Crime and punishment: the economic burden of impunity

Abstract

Crime is an economically important activity, sometimes called the industry of crime. It may represent a mechanism of wealth distribution but also a social and economic charge because of the cost of the law enforcement system. Sometimes it may be less costly for the society to allow for some level of criminality. A drawback of such policy may lead to a high increase of criminal activity that may become hard to reduce. We investigate the level of law enforcement required to keep crime within acceptable limits and show that a sharp phase transition is observed as a function of the probability of punishment. We also analyze the growth of the economy, the inequality in the wealth distribution (the Gini coefficient) and other relevant quantities under different scenarios of criminal activity and probability of apprehension.