Law and Economics Classics - Crime
At Grove City College, I teach Law and Economics--a course that explicitly examines how "people expand their options by cooperating." It therefore lies at the heart of "mere economics." In this sermon series, I'll be posting a summary of classic L&E papers over the coming weeks.
Levitt, Steven D. "Understanding why crime fell in the 1990s: Four factors that explain the decline and six that do not." Journal of Economic Perspectives 18, no. 1 (2004): 163-190.
Levitt attempts to answer: “why did crime fall in the 1990’s?” He lists a number of relevant factors and a number of irrelevant factors. When reading this paper, it’s critically important to separate positive from normative analysis. Here are the things that do not explain the decline: the strong economy of the 1990’s, changing demographics, better policing strategies, gun control laws, concealed weapons laws, and increased use of the death penalty. However, the things that Levitt believe did affect the drop in crime: decreasing crack epidemic, increased abortion, increasing numbers of police, and increasing prison population. Crime decreased in magnitude steadily through the 1990’s, with the homicide rate dropping almost 50 percent over the decade from ~9 to ~5 per 100,000 residents. Almost every type of crime decreased between 20-60 percent from 1991 to 2000. A stronger economy seemingly has little impact on crime, despite the increased labor market opportunities raising the opportunity costs of crime in theory. (This is a puzzling result that, to my mind, suggests ceteris is not paribus).
Likewise, Levitt argues that the changing demographics do affect crime, but the changes in this period produce a net null effect. There was an aging population, which should reduce crime (baby boomers). However, there is also a surge in the adolescent population which was expected to increase crime. If anything, the demographic change reduced crime slightly. “Better” police strategies do not seem to be a factor, largely because there is insufficient evidence. New York City is the main locality that innovates in police strategy, but it is unclear that the effects here are different from other large cities after accounting for the changing size of the police force. “Reasonable people could disagree on the impact, but I think it’s small.” Gun control laws are ineffective—especially gun buyback programs. The marginal gun bought back is the gun that has least value in other uses (i.e., in crime). Cases of DC and Chicago present little evidence of gun control success. Concealed carry laws that would allow individuals to carry guns should theoretically increase the costs of crime. However, there is no evidence that there is a lasting effect, if there is even a temporary shock. The increased use of the death penalty doesn’t fly as an explanation, because the quantity of death sentences is too small even if there is a large (6-7 fewer murders per death sentence) deterrence effect.
The increase in police over the period is believed to have reduced crime. Levitt suggests somewhere between 5-6 percent decrease in the crime rate (which amounts to about 10-20% of the total decrease in crime, since it dropped between 20-50 percent). About 1/3 of the decline in crime can be explained by the rising prison population. He discusses the joint mechanisms of the incapacitation effect and the deterrence effect—both appear to be important. The declining crack epidemic accounts for about 15% of the drop in crime. Crack cocaine was introduced around 1985 and corresponded to gang activity.
Finally, Levitt cites the legalization of abortion as a major explanation. This is by far his most controversial argument, and it has been subject to harsh critique. Abortions presumably occur in family situations that would be unhealthy, and thus remove a portion of the population who are more likely to commit crime. Relatedly, a reduction in unwanted births can lead to less crime in and of itself—people perhaps become more desperate in attempts to ‘make ends meet.’ Legalized in 1973, the abortion timeline is consistent with the coming-of-age of a generation. As a larger proportion of the would-be criminal population is aborted, crime is reduced. Together, these four reasons account for 90 to over 100 percent of the reported decrease in crime.
Levitt’s findings on abortion have been so controversial—and I disagree with them—that it’s worth highlighting a significant criticism. John Lott has argued, persuasively to my mind, that legalized abortion lead to more out-of-wedlock births, which in turn, slightly increased the crime rate.
In the end, Levitt suggests that the real puzzle is why crime did not falter sooner. Indeed, economists and criminologists had been predicting the 1990’s would be a “bloodbath,” but this failed to materialize. Which only goes to show the poverty of social-scientific point predictions.
