Economic theory of crime

February 14, 2016

There is no widely accepted definition of economic crime, and it is impossible to enumerate briefly the various definitions, theories, and offenses included in this category. We focus on the theoretical work that explores three aspects of economic crime: offender motivations, economic outcomes, and economic processes.

The first tradition refers to economic crimes as illegal acts in which offenders' principal motivation appears to be economic gain (e.g., Freeman). Here, an economic crime is conceived of as any offense in which individuals or collectivities of people purposively act in an illegal manner in order to gain financial returns (e.g., robbery, drug selling, tax evasion, computer crime, and abuses of economic aid). Although conceptually appealing, this tradition has several drawbacks. For example, it assumes that offenders' motivations are readily observable or knowable from the criminal act itself. Although the motive behind robberies may appear to be the desire for property, perpetrators' primary motivation may be different (e.g., thrill seeking or racial hatred). Some crimes have multiple motives and economic gain may be a secondary goal. Furthermore, offenders themselves are not always conscious of their motives and they may be unable to distinguish between the reasons that precipitated their actions and the rationalizations or justifications that follow them.

A second tradition avoids difficulties associated with trying to infer motives and focuses on illegal acts that successfully provide offenders with an economic return (e.g., Chamlin and Kennedy). However, excluding attempted crimes from analysis limits our understanding; successfully completed offenses may differ in important ways from those that are failures. A variation of this tradition defines economic crime as offenses for which victims incur an economic cost (e.g., Salvesberg; Reuvid ). Typical victims include individuals, groups, or organizations against which the act was directed; however, a much wider group of victims may have been indirectly affected by such crimes. This occurs in cases in which a criminal act subverts or undermines the commercial effectiveness of normative business practices and the negative consequences extend beyond those at whom the specific immediate harm was intended (e.g., computer hacking, insider trading in stock market transactions). This definition addresses a common oversight in criminology—ignoring or under-representing victim issues—nonetheless, it is too narrow in some respects and too broad in others. For example, it excludes "victimless" crimes that have economic implications (e.g., prostitution) and includes any offense for which victims experience a cost (e.g., an assault that results in medical expenses or loss of wages).

A third tradition contends that the processes that lead to criminal behavior are the same as those that guide consumer behavior in the marketplace. This approach informs most theoretical work on crime offered by economists since the late 1960s. Its most cogent statement is found in Gary Becker's neoclassical or "economic" approach to explaining crime (1968; repr. 1974). The remainder of this entry describes this approach and discusses its advantages and weaknesses; reviews other social science perspectives that address some of the shortcomings of the neoclassical approach; and summarizes recent directions in the study of economic crime.



Additional Topics

The classical approach to crime originated in the Enlightenment and is evident in the writings of Thomas Hobbes, John Locke, Jean Jaques Rousseau, and others. According to this perspective, intelligence and rational thought are fundamental characteristics of people and the principal basis for their behavior. In other words, people have free will, make choices and pursue their own interests. In the…

In the late 1960s the economist Gary Becker questioned positivist approaches to crime, arguing that: "[a] useful theory of criminal behavior can dispense with special theories of anomie, psychological inadequacies, or inheritance of special traits, and simply extend the economist's usual analysis of choice" (repr. 1974, p. 2). Characterizing his approach as an effort of "resurrection, modernizatio…

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