An Economic Model of Crime and Police:

Some Empirical Results*

JEFFREY I. CHAPMAN
Assistant Professor, School of Public Administration,
University of Southern California

Crime and
police are two interdependent phenomena; yet,
they often analyzed separately. This paper develops a
are
simultaneous model of crime causation, police output and
demand for police and therefore incorporates this inter-
dependence. It was found that relative illegal wages have a
strong positive influence on crime, but police activity can
retard crime. Further, police labor is positively related to
police output and property crimes are more important than
other types of felonies in increasing the demand for police.

ALTHOUGH CRIME has always been
part of the American scene, public
concern about crime has greatly fluc-
tuated. For example, the terms &dquo;crime,&dquo;
&dquo;police,&dquo; and &dquo;law enforcement&dquo; can-
not be found in the subject index of the
1960 Presidential campaign speeches of
John Kennedy or Richard Nixon
(Saunders, 1970). Yet, by 1968 the Om-
nibus Crime Act-which authorized
$500-million to be spent on crime
research-was law. And by the election
of 1970, which was used by men of both
parties to politicize the issue of crime,
$8.6-billion was being spent on crime
control. By 1973, this figure had
reached $13-billion.
I basic parts of the criminal justice sys-
For whatever reasons, public interest
in crime is increasing. And, concurrent
z’ The author gratefully thanks George
Break, of the University of California, Berke-
ley ; E. K. Nelson, of the University of South-
ern California, and an anonymous referee for
their helpful comments. Of course, all errors
are the sole responsibility of the author.
with this increase has been a rise in the
interest of public analysts in crime
and the police. Becker’s seminal work
(Becker, 1968) has provided fuel for
new theoretical attempts to describe
crime as an economic process, and the
subjects of crime and police are now
considered fair game for analysts. For
example, crime has been said to depend
upon such varied things as the number
of associations between criminals and
potential criminals (Sutherland, 1939),
the environment, the chance of being
caught (Becker, 1968; Ehrlich, 1973)
or the economic system of the country
(Bonger, 1969). However, most of the
empirical testing of these hypotheses
has either ignored or submerged other
tem.’ What is needed is both an inte-
gration of the theories of crime and
police response into a coherent model
and an empirical testing of that model.
This integration and testing is the at-
tempt of this paper.
1. For example, see Walzer, 1972, Sjoquist,
1973 and Rottenberg, 1973.

