The Economics of Crime In the Urban Ghetto

Abstract

This paper explores the economic aspects of participation in illegitimate activities in urban ghetto areas. The motivation for examining economic issues underlying ghetto crime and at the same time ignoring other important components of the interlocking mechanisms generating crime stems from a desire to question the efficacy of economic policy in general and labor market policy in particular in reducing crime. A resurgence of interest by the U.S. Department of Labor in the employment experiences of ex-offenders has manifested itself in the revival of manpower training, work release, job referral, and employment counseling projects. Research sponsored by the Department of Labor continues to test the significance of cash subsidies and other income supplements to released offenders in reducing crime and improving the prison-to-labor market transition. Is this interest misplaced? Although the role that economic opportunities play in affecting participation in crime is acknowledged without challenge by many, during the past decade the central focus of economists studying criminal behavior has been on deterrence. How can we justify expenditures for manpower programs, work release, prison industries, and training programs ostensibly to reduce crime when the perspective with which we view criminality is couched in terms of law and order dicta of the deterrent effectiveness of the certainty or severity of punishment? I propose to survey how economists have approached the analysis of criminality. Two major themes emerge: the assumed rationality of some profit motivated criminal behavior and the determining effect the structure of employment opportunities has on decisions of potential offenders. It is possible to synthesize these apparently opposing economic approaches to model the relationship of employment opportunities and so-called rational criminal decisions. This is done via a discussion of the institutional structure in which labor market and for-profit criminal decisions are made within the urban ghetto.

Keywords: economics, crimes, urban ghetto, ghetto, illegitimate activities, U.S Department of Labor, labo market, criminal behavior