Economics 160

1
Economics 160
Lecture 16 Professor Votey Decision Theory
Jury Trials, Fair to Whom ?
But First, we need to wrap up the story from last
time, when I stopped early to have time to
distribute the Midterms
Votey, Lecture 8, Notes, p. 121 Syllabus XVI
2

• We were talking about drugs
  -One of the major problems of our times
• We talked about 4 approaches
• Driving up the price of narcotic drugs to
  discourage use. This basic U.S. policy- doesnt
  make it purely on theoretical grounds. The data
  on the U.S. experience bears out that conclusion.
  The approach is still the favored policy.
• Arresting users under the influence. It reduced
  property crime but without treatment, users were
  not cured of their addiction and would go back to
  using drugs. The program never gathered support
  because it didnt go after sellers.
• Preemptive Buying, the expected to be miracle
  result of attempting to take over the opium
  market. The proponents of the project learned
  that supplies were effectively unlimited. The
  approach is still in use, although it didnt
  work.
• The British approach- A Heroin Maintenance
  Program. It allowed users to maintain their
  habits and to continue to be citizens, employed
  and openly drug users. Sometimes users would
  eventually get off the drugs, but they werent
  under pressure-and they didnt need to steal to
  maintain their habits. The Swiss have been using
  essentially that approach since the early 90s.

3
The Problem, more generally, lies in
the nature of Black Markets

• Both buyers and sellers enter into the market
  transaction willingly, even eagerly.
• Any regulation of such a market will be favored
  neither by buyers nor sellers.
• Regulation of clandestine markets has never been
  easy.
• The history of control of illicit drug sales in
  the U. S.
• is proof enough. We never gained
  control.

4
The illicit U. S. Drug Market as illustrated by
the Crime Control Technology
Drug Use
Social Cost of Drug Use with existing policy
crime control technology
Resources for Control
5
The illicit U. S. Drug Market as illustrated by
the Crime Control Technology
Drug Use
Minimum Social Cost of Drug Use
Resources for Control
6
The illicit U. S. Drug Market as illustrated by
the Crime Control Technology
Drug Use
The Range of Choice
Resources for Control
7
What is the reality?

• The illicit demand for drugs tends to be
  inelastic
• The illicit supply is
  virtually inexhaustible

8
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10
The facts The Demand for Drugs is almost
perfectly inelastic. With the observed response
of addicts to price, the inability of the
authorities to curb the inflow, and the quality
of drugs continuing to improve, it is clear that
present policies are a mammoth failure. It is
time the Administration, the Congress, and the
U.S. Public take a look at how other nations
manage to find better ways to deal with this
problem.
11
With imprisonment, we make the problem worse
The problem looks even worse for California
12
What can we conclude about our degree of
success in the War on Drugs?
With Drug quality improving and price falling
substantially, in the face of increased seizures,
it is clear that the objectives of the
strategy are not being achieved, despite massive
annual increases in funding for control.
Professor Phillips presented earlier the record
of expenditures at the Federal level. They
exceeded 23 billions when reported under the
Clinton administration. State and local
expenditures have been estimated to be several
times that amount.
What does this say about controllability and the
logic of making continued expenditures of this
magnitude?
13
We should be able to learn from history!
Prohibition was a failure, but repeal and more
limited laws to regulate alcohol have provided
improvement. Tax revenues provide revenue
for education, for treatment and
for the costs of regulation
We are managing to regulate the use of tobacco,
imposing many of the costs on producers
The use of both is restricted by law to adults.
It doesnt work perfectly, but use is out in the
open and hence more controllable
Alcohol and tobacco differ in their effects and
the laws regulating their use differ
accordingly.
14
An Illustration
15
What might be a reasonable strategy?

• It is clear that the public does not want to
  make it easy for our young people to
  become addicted to drugs any more than to
  alcohol or tobacco
• We need a strategy that disarms the
  illegitimate market without creating
  runaway drug use
• We would want a strategy that deals with the
  costs to victims of using drugs
• We need what economists refer to as a second
  best strategy an attainable strategy
  objective rather than an absolutely
  unattainable perfect outcome

16

• Some Talking Points
• Policies would need to be tailored to each drug
  individually
• We could begin with marijuana that is already
  recognized as causing minor damage
  compared to alcohol and cigarettes and
  potentially having beneficial effects for
  a number of illnesses.
• We could then move on to heroin that was
  developed originally for it medicinal
  potential.
• Possibly the greatest risk with heroin is
  overdosing, which might be vastly reduced
  by quality control, regulation of packaging for
  the drug, and sound recommendations for safe
  dosages as is done in a variety of ways with
  alcohol.

17

• Cocaine, also originally produced for medicinal
  purposes, could be marketed with reasonable
  safety with controls on quality and
  quantities for dosage.
• Crack cocaine usage could be reduced by
  maintaining a much greater price
  differential between powder in a
  legitimate market and crack in an illicit market.
• Meth Amphetamine would have to be treated with
  much greater caution, with its far greater
  capacity to be addicting. While this drug
  has been around for a long time and only
  more recently become popular for
  recreational use, it has a far greater
  potential for harm.
• Note, however, that, if we managed to achieve
  far greater control over other addicting
  drugs, Meth would become a more manageable
  problem.