48

The following sections will present
first historical analysis of the litera-
a
ture, then the derivation and estima-
tion of a model, and finally conclusions
as to the validity of the results.
II
As earlier noted, there are many dif-
ferent trends of thought that can be
utilized to explain crime. In this paper,
two major currents of thought can be
usefully considered as crime causation
theories: an ecological school and an
economic school. Later, in Part III in
this paper, it will be shown how these
two methods of approaching crime are
really variations on the same theme.
The aim of the students of the eco-
logical school of crime is to discover
the spatial distribution of crime rates
and compare these distributions with
distributions of other population char-
acteristics. It is implicitly assumed that
these characteristics are causally re-
lated to crime behavior. (Wilks, 1967).
The milieu approach of the Chicago
School was one of the first ecological
approaches to crime. In this approach
it was discovered (Burgess, 1927; Shaw,
1929) that the neighborhood of the in-
dividual did appear to be a reliable in-
dicator of the potentialities of criminal
activity. However, these early studies
have been criticized because, among
other things, they neglected to consider
the possibility that the neighborhoods
may have acted as collectors of crim-
inals rather than have acted as a cor-
rupting influence upon the potential
lawbreaker (Korn and McCorkle,
1967).
More recent empirical work also re-
flects the fundamental philosophy of
this school. Quinney (1964, 1966), us-
ing correlation analysis, found that dif-
ferent types of per capita crimes were
negatively related to economic status,
49
positively related to racial status, and
only slightly correlated with family
status. Later he found that for almost
all crimes, socioeconomic variables
almost
were always more highly cor-
related with crime rates in rural and
isolated urban areas than in standard
metropolitan statistical areas.2 Schuess-
ler and Slatin (1964), using principal
component factor analysis, also empir-
ically analyzed crime and population
aggregates. They discovered that crime
could be related to three basic factors:
a conformity factor, a minority factor,
and an anomie factor. These factors,
which contain variables that they
thought best fit the factor description,
explained a great deal of the offense
rate.
Unfortunately, at least two basic er-
rors appear in these studies. The first is
that in all of them the statistical tech-
niques employed were not always en-
tirely appropriate; the second is that
crucial parts of the theoretical develop-
ment were lacking.
In both of the Quinney studies, the
emphasis is on correlation analysis,
usually between crime and one factor.
Although he sometimes subdivides by
different socioeconomic groups and
analyzes relationships between the
crime-causing variables and crime, a
far better technique that could be used
is some form of multiple regression
analysis which can hold specific vari-
ables constant. In their study, Schuess-
ler and Slatin include within the factor
to be used as an
&dquo;explainer&dquo; of a spe-
cific crime, the specific crime itself.
However, the discovery that a particu-
lar factor which includes the same spe-
cific crime explains that crime well is
2. Generally a standard metropolitan statis-
tical area (SMSA) is defined as a country or
group of counties which contains at least one
of 50,000 inhabitants or more.
50
not a particularly useful finding for
policy prescriptions.
An even more basic criticism of the
foregoing studies, and the entire eco-
logical theory of crime, is that there is
little theoretical development. No hy-
potheses explicitly tested and little,
are
if any, justification is presented as to
why certain variables are selected to
represent certain characteristics. In
fact, at the end of their study, Schuess-
ler and Slatin explain how the results
could be used to substantiate several
different theoretical models of crime.
The ecological basis of crime can be
related to an economic approach. An
economist would postulate that, given
his environment, criminal would act
a
in a rational maximize util-
manner to
ity. Thus, two identical individuals
who face different environmental con-
straints would behave differently with
respect to criminal intentions, not be-
cause their aims were different but
because their environments differed.
Note that the ecologist would say that
the environment is causing the crimi-
nal to act, whereas the economist
would say that the criminal is acting,
taking his environment into account.
Jeremy Bentham was one of the first
political economists to seriously ana-
lyze crime in this manner (Geis, 1955).
He developed two basic criminological
concepts: (1) human action can be re-
duced to one formula of motivation:
pursue pleasure and avoid pain; and
(2) to prevent people from engaging in
uncontrollable orgies of criminal be-
havior as they follow this precept,
checks and sanctions may be estab-
lished by legislation.
In application, Bentham’s precepts
lead to quite modern criminal codes.
For example, laws become necessary
not to provide vengeance but to deter,
and offenses must be productive of evil
in order for them to be considered
offenses.
Despite this auspicious beginning,
little additional theoretical work ex-
ploring the relationship between eco-
nomics and crime was done for 200
years. And although Becker did not in-
vent the field of theoretical analysis of
adult crime, lie certainly reestablished
its importance and was responsible for
several responses and extensions of
his analysis. (For some extensions of
Becker, see Stigler, 1970; Harris, 1970;
Rottenberg, 1968; Eriich, 1973; Sjo-
quist, 1973.)
Becker’s model all-inclusive. It
was
not only developed an equation for the
supply of crimes but also a system that
included losses to society from crime
and from enforcement. It also de-
veloped an optimal enforcement rule
(which was later slightly modified by
Harris to take account of the possibility
that tle legal framework also can be
regulated by policy [Harris, 1970~).
The basic Becker equation for the
supply of crimes relates the number of
offenses committed by any individual
to his probability of conviction, his
punishment if convicted, and a port-
manteau variable that reflects other
possible influences. It is not difficult to
see that with little difficulty Becker’s
crime function and tlze ecologists can
be reconciled.
There have been few police produc-
tion function studies and even fewer
demand for police studies (see Hirsch,
1973 for summary of studies). In gen-
eral, for public service functions, out-
put has been defined to be a function
of inputs, input quality, and service de-
livery conditions. For police, this in-
volves problems in defining output and
isolating factors, aside from inputs,
which can be legitimately expected to
influence the public delivery of that
 51

output. In of demand studies,

terms ecological variables are used in the
not only mustthe relevant quantity de- model, what is really being done is pos-
manded be determined, but it must tulating a
specific crime-causing situa-
also be decided what are the indepen- tion in a community, and then measur-
dent variables which affect that de- ing the effect this situation has on the
mand. For police this demand could be community crime rate. Generally, it
for the inputs of the production func- can be said:

tions, e.g., patrolmen, and, quite possi-

bly, one of the determinants of demand ~
N1 &dquo; fl (Ed (1)
would be crime, as explained by the with:i N1 = the amount of crime
crime function. The following sections committed because of
will further develop these relation- the situational ele-
ment
ships.
Ei = environmental situa-
III tion i
fl =
functional relation-
The underlying element used to uni- ship for
equation (1).
fy the two approaclies to crime is the

