Limited Rationality and Criminal Decision Making

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Limited Rationality and Criminal Decision Making

• Jonathan P. Caulkins
• Carnegie Mellon University Heinz School and Qatar
  Campus

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Why Do Criminals Commit Crimes?

• Non-Economic reasons
• Strain theory, anomie, differential association,
  etc.
• Economic reasons
• It pays (little more needs to be said)
• It pays from their perspective but not others
• E.g., criminals have higher discount rates, fewer
  legitimate labor market opportunities, dislike
  being in prison less than others, etc.
• It doesnt pay, but they make mistakes
• Poor impulse control, hot vs. cold decision
  making, etc.

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Idea Here New Conjecture for Why Fallible Humans
Might Commit Crimes That Arent Really in Their
Interest

• Based on familiar ideas from cognitive psych
• Gains and losses treated asymmetrically
• Zero point is malleable
• Very low probabilities are not always processed
  in ways consistent with maximizing EU
• Prelecs nonlinear weighting of subjective
  probability
• Impetus was big mystery of drug prices

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Punishment Risk Up Price Down!?!
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Drivers of Price

• In 1992 it was possible to justify the price of
  cocaine by pricing out all industry-wide costs of
  doing business
• Prices before then were too high
• Current prices may be too low?
• Why do sellers sell?
• Boring reasons (high discount rate, etc.)
• Maybe interesting reasons

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Would You Take This Gamble?
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How About This One?
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If You Took Last One 10 Times, Might You Start to
See It As
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And Then Live With That Long Term
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Related Thought on Why Sellers Sell

• Suppose a teen-ager believes that
• Selling drugs is a bad deal, on average
• Theres a 10 chance that the teen is unusually
  skillful and so would have 1/10 the chance of
  suffering bad outcomes by selling
• Decides to try selling for 10 cycles and see
  what happens
• What is the posterior probability that the teen
  is an above average seller, conditional on having
  sold successfully for ten cycles?

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Summary of Story for Sellers

• Even for someone who initially finds the risks of
  a career of drug selling daunting
• Might sell for one cycle a few times
• Urgent need for cash, intoxication, peer pressure
  (a dare), or other unusual circumstances
• Having succeeded 10 times might
• Change framing (shift zero point to selling
  successfully)
• Over-estimate what that says about own skill
• Decide selling on an ongoing basis does beat
  legitimate work

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Same Structure Might Apply to

• Other deviant, non-criminal behavior
• Speeding
• Risky sex
• Extreme sports
• Other criminal behavior
• Shoplifting
• Vandalism
• Teen delinquency generally
• Coupled with barriers to exit, might explain a
  lot?