18
The whole objective is not to make it easier for
drug abusers to waste their lives, but rather
to go from an idealistic approach that has proven
to be unworkable to a pragmatic approach that has
proven elsewhere to be superior in achieving what
are our own objectives. We need to focus, not
on what we find as undesirable, but on what has
been demonstrated to be attainable and superior
to what we have now. Why is this so hard for we
Americans to grasp?
19

• Most important things to achieve would be
• 1. Reduction of loss of life
• 2. Reduced damages to health
• 3. Reducing the marketing of dangerous
  substances through illicit markets
  rather than controlled ones, thus
  making crime less profitable.
• Note that the Mafia got its start as a major
  force in the U.S. via Prohibition, turning
  to prostitution and drugs when Prohibition
  was repealed. We need to work out ways to
  make such activities less profitable.

20
Points to Remember

• The economic paradigm provides guidance for
  policy that is logical and likely to lead to
  improvement.
• Its logic tells us not to throw good money after
  bad.
• To end the War on Drugs, as it has been conducted
  by all recent administrations, is not to favor
  drugs
• It is to stop favoring stupidity
• Think of the improvements in our system of
  education or healthcare we could provide to the
  people without it - if we redirected those funds

21
More on the role of Decision Theory the Economic
Paradigm (in part review)

• Who uses it and why?
• 1. Criminal participants - following basic
  Bentham / Utilitarian theory
• 2. Society in response - with efforts at crime
  control
• 2 sets of actors on opposing sides of the
  problem
• Why do rational people commit crime?
• 1. Because it pays - though the individual may
  be making the best of a poor set of options
• 2. Most criminals are making a choice

• - the legitimate alternative appears worse

22
Behavior of the individual

On what basis does the individual make a
choice?
Success Job X
Legitimate Job
Unempl 0
Failure
CHOICE
Jail D days _at_ Z loss
Crime
The Key
Success Take from crime Y
Expected Net Benefits E(NB) P(B) . B - P(C)
. C needs to be calculated for each option,
i.e., E(NB) (1 - P(U)).X P(U).0 vs. (1 -
P(A)).Y P(A).(-Z) Simply pick the Best
23
Behavior of the individual

On what basis does the individual make a
choice?
Success Job X
Legitimate Job
Unempl 0
Failure
CHOICE
Jail D days _at_ Z loss
Crime
The Key
Success Take from crime Y
Expected Net Benefits E(NB) P(B) . B - P(C)
. C needs to be calculated for each option,
i.e., E(NB) (1 - P(U)).X P(U).0 vs. (1 -
P(A)).Y P(A).(-Z)
But
24

On what basis does the individual make a
choice?
Legitimate Job
Unempl 0
Failure
CHOICE
Jail D days _at_ Z loss
Crime
The Key
Success Take from crime Y
E(NB) (1 -1).X P(U).0 vs. (1 - P(A)).Y
P(A).(-Z) BUT if P(U) 1
25

On what basis does the individual make a
choice?
Failure
CHOICE
Jail D days _at_ Z loss
Crime
The Key
Success Take from crime Y
E(NB) (1 - P(A)).Y
P(A).(-Z) the only choice is CRIME
26
Do individuals really behave like this?

• Articles
• by Krohm,The Pecuniary Incentives of Property
  Crime,
• and Gunning,How Profitable is Burglary?,
• Syllabus XV, tend to support this sort of
  analysis
• We should add at least one more choice for
  persons on the threshold of selecting a career

27
Do individuals really behave like this?

• Articles by Krohm,The Pecuniary Incentives of
  Property Crime, and Gunning,How Profitable is
  Burglary?, Syllabus XV, tend to support this
  sort of analysis
• We should add at least one more choice for
  persons on the threshold of selecting a
  careerEducation (Investment in Human Capital)

28
Do individuals really behave like this?

• Articles by Krohm,The Pecuniary Incentives of
  Property Crime, and Gunning,How Profitable is
  Burglary?, Syllabus XV, tend to support this
  sort of analysis
• We should add at least one more choice for
  persons on the threshold of selecting a career
  Education (Investment in Human
  Capital)-but opting for education requires
  wealth

29
Do individuals really behave like this?

• Articles by Krohm,The Pecuniary Incentives of
  Property Crime, and Gunning,How Profitable is
  Burglary?, Syllabus XV, tend to support this
  sort of analysis
• We should add at least one more choice for
  persons on the threshold of selecting a career
  Education (Investment in Human
  Capital)-but opting for education requires
  wealth or an alternative income source

30
Do individuals really behave like this?

• Articles by Krohm,The Pecuniary Incentives of
  Property Crime, and Gunning,How Profitable is
  Burglary?, Syllabus XV, tend to support this
  sort of analysis
• We should add at least one more choice for
  persons on the threshold of selecting a career
  Education (Investment in Human
  Capital)-but opting for education requires
  wealth or an alternative income source (or a
  subsidy)

31
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations

32
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities

33
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities
• 2. Manipulating the values of costs and benefits

34
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities
• 2. Manipulating the values of costs and benefits
• But there are really two classes of solutions