expected wage of crime. It is generally The second underlying element con-

assumed that the higher payoff from tains the notion of an expected wage or
going into crime, the greater the payoff from going into crime. This
chances of an individual participating payoff should be the expected mone-
in the illegal activity. Yet, these ex- tary gain that the criminal could ob-
pected illegal wages, that is, the various tain by perpetrating a crime.
payoffs from committing various kinds It be shown that the individual
can
of crime are highly dependent on the must do three things to maximize his
environment that surrounds the indi- Utility.3 He must first equate the ratio
vidual, since this environment colors
3. For this second element, assume a utility
the individual’s perception of the
function for the individual who considers crime
payoff. as apossible activity:
Thus two basic elements underlie a U = U(Y, C, L) (1’)
supply-of-crimes equation: the first is with Y = expected income earned from
the idea that individuals must have legal means

distinct preferences that dictate their C = expected income earned from il-

rational behavior in certain situations, legal means

L = the equivalent of expected
and the second is that, in general, an income earned at leisure.
individual will try to maximize the This function has three basic constraints:
utilit.y he gains from earning criminal Y =
WyK (2’)
and noncriminal income. C =
X
C
W (3’)
The first element-which is derived H = K + X + L (4’)
from the ecological theories-basically with:
says that the environment of an indi- Wy = expected average wage rate for
vidual has an influence on his behav- legal labor
ior. If the environment is such as to K = number of hours devoted to
encourage crime, then it would be ex- legal labor
X = number of hours devoted to il-
pected that the individual in that en- legal labor
vironment would be more likely to C
W = expected average wage rate for
commit crime. Thus, when community illegal labor
52
of marginal utilities of expected legal
and illegal income to the ratio of the
wages of illegal and legal income. He
must also equate the ratio of the mar-
ginal utilities of leisure income and il-
legal income to the illegal wage re-
ceived, and finally lie must equate the
ratio of the marginal utilities of leisure
income and illegal income to the legal
wage received. Finally, the rate of sub-
stitution between the amount of illegal
income earned through crime (which
is directly related to the amount of
crime committed) and the amount of
legal income earned is also equal to the
ratio of the two wages; and so it can be
said:
N2 =
f2(We/VVy) (2)
with: N2 =
amount of crime that
a person commits be-
cause of this element
We =
expected criminal
wage
ivy =
expected legal wage
f2 = functional relation-
~
ship for equation (2).
L - number of hours devoted to lei-
sure. (It should be noted that
the leisure wage rate is used as a
base for measuring legal and il-
legal wages. Thus, the L in I’ is
equivalent to the L in 4’).
H - total hours available for earning
legal income, illegal income, and
leisure income (if L includes rest
and recreation, H 24 hours per
=
day).
Maximizing equation I’ with respect to equa-
tions 2’, 3’, and 4’ it can be found using Lagran-
gian techniques that:
and NT = f3 (~’~i’ We jWy ) (3)
with NT total crime
=
f3 = functional relation-
ship for equation (3).
It should be noted, of course, that
there is a great deal of interrelation-
ship between the &dquo;environmental&dquo;
variables and the &dquo;economic rational-
ity&dquo; variables. In fact, many of the en-
vironmental type of variables are close-
ly related with either the illegal or
legal wage rates, and might be consid-
ered as modifiers of those rates. For
expositional purposes, however, the
two classes of variables will be main-
tained.
Note, however, that Wc/Wy are the
expected wage rates. Some adjustment
must be made for the chances that
either the wages will not be collected
or that the criminal will not have an
opportunity to benefit from collecting
them. Thus, included within the crime-
supply equation must be the arrest rate
variable that the potential criminal
considers.~ In this case, since the true
criminal is unconcerned with false ar-
rests,5 the total arrest rate (total ar-
rests, A, divided by the total crixnes, N)
is the relevant variable, and equation
3 could be rewritten.6
4. This corresponds to Becker’s probability
of apprehension variable. Note that it enters the
potential criminal’s utility function only as he
perceives its influence on his chances for earn-
ing illegal income. Thus, the potential law-
breaker is only indirectly influenced by his
probability of arrest.
5. Note that a potential criminal should be
less interested in the clearance rate (i.e., crimes
solved per total crimes) than the raw arrest
rate. This would be because a criminal would
not care about a false arrest, since he knows
that if he is arrested it will not be a false arrest.
6. It has often been asserted that violent
crimes are irrational acts. If so, then the arrest
rate should have no effect on the violent crime
rate. However, if violent crimes include some
rationality, then the arrest rate should be nega-
tively related to the violent crime rate.

