Crime: Economic Incentives and Social Networks

  By Paul Ormerod

  Institute of Economic Affairs , June 2005

  In recent years, the economic analysis of crime has helped increase our understanding of different influences on crime levels. Although economic factors may not cause crime, different economic circumstances can increase or decrease the likelihood that an individual who may feel inclined towards criminal behaviour will commit a crime in practice. And incentives, including punishments, do affect crime rates.

Despite these advances in understanding, traditional models have a poor record of predicting the influence of economic factors and other incentives on crime. Paul Ormerod shows how crime rates have varied across time and place in a way that economic variables and incentives alone cannot explain. In a lucid style, accessible to the non-economist and economist alike, the author shows how new developments in economics can be applied to the analysis of criminal behaviour and used to draw policy conclusions.

These new models take into account and illustrate how individuals interact with each other in social networks. As a result, they lead the author to more realistic conclusions and more informed policy recommendations.

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