35
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities
• 2. Manipulating the values of costs and benefits
• But there are really two classes of solutions
• A. Factors relating to Deterrence and
  Incapacitation

36
Consider the Circular Flow Process (again)
Causal Forces

Victim Costs
A
37
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities
• 2. Manipulating the values of costs and benefits
• But there are really two classes of solutions A.
  Factors relating to Deterrence and
  Incapacitation Resources spent to raise

38
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities
• 2. Manipulating the values of costs and benefits
• But there are really two classes of solutions A.
  Factors relating to Deterrence and
  Incapacitation Resources spent to raise
  a. P(A)

39
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities
• 2. Manipulating the values of costs and benefits
• But there are really two classes of solutions A.
  Factors relating to Deterrence and
  Incapacitation Resources spent to raise
  a. P(A), P(CA)

40
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities
• 2. Manipulating the values of costs and benefits
• But there are really two classes of solutions A.
  Factors relating to Deterrence and
  Incapacitation Resources spent to raise
  a. P(A), P(CA), P(PunishmentC)

41
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities
• 2. Manipulating the values of costs and benefits
• But there are really two classes of solutions A.
  Factors relating to Deterrence and
  Incapacitation Resources spent to raise
  a. P(A), P(CA), P(PunishmentC) b.
  Sentences

42
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities
• 2. Manipulating the values of costs and benefits
• But there are really two classes of solutions A.
  Factors relating to Deterrence and
  Incapacitation Resources spent to raise
  a. P(A), P(CA), P(PunishmentC) b.
  Sentences Prison/Jail (length)

43
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities
• 2. Manipulating the values of costs and benefits
• But there are really two classes of solutions A.
  Factors relating to Deterrence and
  Incapacitation Resources spent to raise
  a. P(A), P(CA), P(PunishmentC) b.
  Sentences Prison/Jail (length) Fines
  ()

44
As Bentham, and others since, have pointed out,
choices for society, to prevent crime
- mirror the choices of the potential
criminal

• Two basic choices in terms of value of
  expectations
• 1. Affecting the probabilities
• 2. Manipulating the values of costs and benefits
• But there are really two classes of solutions A.
  Factors relating to Deterrence and
  Incapacitation Resources spent to raise
  a. P(A), P(CA), P(PunishmentC) b.
  Sentences Prison/Jail (length) Fines
  () Probation (length)

45

• But there are really two classes of solutions
  A. Factors relating to Deterrence and
  Incapacitation Resources spent to raise
  a. P(A), P(CA), P(PunishmentC) b.
  Sentences Prison/Jail (length) Fines
  () Probation (length)

46

• But there are really two classes of solutions
  A. Factors relating to Deterrence and
  Incapacitation Resources spent to
  raise a. P(A), P(CA), P(PunishmentC)
  b. Sentences Prison/Jail (length)
  Fines () Probation (length) B.
  Factors relating to future opportunities

47

• But there are really two classes of solutions
  A. Factors relating to Deterrence and
  Incapacitation Resources spent to
  raise a. P(A), P(CA), P(PunishmentC)
  b. Sentences Prison/Jail (length)
  Fines () Probation (length) B.
  Factors relating to future opportunities
  Resources spent to

48

• But there are really two classes of solutions
  A. Factors relating to Deterrence and
  Incapacitation Resources spent to
  raise a. P(A), P(CA), P(PunishmentC)
  b. Sentences Prison/Jail (length)
  Fines () Probation (length) B.
  Factors relating to future opportunities
  Resources spent to a. Affect availability
  of jobs

49

• But there are really two classes of solutions
  A. Factors relating to Deterrence and
  Incapacitation Resources spent to
  raise a. P(A), P(CA), P(PunishmentC)
  b. Sentences Prison/Jail (length)
  Fines () Probation (length) B.
  Factors relating to future opportunities
  Resources spent to a. Affect availability
  of jobs i. Invest in jobs on aggregate level
  

50

• But there are really two classes of solutions
  A. Factors relating to Deterrence and
  Incapacitation Resources spent to
  raise a. P(A), P(CA), P(PunishmentC)
  b. Sentences Prison/Jail (length)
  Fines () Probation (length) B.
  Factors relating to future opportunities
  Resources spent to a. Affect availability
  of jobs i. Invest in jobs on aggregate level
  ii. Invest in individuals (training/
  education) to make them more employable

51

• But there are really two classes of solutions
  A. Factors relating to Deterrence and
  Incapacitation Resources spent to
  raise a. P(A), P(CA), P(PunishmentC)
  b. Sentences Prison/Jail (length)
  Fines () Probation (length) B.
  Factors relating to future opportunities
  Resources spent to a. Affect availability
  of jobs i. Invest in jobs on aggregate level
  ii. Invest in individuals (training/education)
  to make them more employable b.
  Affect quality of jobs

52

• But there are really two classes of solutions
  A. Factors relating to Deterrence and
  Incapacitation Resources spent to
  raise a. P(A), P(CA), P(PunishmentC)
  b. Sentences Prison/Jail (length)
  Fines () Probation (length) B.
  Factors relating to future opportunities
  Resources spent to a. Affect availability of
  jobs i. invest in jobs on aggregate level
  ii. invest in individuals
  (training/education)
  to make them more employable b. Affect
  quality of jobs i. Aggregate - health care,
  unemployment ins.