NT = ~4 (~i , ~C /~~Y , /~/~,
(4)
with A/N =
the arrest rate
F4 - functional relation-
ship for equation
(4).
Although police do many things, the
attention of the public is often oriented
toward how many arrests police make.
For this study, arrest rates can be con-
sidered an output of police and thus
would be the relevant dependent vari-
able in a police production function.
Of course, this is an over simplification
of police output, which includes far
more activities. Thus, the estimates for
this equation may be slightly biased
upward. It is postulated that arrest
rates depend upon physical police in-
puts and the service environment in
which the force must operate. With
arrest rates as the dependent variable,
this function must be simultaneously
estimated with equation (4), the sup-
ply-of-crimes equation. The indepen-
dent variables in this function would
be police labor inputs and service con-
ditions. We thus have:
A/N = g (~9~) ~
(5)
with C = set of physical police
inputs
S =
set of service condi-
tions
g
=
functional relation-
ship for equation
(5).
There is, however, a problem with
this simple formulation. That is, while
police labor inputs influence arrest
rates, and arrest rates influence the
crime rate, the crime rate itself may
influence the demand for police labor.
In addition, the quantity of police
labor that is hired in a particular city
53
should depend upon its price-the
wage rate---and other societal variables
that impact on the citizen’s perception
of how necessary police are. In this
case, we have:i
ci = h(~T 9 ~~ W)
~
(6)
with:i C][ = per capita sworn
policemen
V = set of socioeconomic
variables that influ-
ence the demand for
police
W = wage (price) of police
h = functional relation-
ship for equation (6).
If the assumption is made that the
marginal cost of police labor is con-
stant (so that equation 6 can be esti-
mated), then equations 4, 5, and 6
constitute a general three-equation si-
multaneous model of crime and police
response. This model thus has three
dependent variables: crime rates; ar-
rest rates; and per capita police. Yet,
the model indicates that these vari-
ables are interrelated, and, in fact, it
indicates that the arrest rate has an
influence on crime, police impact the
arrest rate, and crime rates can influ-
ence how many police are hired. As the
relevant independent environmental
variables, service conditions, and socio-
economic variables are specified, the
separate equations, 4, 5, and 6, can be
estimated simultaneously and there-
fore a more accurate description of the
relationships between police and crime
is possible.
The entire system can also be partial-
ly illustrated in the following graph-
ical system demonstrating the interre-
lationships between the wage rate, the
number of per capita police, the arrest
rate, and the number of per capita
police, the arrest rate, and the number
of per capita crimes. (See figure 1.) Ini-
54
FIG. 1
tially, let the system be at equilibrium,
with a crime rate of c., an arrest rate of
x~, the number of per capita police
equal to A, and a wage rate of W.7 Now,
if the crime rate is defined as the prop-
erty crime rate, it can be shown what
would happen if one of the exogenous
variables in the system changes. Sup-
pose, for example, an independent
variable positively related to property
crime increases and thus, NN shifts to
I~I°~1°. The property crime rate then in-
creases to c. With this increase in crime,
the demand for police would also in-
crease (since it also depends upon the
crime rate). If the community was con-
tent with the earlier level of crime but
7. For graphical simplicity the crime rate—
police and police-wage relationships —are shown
as straight lines. This assumption will be an-
alyzed later in the paper.
would tolerate no more crime, the de-
mand for police would have to move
far enough to the right so that enough
policemen would be hired at wage w
to increase the arrest rate to x,. With
this new arrest rate, the level of crime
would fall back to c~ and the town
would once again be contented. How-
ever, it has taken an increase in ex-
penditures of ABCD to restore this
happiness.
This graphical explanation further
demonstrates the simultaneity proper-
ties of the model. Since a change in one
variable influences all other variables
to form a new equilibrium solution, all
of the equations have to be estimated
simultaneously to ensure that the esti-
mated coefficients will be consistent.
Two stage least squares, a technique
that is utilized for simultaneous equa-
tions estimation, will be used.

