military and other resources to try to interdict international drug shipments (generally ineffectively) and has loaded the federal prisons with drug offenders. Today more than 50 percent of federal prisoners are in prison for drug offenses (Flanagan and Maguire 1994). The federal government supports (at a declining level) research on crime, delinquency, and the criminal justice system. The results of such research may be important in determining state and local policies. For example, longitudinal studies have shown that a small number of high-rate offenders are responsible for a disproportionate number of offenses (Tauchen and Witte 1994), and experiments on police handling of domestic violence have altered the way police handle such incidents (Garner, Fagan, and Maxwell 1995). Finally, the federal government provides funds to state and local criminal justice agencies. For example, the Violent Crime Control and Law Enforcement Act of 1994 proposes spending $9 billion to help local police departments hire 100,000 new officers (although the actual number hired is far lower). Research suggests that these federal initiatives may be fruitful avenues for criminal justice policy (Donohue and Siegelman 1994; Tauchen and Witte 1994). Urban Crime: Issues and Policies 743 New directions for public policy toward urban crime Criminal justice policies During the past decade, we have greatly increased the proportion of criminal justice resources allocated to prisons. Between 1970 and 1990, while the number of prison cells roughly tripled, the number of police officers remained approximately constant (Flanagan and Maguire 1994). Research suggests that building more prisons is not the most effective use of criminal justice dollars. Incarceration does not appear to significantly decrease either the postrelease criminal activities of those incarcerated (specific deterrence) or the level of crime in most urban communities (general deterrence). The crime-reducing effect of increased expenditures on police has more research support. Such increases do seem to deter young men from committing crimes, but the effect on crime is not large (Tauchen and Witte 1994). Still, increased spending on police will likely have a larger effect on crime than increased spending on prison cells.6 Most citizens do not like to see drug dealing in urban streets. Random violence among dealers and the vacant stares and hyperactivity of drug users make the streets more threatening. However, most citizens fear violent crime aimed at the general public far more than they fear drug dealing or the negative externalities it produces. Both these public attitudes and research suggest that it may be time to reallocate criminal justice resources from drug dealing to violent crime. Some states are now beginning to reallocate prison resources to violent offenders. There may be a hidden crime-reduction benefit in using more of the new prison cells to house violent offenders, who are not as quickly or completely replaced with new offenders as drug dealers are. What are we going to do with convicted drug dealers if we do not put them in prison? I would suggest that many drug dealers, and indeed many property offenders, can best be punished with fines and electronic surveillance. With new monitoring technology, the movements of convicted offenders can be followed carefully while they are on the street. They can be picked up if they are found to be at the scene of a burglary or at known centers of drug 6 Campbell (1994) discusses the effect of police on crime. 744 Ann Dryden Witte distribution. Fines collected from the offenders could be used to pay surveillance costs or restitution for victims. In the long run, we may want to rethink our laws regarding “victimless” crimes such as drug use. For example, we could consider decriminalizing the less virulent drugs, such as marijuana. There are precedents for this in the repeal of Prohibition during the 1930s and the more recent legalization, and state provision, of gambling. Policies for at-risk youth Growing up poor in U.S. urban areas has never been easy, but the situation facing young, urban Americans has deteriorated since the 1960s and early 1970s. Urban schools, particularly in distressed neighborhoods, are more often settings for violence and drug dealing than for education. Traditional education, even at its best, ill prepares young people for the high-tech, rapidly changing workplace of today. Respected authority, legitimate role models, supervision by adults, and close, caring relationships with adults are scarce in distressed neighborhoods. Structured, legal leisure activities are rare, but the streets provide a range of illegal and semilegal ways of killing time and even making money. Few programs for at-risk youth have been shown to be effective, with the notable exception of the Job Corps (described earlier). Funds are unlikely to be available to remove a large proportion of at-risk youth from their neighborhoods. It is not even clear that this would be desirable on a large scale. What are we to do with the youth who remain in the difficult environment of the inner city? I think we have no choice but to make some changes in the environment, beginning with schools. Considerable research suggests that structured, value-oriented education and education that seeks close ties with families can improve the lives of at-risk youth. It may be time to invest in such education rather than traditional public high schools. New York City has experimented with alternative school settings, and the CAR program has shown preliminary success in diverse low-income settings (Harrell 1995). Research also suggests that it is important to keep young people busy doing something legal that interests and engages them. Youth who spend more time working and at school have lower levels of criminal activity, even after controlling for a large number of other factors. Also, inner-city youth who are involved Urban Crime: Issues and Policies 745 in church activities or who attend parochial schools have lower levels of criminal activity and are more likely to escape poverty than youth who are not so involved. The British experience and preliminary CAR results cited above suggest that wellstructured summer programs may be effective both in making the streets more pleasant and in lowering crime. (See Witte and Tauchen 1994 for evidence regarding the effect of work and schooling on crime.) Even intensive interventions with preadolescent or adolescent youth who already have problems can be expected to produce only