53

• But there are really two classes of solutions
  A. Factors relating to Deterrence and
  Incapacitation Resources spent to
  raise a. P(A), P(CA), P(PunishmentC)
  b. Sentences Prison/Jail (length)
  Fines () Probation (length) B.
  Factors relating to future opportunities
  Resources spent to a. Affect availability
  of jobs i. invest in jobs on aggregate level
  ii. invest in individuals (training/education)
  to make
  them more employable b. Affect quality of
  jobs i. Aggregate - health care, unemployment
  ins. ii. Individual - quality of education

54
Consider the Circular Flow Process (again)
Causal Forces
B

Victim Costs
55
When we consider our circular flow model,
there is one aspect of it that tends to be
ignored

• Rehabilitation, for apparently good reason

56
When we consider our circular flow model,
there is one aspect of it that tends to be ignored

• Rehabilitation, for apparently good reason
• The data show that for California and most states
  - inmates in prisons are convicts with sentences
  for 1 year or greater

57
When we consider our circular flow model,
there is one aspect of it that tends to be ignored

• Rehabilitation, for apparently good reason
• The data show that for California and most states
  - inmates in prisons are convicts with sentences
  for 1 year or greater
• These individuals have been found guilty of
  serious crimes (except for those in for drug
  possession)

58
When we consider our circular flow model,
there is one aspect of it that tends to be ignored

• Rehabilitation, for apparently good reason
• The data show that for California and most states
  - inmates in prisons are convicts with sentences
  for 1 year or greater
• These individuals have been found guilty of
  serious crimes
• Roughly 70 recidivate within 36 months of release

59
When we consider our circular flow model,
there is one aspect of it that tends to be ignored

• Rehabilitation, for apparently good reason
• The data show that for California and most states
  - inmates in prisons are convicts with sentences
  for 1 year or greater
• These individuals have been found guilty of
  serious crimes
• Roughly 70 recidivate within 36 months of
  release
• Most ultimately return to prison

60
When we consider our circular flow model,
there is one aspect of it that tends to be ignored

• Rehabilitation, for apparently good reason
• The data show that for California and most states
  - inmates in prisons are convicts with sentences
  for 1 year or greater
• These individuals have been found guilty of
  serious crimes
• Roughly 70 recidivate within 36 months of
  release
• Most ultimately return to prison - approaching
  90 over 5 years

61
When we consider our circular flow model,
there is one aspect of it that tends to be ignored

• Rehabilitation, for apparently good reason
• The data show that for California and most states
  - inmates in prisons are convicts with sentences
  for 1 year or greater
• These individuals have been found guilty of
  serious crimes
• Roughly 70 recidivate within 36 months of
  release
• Most ultimately return to prison - approaching
  90 over 5 years
• So why be concerned about spending on
  rehabilitation projects?

62
So why be concerned about spending on
rehabilitation projects? 2 reasons

• There are cases in which rehabilitation
  works very well

63
So why be concerned about spending on
rehabilitation projects? 2 reasons

• There are cases in which rehabilitation works
  very well
• Peter Jennings , ABC News 530 pm, Tue., February
  19, 1997

64
So why be concerned about spending on
rehabilitation projects? 2 reasons

• There are cases in which rehabilitation works
  very well
• Peter Jennings , ABC News 530 pm, Tue., February
  19
• San Francisco rehabilitation program run by a
  private,

65
So why be concerned about spending on
rehabilitation projects? 2 reasons

• There are cases in which rehabilitation works
  very well
• Peter Jennings , ABC News 530 pm, Tue., February
  19
• San Francisco rehabilitation program run by a
  private, non-profit foundation

66
So why be concerned about spending on
rehabilitation projects? 2 reasons

• There are cases in which rehabilitation works
  very well
• Peter Jennings , ABC News 530 pm, Tue., February
  19
• San Francisco rehabilitation program run by a
  private, non-profit foundation, at no cost to city

67
So why be concerned about spending on
rehabilitation projects? 2 reasons

• There are cases in which rehabilitation works
  very well
• Peter Jennings , ABC News 530 pm, Tue., February
  19
• San Francisco rehabilitation program run by a
  private, non-profit foundation, at no cost to
  city, operating for more than 20 years.

68
So why be concerned about spending on
rehabilitation projects? 2 reasons

• There are cases in which rehabilitation works
  very well
• Peter Jennings , ABC News 530 pm, Tue., February
  19
• San Francisco rehabilitation program run by a
  private, non-profit foundation, at no cost to
  city, operating for more than 20 years.
• More than 23,000 parolees sent to center

69
So why be concerned about spending on
rehabilitation projects? 2 reasons

• There are cases in which rehabilitation works
  very well
• Peter Jennings , ABC News 530 pm, Tue., February
  19
• San Francisco rehabilitation program run by a
  private, non-profit foundation, at no cost to
  city, operating for more than 20 years.
• More than 23,000 parolees sent to center
• mandatory training in 3 job skills, work for wages