Before the results of this estimation
are presented a more complete identifi-
cation of the exogenous variables is
r~ec.essary.
There are two crime equations for
two types of crimes: a property crime
equation and a violent crime equation.
The variables for these equations can
be divided into two basic groups which
can be empirically tested: the &dquo;eco-
nomic&dquo; group and the &dquo;environment-
al&dquo; group. In this model, for the prop-
erty crime equation, the economic
variables are considered to be the rela-
tive wage variable, the chances of being
arrested, and likelihood of being em-
ployed. For the violent crime equation,
the economic variables are income, em-
ployment prospects, other criminal ac-
tivity of the potentially violent crim-
inal, and the chance of arrest. The
environmental type of variables for the
property crime equations include the
extent of discrimination that the po-
tential criminal faces, the social class of
the individual, and the environmental
factors that influence the potential suc-
cess of the crime. Since little is known
about the environmental factors that
influence violent crimes, the degree of
discrimination will be utilized as the
proxy variable for the environment.
The specification of these variables
is relatively straightforward. The eco-
nomic rationality variable for the prop-
erty crime equation, named WAGE, is
defined to be the average per capita
illegal wage rate for criminal activity
in a specific city divided by the average
per capita legal wage for legal activity
of that city. The per capita illegal
wage is, of course, unknown. Yet, it can
be estimated by the total losses that
occi.ir because of felony crime divided
by the city population,8 that is:
8. This is somewhat analogous to the man-
ner in which per capita Gross National Product
is calculated, e.g. total production/population.
55
XiLi
~vc
POPULA’fION = BVc
=
with:i Xi = number of reported
property crime i
L~ ~ gross loss per prop-
erty crime (see Table
1 ~.
Of course, hidden in this estimate are
several potential problems. The city’s
loss is not necessarily the criminal’s
gain, since it is unlikely that the crimi-
nal will realize full value of the goods
that are stolen. This imparts an up-
ward bias to We. However, since the
potential criminal income which arises
from misdemeanor offenses is not
counted, We may be understated.
Hopefully, these problems will tend to
offset one another, and Wp will be
useful.
Areas with higher average illegal
gains should experience a higher level
of property crime. Conversely, if the
average illegal gains were equal but
legal income differed in separate cities,
the model predicts that the city with
the higher median income would ex-
perience less property crime. (It might
be noted that median income may not
be the optimal specification for the le-
gal wage. However, data limitations
foreclose using average income or in-
come variations measures.)
There are two other economic vari-
ables. The first, WK, is the percentage
of the labor force that worked full-
time in the previous year. This takes
into account the average potential un-
certainty of the earning of the legal
wage. It is expected that as this per-
centage increases, the property crime
rate will decrease. The second, ARST,
is the probability of being arrested, as
measured by the arrest rate. This vari-
able should give and indication to the
potential criminal as to how likely he
56
ESTIMATED LOSSES TO INDIVIDUALS FROM PROPERTY
CRIMES, BY OFFENSES
Source: President’s Commission on
is to get away with his illegal activities.
The greater the chance of his being
caught, the less likely he will enjoy the
fruits of his illegal endeavor, and thus
this variable should be negatively re-
lated to the property crime rate.
The economic variables that influ-
ence violent crime are not expected to
be as directly influential as the wage
ratio is expected to be on the property
crime rate. The first, ERN, is the me-
dian income of the individual (the in-
come
Wy which is the denominator of
the wage ratio in legal activities) and
should be negatively related; the sec-
ond is the percentage of the labor force
that worked full-time in the previous
year, WK, which should be negatively
related (as noted above in the property
crime discussion). The third should be
the chance of the potential criminal
participating in a property crime,
which should be positively related.
This last variable implies that a person
involved in the commission of a prop-
erty crime may be forced to commit a
violent crime in order to successfully
complete the property crime. To the
extent that property crimes are eco-
nomically motivated, then violent
crimes, as joint products of economic
crimes, are economically motivated.
There are three environmental vari-
ables that should influence the prop-
erty crime rate. Two of them garner
TABLE 1
(in dollars)
Law Enforcement (1967), p. 42.
their influence by their actions affect-
ing the individual, while the third is
a proxy for the individual’s perception
of the atmosphere surrounding the po-
tential victim. These variables can be
more directly specified as follows: to
tle extent that the individual faces dis-
crimination or is a member of a group
that may have little to lose by par-
ticipating in crime, it is expected that
the individual will commit more
crimes. Thus, the two variables are
specified as the percentage non-white
in a city, D, and the percentage of the
male population over age 14 and
neither in the labor force nor in school,
LZM. Both should be positively related
to the property crime rate. The third
environmental variable should be the
clances of the potential criminal find-
ing someone at home when he attacks
the house. To the extent that there is
someone at hcme, he is deterred from
the crime. This variable is measured
by the female labor participation rate,
FLP, and, since this number measures
those not at home, should be positively
related to the property crime rate.
There is no real theory of what en-
vironmental variables should influence
the violent crime rate. For this paper,
we will use the percent non-white of a
city to act as a proxy for the frustra-
tions that the discriminated-against
feels. The greater this percentage, the

