Economics Theory and Crime
The purpose of this article is to show that economic theory can be used and applied to every aspect of life, even crime. The article explains that crimes which have high profit maximization such as stealing and drug dealing need laws to reflect punishments that hit the criminal where it hurts them the most; financially. Supposedly, criminals are rational people and decide to commit crimes the same way normal people make economic decisions. It's just a simple analysis of choices "among the alternative combinations of costs and benefits." This being said, laws don't need to make it impossible for people to commit crimes, they need to make it unprofitable.
Economic analysis can also be used to "help us understand organized crime." Often the media and those working for the law enforcement and court system make it seem like crime rings are run like any other large business.
The article states that what we know about economics of organization makes this an "unlikely description of real criminal organizations." First of all the larger the organization, the harder it is to control than smaller ones. Legitimate businesses have the advantage of making use of memos, reports, evaluations and other things of that nature. Therefore, "informational diseconomies of scale" show us that criminal organizations would be smaller in scale than average lawful businesses in other markets. Studies by Reuter and Rubenstein seem to confirm that indeed "criminal firms are relatively small... and decentralized, exactly the opposite of what we see in movies and novels." Rather than being organized, the criminal market is more of a "network of individuals that cooperate ...and do things for each other to their own mutual [economic] interest."
Examining the "War on Drugs" approach we find that from an economic standpoint the "objective is to...