70
So why be concerned about spending on
rehabilitation projects? 2 reasons

• There are cases in which rehabilitation works
  very well
• Peter Jennings , ABC News 530 pm, Tue., February
  19
• San Francisco rehabilitation program run by a
  private, non-profit foundation, at no cost to
  city, operating for more than 20 years.
• More than 23,000 parolees sent to center
• mandatory training in 3 job skills, work for
  wages
• All training by former parolees, graduates of
  program

71
So why be concerned about spending on
rehabilitation projects? 2 reasons

• There are cases in which rehabilitation works
  very well
• Peter Jennings , ABC News 530 pm, Tue., February
  19
• San Francisco rehabilitation program run by a
  private, non-profit foundation, at no cost to
  city, operating for more than 20 years.
• More than 23,000 parolees sent to center
• mandatory training in 3 job skills, work for
  wages
• All training by former parolees, graduates of
  program
• profits pay costs of operation

72
So why be concerned about spending on
rehabilitation projects? 2 reasons

• There are cases in which rehabilitation works
  very well
• Peter Jennings , ABC News 530 pm, Tue., February
  19
• San Francisco rehabilitation program run by a
  private, non-profit foundation, at no cost to
  city, operating for more than 20 years.
• More than 23,000 parolees sent to center
• mandatory training in 3 job skills, work for
  wages
• All training by former parolees, graduates of
  program
• profits pay costs of operation
• Recidivism rates were a small fraction of the
  61 for other parolees of citys jails

73
So why be concerned about spending on
rehabilitation projects? 2 reasons (-cont.)

• Even rehabilitation programs that yield
  higher recidivism rates may have a payoff

74
So why be concerned about spending on
rehabilitation projects? 2 reasons (-cont.)

• Even rehabilitation programs that yield higher
• recidivism rates may have a payoff
• Revealed by Failure Time Models

75
So why be concerned about spending on
rehabilitation projects? 2 reasons (-cont.)

• Even rehabilitation programs that yield higher
  recidivism rates may have a payoff
• Revealed by Failure Time Models
• can determine if a particular investment leads
  to longer life

76
So why be concerned about spending on
rehabilitation projects? 2 reasons (-cont.)

• Even rehabilitation programs that yield higher
  recidivism rates may have a payoff
• Revealed by Failure Time Models
• can determine if a particular investment leads to
  longer life
• then B / C analysis can reveal the degree of
  payoff

77
So why be concerned about spending on
rehabilitation projects? 2 reasons (-cont.)

• Even rehabilitation programs that yield higher
  recidivism rates may have a payoff
• Revealed by Failure Time Models
• can determine if a particular investment leads to
  longer life
• then B / C analysis can reveal the degree of
  payoff
• initially used in engineering to consider
  product quality, e.g., light bulb life

78
So why be concerned about spending on
rehabilitation projects? 2 reasons (-cont.)

• Even rehabilitation programs that yield higher
  recidivism rates may have a payoff
• Revealed by Failure Time Models
• can determine if a particular investment leads
  to longer life
• then B / C analysis can reveal the degree of
  payoff
• initially used in engineering to consider
  product quality, e.g., light bulb life
• The case of burglars

79
So why be concerned about spending on
rehabilitation projects? 2 reasons (-cont.)

• Even rehabilitation programs that yield higher
  recidivism rates may have a payoff
• Revealed by Failure Time Models
• can determine if a particular investment leads
  to longer life
• then B / C analysis can reveal the degree of
  payoff
• initially used in engineering to consider
  product quality, e.g., light bulb life
• The case of burglars
• Most are professional, career criminals

80
So why be concerned about spending on
rehabilitation projects? 2 reasons (-cont.)

• Even rehabilitation programs that yield higher
  recidivism rates may have a payoff
• Revealed by Failure Time Models
• can determine if a particular investment leads to
  longer life
• then B / C analysis can reveal the degree of
  payoff
• initially used in engineering to consider product
  quality, e.g., light bulb life
• The case of burglars
• Most are professional, career criminals
• In prison, dont commit burglaries

81
So why be concerned about spending on
rehabilitation projects? 2 reasons (-cont.)

• Even rehabilitation programs that yield higher
  recidivism rates may have a payoff
• Revealed by Failure Time Models
• can determine if a particular investment leads to
  longer life
• then B / C analysis can reveal the degree of
  payoff
• initially used in engineering to consider product
  quality, e.g., light bulb life
• The case of burglars
• Most are professional, career criminals
• In prison, dont commit burglaries
• On release, even if attempt to go straight, most
  often find that best economic opportunities are
  in burglary

82

• Does it pay to attempt to rehabilitate burglars?

83

• Does it pay to attempt to rehabilitate burglars?
• Most recidivism studies would argue, No.

