Deterrence theory and Economics

Last fall I took some economics classes at Metro State. I had never really thought about economics much before, but I was struck by how rational it assumed people are in their decision making. Particularly, the concept of a cost-benefit analysis usually assumed that people would rationally analyze all available data to make the best decision for themselves (usually in terms of economic gain).

I bring this up because deterrence theory in chapter 8 reminded me a lot of cost-benefit analysis in economics. It uses the same principles as in economics, just related to sociology. Particularly, it focuses on the thought processes people have in deciding whether or not to act in a way that might be seen as "deviant". The theory states that if the individual thinks that the benefits of performing a certain deviant act outweigh the potential costs, then they will follow through with that act...and vice versa.

This theory explains why there are fewer murders than, say, thefts. The punishment for theft is a lot less than the punishment for murder, so people may be more inclined to steal something than kill someone because the potential costs of being caught are less.

However, just like how the economic model of cost-benefit analysis simplifies things down to a level that rarely exists in real life, so too does the deterrence theory fail to explain the relationship between deviances and punishments in society. For instance, chapter 8 goes on to discuss how the punishments for white-collar crime and blue-collar crime are not in proportion to the societal damage they do, especially if you think about it terms of money lost. If deterrence theory were accurate, then society would reassess the punishments it has for blue-collar crime and white-collar crime and and adjust them accordingly. So, if we're judging what the punishment should be off of societal harm, then white-collar crime should incur much stiffer punishments than blue-collar crime. However, this isn't the case in reality, so deterrence theory is limited in what it can tell us about about deviancy, punishment, and society.

Obviously what I am writing about here is quite relevant to the economic downturn of the last 5 years, and the decade of economic irresponsibility that preceded it. I noticed in the text that it listed just three prominent financial figures who have received jail time in the wake of the global financial crisis. To the hundreds and maybe thousands of people who gambled with other peoples' money, deceived poor people into making poor financial decisions for their own (or their company's) gain, and used risky investment strategies that eventually necessitated a $700 billion dollar bailout: where is their punishment? Instead, they were coddled, bailed out, and are back to making obscene amounts of money in an era of unprecedented income disparity while the rest of America continues to struggle with high unemployment. Here's an example of that outrage: