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Gary Beckers contributions to economics have been monumental. As a recipient of Nobel Prize in 1992, he was honored for expanding microeconomic analysis to include human behavior which was previously only covered by the social sciences (Becker, 1993). Becker encouraged other economists to tackle new issues in economics from a more behavioral approach. His "economic approach" said that individual agents, (i.e., firms or households) all behaved "rationally." His four primary areas of research around human behavior focused on (1) human capital, (2) behavior of the family, (3) crime and punishment, and (4) market discrimination on labor and goods (Becker, 1978). Becker also had three principles that he believed were critical to research - (1) theories should have empirical substance, (2) theories should be more factual, relying less on assumptions, and (3) the economist should not change his "tastes" (Fuchs, 1994). The casino/gaming environment is dynamic, and constantly changing with regards to crime and human behavior. This paper will attempt to apply Becker's theoretical perspectives (an economic perspective) on human capital and crime and punishment to a practical application of crime that occurs in the casino/gaming environment.
Gary Becker's Contributions - Human Capital
One of Becker's most significant contributions is in the realm of human capital. He looked at how consumer or household activities were indirectly involved in market outcomes. More specifically, how time and goods not being consumed impacted the earnings growth later on. How an individual determines when to allocate resources to one's own human capital will cause disparities in their investments throughout their life. Becker claims that an individual has a choice as to whether they want to receive their wages now or delay them for greater earning potential in the future is considered an economic approach where one calculates an expected gain. He also asserts that groups that have a higher expectation to be in the labor force usually have a higher expected return on investment for education. In Becker's research he found that men are more likely to continue their education than women, and nonwhite women who are more likely to be in the labor force are more likely than white women to continue their higher education (Becker, 1978). Becker's work in human capital looked at determining private and social rates of return compared to the varying levels of investment of education among men, women, blacks, and other individual groups (Becker, 1993).
Becker, through his theory of human capital has developed an analytical framework for researching what the return on investment for education and on-the-job training is but also what that return on investment for wage disparities is over the course of time. Becker's theory on human capital demonstrates a suggestive interpretation of the "gender gap" in earning potential (Becker, 1993).
Gary Becker's Contributions - Crime and Punishment
Gary Becker was very influential in applying his rational behavior theory in crime and punishment. He claimed that it could be assumed that one can predict that a criminal can respond in a rational way when determining costs (returns) and benefits, such as whether the individual will receive a probable punishment for committing the crime. Where social scientists look at criminal activities as irrational behavior, Becker studied the criminal activity as rational behavior under uncertain scenarios (Becker, 1974). Becker used an empirical approach to suggest that certain crimes committed by a certain group of individuals can be explained by their human capital (i.e., education). (Becker, 1974).
His interest in developing the "economic approach" to crime came about when he was driving to Columbia university and attempted to calculate the probability of getting a ticket, penalty size, and the cost associated with his car being towed, all because he was running late and debated whether to park illegally. He was intrigued with how one could come up with an "optimal behavior" for both the offender and the police (Becker, 1993). Becker felt that criminal individuals were not dissimilar from non-criminals in their motivations, but instead studied the empirical implications that the behavior a criminal individual engages in is rational. He claimed that the amount of crime was influenced by rationality and preferences as well as public policies (Becker, 1993).
Gary Becker in his earlier work in crime was interested as to why theft wasn't viewed as redistributing resources from wealthy to poor people, but rather viewed as a societal harm. Through his research he found out that what the criminals spent their time on was "rent seeking" because what the criminals were engaging in through theft was not creating affluence, but the redistribution of wealth was forced. Becker's economic approach to crime was extremely influential because it was used to study of enforcement of laws and statutes, such as income tax evasions, and minimum wage legislation to name a few, and used by governmental agencies as a way to implement new statutes (Becker, 1993). The "optimal" level of enforcement depends on several factors - (1) the costs associated with apprehension and conviction of the offender, (2) the nature of the criminal punishment, and (3) the reactions of criminals to the enforcement changes (Becker, 1974).
Becker looks to confine the optimization issue while minimizing societal costs.
In Becker's Model to combat crime he studied an individual's behavior relative to the costs of crime. He divided those relations into five categories - (1) the number and cost of offenses, (2) number of offenses and punishments, (3) number of arrests, offenses and convictions and the costs for the police and courts, (4) number of convictions and costs of punishments, and (5) number of offenses and private costs associated with apprehension (Becker, 1974). When an individual chooses to commit a crime they go through a cost-benefit analysis for whether to engage in the activity. The criminal will consider the punishment of the offense, probability of conviction and punishment and any income that may be available (Becker, 1974).
Practical Application of Becker's Theories on Casino Crime
The scenario we will use in this practical application is an individual (offender) committing credit card fraud in the casino. From an economic perspective of Gary Becker, this offender committing credit fraud in the casino is rational. The offender believes that he is "better off" by engaging in his profession (committing crimes) and this is the best alternative that is available. He does not necessarily compute what the specific costs and benefits are to committing the crime but believes that by engaging in the criminal activity is the one that fits what he is trying to achieve. In addition to the offender being "rational," the offender would also be choosing to engage in this type of activity because of his lack of investment in human capital (education). Because the offender has little educational background he would be more likely to engage in committing crime than an individual with more education.
From the law enforcement perspective, Gary Becker would apply that same assumption of rationality and say that those individuals are no more or less rational than the criminals they are trying to catch. While the most optimal situation in controlling and preventing crime from a law enforcement perspective so that there is no more credit card fraud in the casino is ideal, but whether it occurs or not depends on the costs that are associated with eliminating that criminal activity. It would not be rational for the casino to hire five hundred security personnel and tribal police to help eliminate crime because the costs would significantly outweigh the benefits.
With regards to punishment for the crimes committed by the offender, an economist, Becker would say that the expected punishment should be parallel to the damage that was done. As an economist, Becker would say that because the credit card fraud committed by the offender is a "external" harm the offender should be taxed (fined) so that the marginal net damages would be zero (Becker, 1974). The fines imposed by the casino or Tribal authority would aid in providing compensation to the victims of the credit card fraud that occurred so that the victim would be no worse off than if the offense had not been committed (Becker, 1974). The punishment as a fine (and including restitution) imposed by the casino on the offender would be given to the victim of the crime and considered a "transfer payment" and is clearly a "gain" to the victim. On the other hand, punishment by imprisonment would be viewed as a net loss to both society and the victim, and no one is better off.
Gary Becker's contributions to economics and the social sciences has been instrumental and provided the tools to aid in developing public and private policies to help prevent illegal behavior by criminals. He demonstrates how calculating those "optimal" decisions can help minimize the loss to society from damages caused by criminals. The "optimal" policies that aid in fighting criminal activity are essentially a part of the "optimal" allocation of resources in the market. He also claims that implementing fines as opposed to imprisonment for punishment can have several advantages because they help to safeguard resources, help to compensate victims/society and punish offender accordingly. As demonstrated in the credit card fraud crime committed in the casino mentioned earlier, casino law enforcement could use Becker's "economic approach" to help in determining alternative ways to mitigate crime.