84

• Does it pay to attempt to rehabilitate burglars?
• Most recidivism studies would argue, No.
• Failure time models show that there may be
  another answer

85

• Does it pay to attempt to rehabilitate burglars?
• Most recidivism studies would argue, No.
• Failure time models show that there may be
  another answer
• Phillips Votey study for National Institute of
  Justice

86

• Does it pay to attempt to rehabilitate burglars?
• Most recidivism studies would argue, No.
• Failure time models show that there may be
  another answer
• Phillips Votey study for National Institute of
  Justice
• Ex-cons released, Boston, Chicago, San Diego

87

• Does it pay to attempt to rehabilitate burglars?
• Most recidivism studies would argue, No.
• Failure time models show that there may be
  another answer
• Phillips Votey study for National Institute of
  Justice
• Ex-cons released, Boston, Chicago, San Diego
• Program provided education, help in getting a
  job, help in keeping a job

88

• Does it pay to attempt to rehabilitate burglars?
• Most recidivism studies would argue, No.
• Failure time models show that there may be
  another answer
• Phillips Votey study for National Institute of
  Justice
• Ex-cons released, Boston, Chicago, San Diego
• Program provided education, help in getting a
  job, help in keeping a job
• Original study found Ultimate recidivism
  failures were not much different from other
  releasees

89

• Does it pay to attempt to rehabilitate burglars?
• Most recidivism studies would argue, No.
• Failure time models show that there may be
  another answer
• Phillips Votey study for National Institute of
  Justice
• Ex-cons released, Boston, Chicago, San Diego
• Program provided education, help in getting a
  job, help in keeping a job
• Original study found Ultimate recidivism
  failures were not much different from other
  releasees
• Phillips Votey findings

90

• Does it pay to attempt to rehabilitate burglars?
• Most recidivism studies would argue, No.
• Failure time models show that there may be
  another answer
• Phillips Votey study for National Institute of
  Justice
• Ex-cons released, Boston, Chicago, San Diego
• Program provided education, help in getting a
  job, help in keeping a job
• Original study found Ultimate recidivism
  failures were not much different from other
  releasees
• Phillips Votey findings
• Those with help in obtaining a job had
  significantly longer times to failure

91

• Does it pay to attempt to rehabilitate burglars?
• Most recidivism studies would argue, No.
• Failure time models show that there may be
  another answer
• Phillips Votey study for National Institute of
  Justice
• Ex-cons released, Boston, Chicago, San Diego
• Program provided education, help in getting a
  job, help in keeping a job
• Original study found Ultimate recidivism
  failures werenot much different from other
  releasees
• Phillips Votey findings
• Those with help in obtaining a job had
  significantly longer times to failure
• Need to examine B / C of program

92
Conducting a B / C Analysis of a
Rehabilitation Program

• What is the cost of the program ?

93
Conducting a B / C Analysis of a
Rehabilitation Program

• That - provides education - help in
  getting a job - help in keeping a job
  ?
• All easily calculated accounting costs
• What are the benefits ?
• The reduction in offenses (OF) for the period
  that the individual is crime free

94
Conducting a B / C Analysis -

• Data required
• the individuals l (offense rate/year)
• the r (loss rate or damages per offense)
  for offenses not committed, i.e., l . R
• Then simply calculate E(NB) E(B) - E(C)
• All three programs, showed a substantial
  payoff.
• Even though most candidates ultimately
  recidivated

95
Opportunities at the aggregate level

• The Nation has, in the past, spent considerable
  funds to attempt to create jobs

96
Opportunities at the aggregate level

• The Nation has, in the past, spent considerable
  funds to attempt to create jobs
• Benefits from job creation programs for people
  who seem unemployable seem to be elusive

97
Opportunities at the aggregate level

• The Nation has, in the past, spent considerable
  funds to attempt to create jobs
• Benefits from job creation programs for people
  who seem unemployable seem to be elusive
• Consider the Great Society Programs

98
Opportunities at the aggregate level

• The Nation has, in the past, spent considerable
  funds to attempt to create jobs
• Benefits from job creation programs for people
  who seem unemployable seem to be elusive
• Consider the Great Society Programs
• Conceived by President John Kennedy

99
Opportunities at the aggregate level

• The Nation has, in the past, spent considerable
  funds to attempt to create jobs
• Benefits from job creation programs for people
  who seem unemployable seem to be elusive
• Consider the Great Society Programs
• Conceived by President John Kennedy
• Implemented by Lyndon B. Johnson

100
Opportunities at the aggregate level

• The Nation has, in the past, spent considerable
  funds to attempt to create jobs
• Benefits from job creation programs for people
  who seem unemployable seem to be elusive
• Consider the Great Society Programs
• Conceived by President John Kennedy
• Implemented by Linden B. Johnson
• Based on theory of Arthur Okun, Chair,
  Council of Economic Advisors

101
Opportunities at the aggregate level

• The Nation has, in the past, spent considerable
  funds to attempt to create jobs
• Benefits from job creation programs for people
  who seem unemployable seem to be elusive
• Consider the Great Society Programs
• Conceived by President John Kennedy
• Implemented by Lyndon B. Johnson
• Based on theory of Arthur Okun, Chair, Council
  of Economic Advisors
• The notion of Potential GNP