limited benefits. Larger benefits may come only if we begin interventions much earlier. A better start Small-scale studies have shown that intensive early interventions that combine early childhood education with family support and education in parenting can reduce juvenile delinquency. Successful programs work with at-risk parents and children for at least two years before children enter school; provide high-quality infant, day-care, or preschool programs for children; provide informational and emotional support on child-development and child-rearing issues for parents; provide prenatal and postnatal health care; and either provide vocational counseling or training or make sure that they are available for parents. Such programs are expensive, but not as expensive as effective programs for juveniles or the criminal justice system’s costs of dealing with crime after it has occurred. The lesson here, as in other areas of policy, is that prevention works and is generally cheaper than dealing with problems after their inception.7 Head Start is a step in the right direction, but it is too small, has too few services, and is too brief to change the lives of the children it enrolls. Current research suggests that the most effective long-term programs to combat crime within the context of the existing health and welfare policies, the child’s family life, and the current economic situation will be intensive programs for atrisk children and their families that begin before or shortly after a child is born. 7 Zigler, Taussig, and Black (1992) discuss the effect of early childhood interventions. 746 Ann Dryden Witte Conclusions Crime rates are now declining in U.S. urban areas. There is much debate as to why this is the case. Some claim that the decline is attributable mainly to the “get tough” crime policy of the 1980s, while others claim it is attributable mainly to a decline in the number of young people and to a calming of the drug turf wars. On balance, research suggests that most of the drop in crime stems from a decrease in the number of young people and from increased police effectiveness. The rate of violent crime among young males has risen substantially in recent years. We do not know the reason for this increase, but it seems likely to have arisen from a number of sources: disorganized communities, dysfunctional families, and decreased economic and educational opportunities. An effective attack on the youth crime problem may involve the criminal justice system only as a backup. Intensive work with at-risk families, organized community activities, and better educational and economic opportunities may provide a more effective frontline attack. The relative costs of education and imprisonment certainly suggest that reallocation of resources from imprisonment to education and training is worthwhile. Author Ann Dryden Witte is Professor of Economics at Florida International University and Wellesley College. She is a member of the National Bureau of Economic Research’s Program in Public Economics and Program in Labor Studies. References Campbell, John. 1994. Policing Crime. Federal Reserve Bank of Boston Regional Review 4:6–11. Carlson, Kenneth. 1993. Income from Illegal Activities. Unpublished tables. Cambridge, MA: Abt Associates. Donohue, John, and Peter Siegelman. 1994. Is the United States at the Optimal Rate of Crime? Working paper. Chicago: Northwestern School of Law. Flanagan, Timothy J., and Kathleen Maguire. 1994. Sourcebook of Criminal Justice Statistics. Washington, DC: U.S. Department of Justice. Garner, Joel, Jeffrey Fagan, and Christopher Maxwell. 1995. Published Findings from the Spouse Assault Replication Program: A Critical Review. Journal of Quantitative Criminology 11:3–28. Urban Crime: Issues and Policies 747 Gillespie, Ed, and Bob Schellhas, eds. 1994. Contract with America: The Bold Plan by Rep. Newt Gingrich, Rep. Dick Armey, and the House Republicans to Change the Nation. New York: Times Books. Harrell, Adele. 1995. Impact of the Children at Risk Program. Washington, DC: The Urban Institute. Jankowski, Martín Sánchez. 1991. Islands in the Street: Gangs and American Urban Society. Berkeley, CA: University of California Press. Krauss, Murray, and Edward Lazear. 1991. Searching for Alternatives: DrugControl Policy in the United States. Stanford, CA: Hoover Institution Press. Long, Sharon, and Ann Witte. 1980. Evaluating the Effect of Public Policies on Land Prices in Metropolitan Areas: Some Suggested Approaches. In Urban Land Markets: Price Indices, Supply Measures, and Public Policy Effects, ed. J. Thomas Black and James Hoben, 133–59. Washington, DC: Urban Land Institute. Mandel, Richard. 1995. Prevention or Pork? A Hard-Headed Look at YouthOriented Anti-Crime Programs. Washington, DC: American Youth Policy Forum. Pozo, Susan. 1993. Price Behavior in Illegal Markets. Unpublished manuscript. Kalamazoo, MI: Western Michigan University, Department of Economics. Pozo, Susan. 1996. The Underground Economy. Kalamazoo, MI: Upjohn Institute. Reuter, Peter, Robert MacCoun, and Patrick Murphy. 1990. Money from Crime: A Study of the Economics of Drug Dealing in Washington, DC. Santa Monica, CA: Rand Corporation. Sassen-Koob, Saskia. 1989. New York City’s Informal Economy. In The Informal Economy: Studies in Advanced and Less Developed Countries, ed. Alejandro Portes, Manuel Castels, and Lauren Benton, 60–77. Baltimore, MD: Johns Hopkins University Press. Sherman, Lawrence. 1992. Policing Domestic Violence. New York: Free Press. Tauchen, Helen, and Ann Witte. 1994. Criminal Deterrence: Revisiting the Issues with a Birth Cohort. Review of Economics and Statistics 76:399–412. Tauchen, Helen, and Ann Witte. 1995. The Dynamics of Domestic Violence. American Economic Review 85:414–18. Tauchen, Helen, Ann Witte, and Sharon Long. 1991. Domestic Violence: A Non-Random Affair. International Economic Review 32:1–21. Williams, Terry. 1989. The Cocaine Kids: The Inside Story of a Teenage Drug Ring. Reading, MA: Addison Wesley. Witte, Ann. 1996. The Social Benefits of Education: Crime. In The Social Benefits of Education, ed. Jere Behrman and Nevzer Stacey. Ann Arbor, MI: University of Michigan Press, forthcoming. 748 Ann Dryden Witte Witte, Ann, and Helen Tauchen. 1994. Work and Crime: An Exploration Using Panel Data. Public Finance 49:155–67. Zigler, Edward, Cara Taussig, and Kathryn Black. 1992. Early Childhood Intervention: A Promising Preventative for Juvenile Delinquency. American Psychologist 47:997–1006.
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Explanation & Answer

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1

Game Theory

1.

How does the Mafia’s “code of silence,” which promises r3etribution against

family members of Mafia members who “rat” on other Mafia members, work to prevent
the prisoner’s dilemma? What must the government do to counter this?

The Mafia’s “code of silence” works to prevent the prison’s dilemma by
discouraging members to not rat on other Mafia members because of the fear that bad
things will happen to their own family members if they do. This threat is often successful
in silencing them. Because they chose to remain silent, the prisoner’s dilemma is
prevented because it’s no longer a choice between ratting them out and taking the
blame–the only option is to take the blame now. It’s also worth knowing that when both
remain silent, their sentences are both much lighter and they get off easier, which
means can return pretty quickly back to the Mafia game.

2.

You and a stranger witness a person bleeding to death. You both know the other

person has seen it as well. Design a static (simultaneous) game that models whether
you call 911.

Rules of the static game:

1. If I pretend I didn’t see it and the stranger pretends they didn’t see it, and we both
walk away

2

2. If the stranger DOES NOT pretend they didn’t see it and I DO NOT pretend I
didn’t see it, I call 911
3. If I DON’T pretend I didn’t see it and the stranger DOES pretend not to see it, I
call 911
4. If I DO pretend I didn’t see it and the stranger DOES NOT pretend to have seen
it, I don’t call 911 (although the stranger possibly will).

*** If calling 911 leads to jai...


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