greater the violent crime rate (at least
for those sample of cities that have
relatively small Black populations).
As earlier noted, the police produc-
tion function relates a simple measure
of one type of police output to physical
inputs and service conditions. The bas-
ic police input for this study will be the
patrolman. Thus, the interpretation
placed on the estimated coefficient for
this input should be that of a &dquo;joint&dquo;
marginal productivity of all of the
other inputs in the police department.
It might be noted, of course, that po-
lice capital is almost: always nearly per-
fectly related to police labor, and thus,
the above interpretation is somewhat
close to reality. Data limitations pre-
vent a further disaggregation of the
patrol variable, per capita policemen,
COP.
The service condition set of elements
contains two basic influences: the non-
crime demands made on the police
within the city and the degree of co-
operation that the police receive from
the city’s populace. These two inflm-
ences could be measured by the per-
centage of workers who use public
transportation to get to work in the
city, PUB, and the percentage non-
white in the city D, where the first
should be positively related to arrest
rates and the second, assuming poor-
police-minority relations, should be
negatively related.
The fourth equation in the system
can be interpreted as the demand curve
for police. It relates the demand for
the number of patrolmen (remember-
ing that patrolmen is one of the inde-
pendent variables in the police pro-
duction function) to the number and
types of crimes that occur (the depend-
ent variables in the crime equations),
their wage, and set of community socio-
economic variables.
57
The crime rate should have two ef-
fects on the demand for police. The
first effect comes from the actual need
for protection by businesses and resi-
dents in the community. The greater
the crime rate, the more protection is
physically required, and thus more po-
lice should be hired. The second effect
is more psychological, and grows as the
fear of being victimized grows. Since
people may fear being victimized a
great deal, this reason for increased de-
mand may be as important as the real,
physical, reason for demand. It is there-
fore anticipated that both crime rates
will be positively related to the number
of patrolmen hired.
The wage variable is exogenous in
this equation. To the extent that the
wage reflects the opportunity cost to
the city decision maker of hiring the
police, as the wage increases, the quan-
tity demanded of policemen should de-
crease.9 It might also be noted that if
police are found to be a necessity, (e.g.,
the demand for police is wage inelast-
ic), then the policeman knows that he
can raise his wages without a
great
deal of worry that he will lose his job.
There are two other elements in the
V set: the wealth of the community
and the class status of the community.
It is anticipated that wealthier com-
munities, because they have more to
lose (in absolute terms) from crime
and are better able to afford police
(since their tax rate is inversely related
to property wealth), would demand
more police. Thus, per
capita property
values, VAL, should be positively re-
lated to the demand for police. It is
9. An alternative formulation is one in which,
in addition to the wage rate, other governmental
expenditures are included to represent oppor-
tunity cost. When this formulation was tested,
the variable was found to add little to the
equation.
58
also expected that the greater the pro-
portion of blue collar workers in a city,
BLUE, the less demand for police
(Chapman, 1974). The third variable
in this set is the percentage of people
who take public transport to work,
PUB. Just as we expect this variable to
be positively related to police output,
we would also expect it to be negative-
ly related to the demand for police,
since as congestion increases, more
policemen should be hired.
There is an implicit fifth equation
in this entire system. That is, a supply
schedule of policemen must also be spe-
cified in order for the demand curve
to be estimated. It will be assumed that
since all of the sample cities will be
small, they will act as wage setters, and
thus tle supply curve will be perfectly
flat in the relevant range. With this
assumption, the demand curve can be
established.
IV
Equations A-D in Table 2 show the
results of the estimation of the four
simultaneous equations of the crime
model. A pooled cross section was uti-
lized, consisting of 147 California cities
with population between 20,000 and
100,000 in 1960. ’I’he two years of the
estimation were 1960 and 1970. The
estimated form is linear, which assumes
a constant marginal influence of each
variable across towns. Two stage least
the estimation
squares was technique
utilized; the coefficients listed are the
least squares estimates Although
10. The least square estimates take into
account the simultaneity properties of the
model. For a discussion of the econometric pro-
perties of these estimates see, for example,
Wommancott and Wommacott. Generally, the
procedure is to regress each of the dependent
variables (per capita property crimes, per capita
violent crimes, arrest rates, and per capita
police) on all of the identified independent vari-
there there has been much controversy
concerning police data (Beattie, 1960),
especially the FBI Uni form Crime Re-
ports data, it was felt that if the cities
used were those within the one state
that has the best data collection ser-
vice, this problem would be minimized.
Individual city crime data in Califor-
nia must be reported to a central De-
partment of Criminal Statistics which
serves the entire state. Failure to report
accurately is considered a crime. These
are the primary reasons why the Presi-
dent’s Crime Commission felt that Cal-
ifornia criminal data are far superior
to those of any other state (President’s
Commission, 1967). Also, because cities
within one state were used, the average
length of time served for felonies, per
city, is not available, and thus punish-
ment not included in the model as
Becker would suggest. It was felt that
this was a small sacrifice to ensure
greater data reliability Thus, pub-
ables. Then, an estimate of the dependent vari-
able is used when it appears as a right hand
variable in any of the equations. The com-
puter program used ESP at the University of
California at Los Angeles.
11. Typically, as police departments expand,
reported crimes increase, thus, implying that
police cause crime. In part, this problem is
handled by the simultaneous nature of the
estimation. However, to the extent that crime is
underreported, there are also estimation prob-
lems. In general, either the intercept or the
estimated coefficients will be biased if crime is
underreported. There are two cases for these
biases.
Case I: In this case, assume that the number
of crimes is underreported, and therefore the
observed number of crimes, Y, equals Y* + V
where Y* is the true number of crimes and V is
the measurement error. Since there is consistent
underreporting, the expected value of V is less
than zero. If X is a set of crime-influencing
characteristics and u is the random disturbance,
then the regression should appear as
Y = α + βX + u + V
where α and β are the true coefficients, and a
bar above a variable indicates the mean of the
variable.
 59

