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ECN 340 (202)

Chapter 7

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ECN 340
Thomas Barbiero

The Economics of Human Behaviour: Chapter 7  Crime o Some acts are legal in some countries but not in others. You can sell things at a profit in Canada but not in Cuba. But certain acts are illegal almost everywhere. o Why are certain forms of behaviour illegal?  The Economics of Law o Burglary is illegal practically everywhere. Most find it immoral o Generally, victim looses more than the victim gains. Thus victim pays a “higher” price o Robin Hood was praised for taking from the rich and giving it to the poor o During the 1960s, ripping off the system was OK o If burglary were legal, all would have to invest heavily in protection  Less time is spent on producing goods and services because these would have to be protected  Burglars would then invest more time if everyone protected their property  Burglars would have to specialize, and become a segment of the labour force  Standard of living would drop as more and more resources are devoted to protection  As people devote more resources to protection, burglars would have to invest more (Arms race) A vicious circle would be established o With no laws, escalating plundering would occur o Some individuals would do relatively well in this situation. Who?  Society as a whole would lose  The Cost of Crime o Some individuals (criminals) can increase lifetime earnings through crime (who?) o These same individuals can increase status among socio-economic peer group o There will be “good” and “bad” criminals, just like students are good/bad o Criminals have to invest in tools, skills, storage facilities, processing and transportation equipment o If it is a criminal organization, have to meet payrolls, including sales and administrative personnel (as in a firm) o The loan shark has to accumulate financial capital o Prostitutes are abused physically and incur medical treatment o A specialist in armed robbery must:  Find site and map it out  Wait for the opportune moment  Pull off the crime  Fence the stolen goods  Stay undercover until things have cooled o Some have to pay costs of guilt and the loss of respect within family and community o As public takes action, cost of crime increases o Criminals will commit “easy” crimes first – those requiring few resources o Then, criminals have to find crimes that either require the least resources or highest returns  Cost to the Victim o Loss of stolen property o Bodily or mental injury o Both losses entail loss of pleasure. If you are killed, you loose all future pleasure! o Rape victims may become subject to community gossip, or subject to cross examination  This contributes to the reason that most women don’t report rape o The friends and family of murdered person lose income and friendship  Cost to Society o Non-victims incur costs of locks, burglar alarm systems, etc. o Some may incur fear to the extent that it severely limits freedom o Higher taxes for police protec
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