Paper: Becker (1968)

Classic paper: "Crime and Punishment: an Economic Approach" (1968) JPE.
== Summary ==
=== I. Introduction ===
=== II. Basic Analysis ===
==== II.A. The Cost of Crime ====
Some descriptives/possible indications for the cost/importance of crime.
==== II.B. The Model ====
To determine how to optimally combat crime, a model can include five types of behavioral relations (5: [x is postponed to section y])
===== 1. Damages =====
* Social harm from criminal activity:H_i = H_i(O_i) where H is the harm, and O_i the level of activity i. Assume harm increases in the level of activity: H_i^' = \frac{dH_i}{dO_i} \geq 0.
* Total gain from criminal activity to offenders: G = G(O), also assume that gain increases in the level of the activity: G' = \frac{dG}{dO} \geq 0.
Then, the net cost of damage to society, D(O), is the simply the difference between the harm and the gain:
D(O) = H(O) - G(O)
He assumes as plausible that offenders receive diminishing marginal gains and cause increasing marginal harm: G<0, and H>0, hence:
D = H - G > 0
Since the derivatives of harm and gain are both positive, the sign of the derivate of the damage—D'—depends on their magnitudes. However, from the equation above we know that the rate at which harm increases is increasing and the rate at which gain increases is decreasing, hence for any level of the activity that produces a net damage the net damage is increasing. [until section V, assume D'>0]
D'(O)>0, \quad \forall O>O_a \text{ where } D'(O_a) \geq 0
===== 2. The Cost of Apprehension and Conviction =====
===== 3. Supply of Offenses =====
===== 4. Punishments =====
=== III. Optimality Conditions ===
=== IV. Shifts in the Behavioral Relations ===
==== V. Fines ====
==== V.A. Welfare Theorems and Transferable Pricing ====
==== V.B. Optimality Conditions ====
==== V.C. The Case for Fines ====
==== V.D. Compensation and the Criminal Law ====
=== VI. Private Expenditures against Crime ===
=== VII. Some Applications ===
=== VIII. Summary and Concluding Remarks ===