lished crime data from the California the crime rate.12 It might also be no-
State Bureau of Criminal Statistics ticed that the arrest rate is also nega-
were used. tively related to the property crime
It should be noted that the greater rate, and so it does appear that the po-
the geographical scope of the data col- lice can &dquo;prevent&dquo; property crimes
lection, the more likely that reporting from occurring. However, its elasticity
standards will differ, there will be er- is far below the employment elasticity,
rors in reported crimes and thus the being on the order of -.9. Thus, a one
more likely that the coefficients will be percent increase in the arrest rate, leads
biased. This is a major criticism of to a 9/10 of one percent fall in the
nationwide econometric crime studies. property crime rate.
Census data and data from various It is interesting to note that the vio-
state sources were used to specify the lent crime equation is quite strong,
other variables (for a complete list of with almost all of the variables being
data sources, see bibliography). highly significant and all of the signs
In general, the results are quite good as
expected. It also seems to explain
for most of the equations. Although more of the variance than the
property
R2’S should only be interpreted heuris- crime equation. This is somewhat un-
tically in a two-stage least squares sys- expected, since it was hypothesized that
tem, an examination of other summary violent crimes should be more irration-
statistics such as the standard error of al and thus (implicitly) should be more
the regression, shows that the equations difficult to explain. However, as anti-
are, for the most part, accurately fitted. cipated, the arrest rate, while negative-
There are several interesting points ly related to the per capita crime rate,
that are apparent in the property crime is not significantly different from zero.
equation. All of the variables have the This is not unexpected, since it is often
anticipated sign, and all are significant- claimed that there is little the police
ly different from zero. The wage rate can do to influence or
prevent violent
variable is quite significant; however, crimes from occurring. It is also inter-
its elasticity is relatively low. The most esting to note that property crimes are
important variable in terms of elastic- quite important as an explanation for
ity is the employment variable which violent crimes: For every one percent
indicates that for a one percent increase increase in the property crime rate
in the percent labor force employed there is a 1.1 percent increase in the
full-time, there is a 1.8 percent drop in violent crime rate. From this finding it

Since E (V) < 0, and thus E (u + V) V < 0,

the errors in measurement will be added to the
=

&beta; = &gam a;&Sigma;yx / &Sigma;x

2 =
&gam a;&beta; with &beta; =
the true value. Since

constant, i.e., &gam a; < 1, &beta; < &beta; and thus &beta; is downward biased.
Y = (&alpha; + V) + &beta;X + u
12. Elasticities can be calculated from
if &alpha; and &beta; are the least square estimators, with
&alpha;
Y- &beta;X X V
=E (&alpha;) = &alpha; + &beta; +
X
.
=- &alpha;
&beta;+ &isin;
= with
X
Y &beta;
/
Thus,since V < 0, the estimated intercept will
be smaller than the true intercept. &beta;
= extimated coefficient

Case II: If the observed Y is less true

X= mean of independent variable

Y by a constant percentage, then

cients will be biased. For example, if Y =
coeffi- than
the &betathe
; Y = mean of dependent variable.