102
The notion of Potential GNP
GNP Potential Actual
Actual GNP
Time
Real GNP rises over time because of
103
The notion of Potential GNP
GNP Potential Actual
Actual GNP
Time
Real GNP rises over time because of Population
Growth and growth of the Labor Force
104
The notion of Potential GNP
GNP Potential Actual
Actual GNP
Time
Real GNP rises over time because of Population
Growth and growth of the Labor Force Private,
Corporate and Government Saving leading to
Investment
105
The notion of Potential GNP
GNP Potential Actual
Actual GNP
Time
Real GNP rises over time because of Population
Growth and growth of the Labor Force Private,
Corporate and Government Saving leading to
Investment Technological Change and Innovation
106
The notion of Potential GNP
GNP Potential Actual
Potential GNP
Actual GNP
Time
107
The notion of Potential GNP
GNP Potential Actual
Potential GNP
Actual GNP
Time
Potential GNP is based on the calculation of what
the country could produce
108
The notion of Potential GNP
GNP Potential Actual
Potential GNP
Actual GNP
Time
Potential GNP is based on the calculation of what
the country could produce if all factors of
production
109
The notion of Potential GNP
GNP Potential Actual
Potential GNP
Actual GNP
Time
Potential GNP is based on the calculation of what
the country could produce if all factors of
production (Capital and Labor).
110
The notion of Potential GNP
GNP Potential Actual
Potential GNP
Actual GNP
Time
Potential GNP is based on the calculation of what
the country could produce if all factors of
production (Capital and Labor) were fully
employed.
111
The notion of Potential GNP
GNP Potential Actual
Potential GNP
Actual GNP
Time
Potential GNP is based on the calculation of what
the country could produce if all factors of
production (Capital and Labor) were fully
employed. This depends upon Demand factors as
well as supply potential.
112
The notion of Potential GNP
GNP Potential Actual
Potential GNP
Actual GNP
Social Cost of Unemployed Resources
Time
113
Okun and the Council of Economic Advisors
argued, convincingly

• Measures to increase the employment of resources
  would pay off in

114
Okun and the Council of Economic Advisors
argued, convincingly

• Measures to increase the employment of resources
  would pay off in
• Higher aggregate and individual levels of living

115
Okun and the Council of Economic Advisors
argued, convincingly

• Measures to increase the employment of resources
  would pay off in
• Higher aggregate and individual levels of living
• Broader based growth

116
Okun and the Council of Economic Advisors
argued, convincingly

• Measures to increase the employment of resources
  would pay off in
• Higher aggregate and individual levels of living
• Broader based growth
• The problem

117
Okun and the Council of Economic Advisors argued,
convincingly

• Measures to increase the employment of resources
  would pay off in
• Higher aggregate and individual levels of living
• Broader based growth
• The problem
• Benefits of Head Start, Educational Programs, Job
  Training difficult to measure

118
Okun and the Council of Economic Advisors argued,
convincingly

• Measures to increase the employment of resources
  would pay off in
• Higher aggregate and individual levels of living
• Broader based growth
• The problem
• Benefits of Head Start, Educational Programs, Job
  Training difficult to measure
• It was easier to find evidence of bureaucratic
  inefficiency

119
Okun and the Council of Economic Advisors argued,
convincingly

• Measures to increase the employment of resources
  would pay off in
• Higher aggregate and individual levels of living
• Broader based growth
• The problem
• Benefits of Head Start, Educational Programs, Job
  Training difficult to measure
• It was easier to find evidence of bureaucratic
  inefficiency
• Taxpayers are always unwilling to pay for
  benefits that go to someone else

120
Okun and the Council of Economic Advisors argued,
convincingly

• Higher aggregate and individual levels of living
• Broader based growth
• The problem
• Benefits of Head Start, Educational Programs, Job
  Training difficult to measure
• It was easier to find evidence of bureaucratic
  inefficiency
• Taxpayers are always unwilling to pay for
  benefits that go to someone else
• More recent studies have tended to find support
  for many Great Society programs

121
Okun and the Council of Economic Advisors
argued, convincingly

• Higher aggregate and individual levels of living
• Broader based growth
• The problem
• Benefits of Head Start, Educational Programs, Job
  Training difficult to measure
• It was easier to find evidence of bureaucratic
  inefficiency
• Taxpayers are always unwilling to pay for
  benefits that go to someone else
• More recent studies have tended to find support
  for many Great Society programs
• But legislators, typically, are more interested
  in opinion polls than fact finding

122
Okun and the Council of Economic Advisors
argued, convincingly

• The problem
• Benefits of Head Start, Educational Programs, Job
  Training difficult to measure
• It was easier to find evidence of bureaucratic
  inefficiency
• Taxpayers are always unwilling to pay for
  benefits that go to someone else
• More recent studies have tended to find support
  for many Great Society programs
• But Congressmen, typically, are more interested
  in opinion polls than fact finding
• There is a perspective that would be worthy of
  further consideration

123
There is a perspective that would be worthy of
further consideration

• Recall the NIJ video in which it was argued that
  the business cycle and general unemployment
  levels had very little impact on crime levels.
• As mentioned earlier, our own studies tend to
  suggest that we shouldnt be too quick to accept
  that position.
• The 90s decline in the crime rates suggests
  that employment levels have a fair amount to do
  with crime levels
• If we focus on those persons at the threshold of
  making a career decision, we would have to argue
  even more strongly to the contrary.

124

• If one were to calculate, as a social cost

125

• If one were to calculate, as a social cost, the
  present value of all the damages that a
  career criminal

126

• If one were to calculate, as a social cost, the
  present value of all the damages that a
  career criminal, in his lifetime

127

• If one were to calculate, as a social cost, the
  present value of all the damages that a
  career criminal, in his lifetime, will impose
  on society

128

• If one were to calculate, as a social cost, the
  present value of all the damages that a
  career criminal, in his lifetime, will impose
  on society, as a consequence of lack of
  economic opportunity at a critical moment in
  his life

129

• If one were to calculate, as a social cost, the
  present value of all the damages that a
  career criminal, in his lifetime, will impose
  on society, as a consequence of lack of
  economic opportunity at a critical moment in
  his life, one would have to conclude that

130

• If one were to calculate, as a social cost, the
  present value of all the damages that a
  career criminal, in his lifetime, will impose
  on society, as a consequence of lack of
  economic opportunity at a critical moment in
  his life, one would have to conclude that the
  costs of failure to more closely approach
  Potential GNP

131

• If one were to calculate, as a social cost, the
  present value of all the damages that a
  career criminal, in his lifetime, will impose
  on society, as a consequence of lack of
  economic opportunity at a critical moment in
  his life, one would have to conclude that the
  costs of failure to more closely approach
  Potential GNP are likely to be very great
  indeed.

132

• Consider the cost to society of the typical
  burglar of Krohms analysis.
• Who commits a burglary a week over his career.
• Who spends a substantial proportion of life in
  jail or prison
• Costing the taxpayers in California roughly
  30,000 per year
• To say nothing of the added costs for law
  enforcement, prosecution, and adjudication.
• If we add in the costs of criminals who begin,
  modestly, as burglars, but graduate to
  robbery and sometimes assault and murder,
  the costs get even higher.

133

• Consider what the alternative benefits might
  have been

134

• Consider what the alternative benefits might
  have been, if we could have found a way to
  make an investment in that same individual's
  human capital

135

• Consider what the alternative benefits might
  have been, if we could have found a way to
  make an investment in that same individual's
  human capital that would have made him a
  constructive member of society

136

• Consider what the alternative benefits might
  have been, if we could have found a way to
  make an investment in that same individual's
  human capital that would have made him a
  constructive member of society, producing a
  contribution to GNP

137

• Consider what the alternative benefits might
  have been, if we could have found a way to
  make an investment in that same individual's
  human capital that would have made him a
  constructive member of society, producing a
  contribution to GNP, paying taxes

138

• Consider what the alternative benefits might
  have been, if we could have found a way to
  make an investment in that same individual's
  human capital that would have made him a
  constructive member of society, producing a
  contribution to GNP, paying taxes and
  contributing to economic growth.

139
This is a hard argument to sell, because it
depends upon speculation about the future, and
there are many uncertainties.

• But this is how all investment decisions are
  made
• Failing to have made such a decision in the past
  is having a devastating impact on higher education

140
This is a hard argument to sell, because it
depends upon speculation about the future, and
there are many uncertainties.

• But this is how all investment decisions are
  made
• Failing to have made such a decision in the past
  is having a devastating impact on higher
  education and on investments in health

141
This is a hard argument to sell, because it
depends upon speculation about the future, and
there are many uncertainties.

• But this is how all investment decisions are
  made
• Failing to have made such a decision in the past
  is having a devastating impact on higher
  education, on investments in health and on the
  general quality of life

142
This is a hard argument to sell, because it
depends upon speculation about the future, and
there are many uncertainties.

• But this is how all investment decisions are
  made
• Failing to have made such a decision in the past
  is having a devastating impact on higher
  education, on investments in health and on the
  general quality of life in California

143
This is a hard argument to sell, because it
depends upon speculation about the future, and
there are many uncertainties.

• But this is how all investment decisions are
  made
• Failing to have made such a decision in the past
  is having a devastating impact on higher
  education, on investments in health and on the
  general quality of life in California and the
  Nation

144
Today there is a strong aversion to having
government take a role in creating economic
opportunities.

• There is much anecdotal evidence of its value
• Small business man in Northern Michigan
• In trouble, age 15, Flint Michigan
• Persuaded to join FDRs CCC
• Put to work on conservation projects, paid
  a modest wage
• Was convinced headed for a life of crime before
  that opportunity
• Gibraltar Road, into the Coast Range from Santa
  Barbara, was built in the 1930s as a WPA project

145
To reiterate Arthur Okuns point about Potential
GNP

• If more people are employed
• Costs of growth and government
• Are spread over greater numbers
• There is not only a greater wage bill
• There is also a broader tax base
• Those previously a burden are made to be
  contributing members of society

146
Careful decision theory analysis is implied for
all such potential investments in people
147
So far, we have talked about decision theory as
it applies to choice to commit crime - or
strategies to prevent it. It can apply to other
CJS decisions.

• Establishing Standards for Justice
• The Criminal Justice System

Police
Prosecutor
Courts
Not Guilty
Guilty
Dismissal
Corrections
What determines the standards for Guilt,
Innocence?
148
Since the O. J. Simpson trials, the standards for
the determination of guilt and innocence have
been subjected to considerable debate.

• Today will describe a personal experience closer
  to home that reflects some of our concerns and
  how our system deals with them
• Tuesday Feb. 22 - Tue, Mar. 1, 1983, served as a
  juror on a criminal case in S. B. County S