They refer to the percentage change in the de-

pendent variable when the specific independent
&gamma;Y* where &gamma; < 1, then with &beta; = 2
&Sigma;vx / &Sigma;xwe obtain variable is changed by one percent.
60

TABLE 2 - Continued
might be possible to conclude that the
police, through their prevention of
property crimes can also help to indi-
rectly retard violent crimes.
The fit of the arrest production func-
tion is quite poor, perhaps indicating
that there is a great deal of variation in
the arrest rates which is due to vari-
ables that are left out of the system.
However, the signs of the variables do
seem to be as anticipated, and the vari-
ables are significantly different from
zero. Policemen per capita is signifi-
cantly different from zero, with an
elasticity of about .6. Thus, arrest
rates may significantly retard property
crimes, and per capita policemen can
significantly increase arrest rates.
The demand for police equation is
quite good. Further, there are several
interesting observations that can be
drawn from this result. The first is that
the wage rate is negatively related to
the demand for police and is highly
significant. A $1000 increase in police
wages will cause an average fall of 50
policemen in a city of 50,000 people.
Further, the demand for police does
61
seem to be wage inelastic, since a one
percent wage increase leads to only a
one half percent decline in the number
of policemen hired. Thus, the police
have a high degree of job stability as
they ask for higher wages. A second
interesting finding is that property
crimes have a much stronger effect on
the demand for police than violent
crimes (which are in fact negatively re-
lated but insignificantly different from
zero). Thus, the innocent citizen might
be interpreted to live more in fear of
property crime than violent crime-a
relatively surprising result. It might
very well be that economic factors truly
dominate the demand for police.
V
In general, this study has indicated
that a simultaneous approach to the
examination of the relationships be-
tween crime and police can be fruitful.
In particular, it has demonstrated that
both economic and environmental
variables play an important role in the
explanation of crime, and that the
62

chances of being arrested can signifi- elastic wage demand. Because the sys-
cantly retard property crime, while tem of equations was solved simultan-

having little effect on violent crime.
Thus, for property crime, it would be
possible to lower crime rates through
an intensification of
police arrest effort-
Further, it was also discovered that
poor community relations can hurt
police output, and thus, there are po-
tential dividends in the improvement
of police-minority relations. Finally, it
was shown that
property crimes have a
large effect on the demand for police
and that policemen are considered to
be a necessity, since they have an in-
eously, these results can be considered
meaningful.
There is clearly much more work to
be done in this area. The entire court
system, the role of diversion projects,
and the penal system could also be in-
corporated into the model. Further, al-
ternative specification of the environ-
mental and police variables should also
be considered. In any case, it is believed
that the simultaneous approach is a
fruitful way of analyzing crime and
police output.

Selected Bibliography
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Becker, Gary S. "Crime and Punishment: An Economic Approach." Journal of Political
Economy, March-April 1968, pp. 169-217.
Bonger, William. Criminality and Economic Conditions. Bloomington: Indiana Uni-
versity Press, 1969.
Burgess, Ernest W. "Social Forces in the Community Making for Mobility." Proceed-
ings of the Minnesota State Conference and Institute of Social Work, 1927.
Chapman, Jeffrey I. "A Model of Crime and Police Output." Ph.D. dissertation, Uni-
versity of California, Berkeley, August 1971.
Chapman, Jeffrey I. "The Demand for Police," Public Finance Quarterly (forthcoming).
Ehrlich, Issac. "Perception in Illegitimate Activities: A Theoretical and Empirical In-
vestigation." Journal of Political Economy, May/June 1973, pp. 521-565.
Federal Bureau of Investigation, Uniform Crime Reports for the United States. Wash-
ington, D.C.: Government Printing Office, 1969.
Geis, Gilbert. "Pioneers in Criminology, VII, Jeremy Bentham (1748-1832)." Journal
of Criminal Law, Criminology, and Police Science, July-August 1955, pp. 159-171.
Harris, John R., "On the Economics of Law and Order." Journal of Political Economy,
January-February 1970, pp. 165-175.
Hirsch, Werner Z. Urban Economic Analyses. New York: McGraw Hill, 1973.
Korn, Richard R., and McCorkel, L’oyd W. Criminology and Penology. San Francisco:
Holt, Rinehart, and Winston, 1967.
Morris, Desmond. The Naked Ape. New York: Dell Publishing, 1967.
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Quinney, Richard. "Crime, Delinquency and Social Areas." Journal of Research in
Crime and Delinquency, July 1964, pp. 149-154.
&mdash;. "Structural Characteristics, Population Areas and Crime Rates in the United
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45-52.
 63

Rottenberg, Simon. "The Clandestine Distribution of Heroin, Its Discovery and Supres-
sion." Journal of Political Economy, January-February 1968, pp. 78-90.
(ed.) Economics of Crime and Punishment. Washington, D.C.: American Enterprise
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Saunders, Charles B. Upgrading the American Police: Education and Training for Bet-
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Wonnacott, Ronald J. and Thomas H. Wonnacott. Econometrics. New York: John
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