Historically, social observers have repeatedly noted a correlation between education and crime, observing that individuals with lower levels of education are more likely to commit crime. However, the relationship between education and crime is complex, and it is important to clearly establish causality to determine if investing in education can effectively reduce crime. Merely observing persistent educational-attainment inequalities between offenders and non-offenders is not sufficient to make any causal claims about the underlying relationship between education and crime. Many other factors can influence an individual’s decision to stay in school or commit a crime, and these factors need to be accounted for when estimating the relationship between education and crime. Economists theoretically predicted in the late 1960s that education, via its positive effect on future earnings, would reduce the probability of criminal participation. Empirical studies have since used various econometric methods to establish that, on average, education has a strong causal crime-reducing effect. One strand of this literature has established in various contexts that individuals from cohorts forced by law to stay longer in school were much less likely to end up in court or prison. There is, however, still much to be discovered about the effect of education on crime, such as the underlying mechanisms related to income or non-cognitive effects, and heterogeneities by context, education level and quality, and individual characteristics. Overall, economists widely agree that investing in education is an efficient public-spending strategy to effectively reduce crime.
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The Economic Benefits of Education for the Reduction of Crime
Joel Carr, Olivier Marie, and Sunčica Vujić
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The Economics of Abortion Policy
Damian Clarke
The economic literature on abortion policy broadly is broad, studying abortion reforms that have occurred over the past two centuries, with a concentration of studies examining policy reform over the 20th and 21st centuries. The literature has examined a range of policies: both those which restrict access and those which legalize elective abortion; but within these two broad classes, the precise nature of policy reform can vary greatly. Policy reforms studied range from specific types of limits or financial barriers restricting access for particular age groups to policies which entirely criminalize or legalize elective abortion. Policies have been studied that restrict or relax individual access as well as impose regulations on abortion providers. The economic literature on abortion reform has illuminated a number of clear links, showing that increased availability of abortion decreases rates of unintended births, and vice versa when access to abortion is limited. These effects have been shown to have downstream impacts in many domains such as family formation, educational attainment, and labor market attachment, as well as impacts on health, empowerment, and broader measures of well-being such as life satisfaction and exposure to intimate partner violence.
There is mixed evidence when examining the impact that abortion reform has on cohorts of children exposed to reform variation. Across contexts abortion reforms have been shown to affect the composition of cohorts of children via differential rates of access to abortion, though this compositional effect is context-dependent, and as such a number of different patterns have been documented. Compositional effects of policies often also have been shown to have a geographic component, given that certain types of individuals are more easily able to travel to access abortion where restrictions are in place in one area but not in another.
Much of what is known in the economic literature on abortion is gleaned from country-level case studies and cohort variation in access, with this evidence generated from a relatively small number of countries in which reforms have occurred and data is available. In general, much of the literature available covers low fertility and industrialized settings. Additional evidence from other settings would allow for a broader understanding of how abortion reform affects well-being.
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The Economics of Copyright Law and Problems With Its Implementation
Jeffrey L. Harrison
Without copyright law, authors would be unable to internalize the benefits of their writings. Copyright law reacts to this by providing authors with a period of exclusivity. The relevant legislation has a contract-like character; authors receive a period of exclusivity, and the public benefits by virtue of original writings that eventually pass into the public domain. Ideally each contract between the public and an author would be individually negotiated. Because U.S. copyright law is strictly utilitarian, authors would be “paid” the lowest amount possible to bring their works into existence. For example, popular authors may be able to internalize sufficient returns in just a few years. In other cases, a longer period of exclusivity is necessary. Huge transaction costs prohibit individual transactions and, at this writing, most works are protected for the life of the author plus 70 years.
As an economic matter, the actual implementation of copyright law is hard to rationalize. Works with even a modicum of creativity are copyrightable. This can result in a disincentive to be creative and invites expensive legal disputes about works that are socially irrelevant. In addition, works receive levels of protection that are independent of their value to the public. In some instances Congress with the approval of the Supreme Court has extended the copyright term for works already in existence. Retroactive extension of the copyright term cannot have an impact on works in existence. Oddly, copyright law views authors as profit maximizers but also limits the value of their works by allowing heirs to terminate assignments after a set period of time. Finally, the remedy for copyright infringement is the damages suffered by the author plus all profits made by the infringer that can be traced to the infringement. It is not clear that this remedy is consistent with the goals of copyright law.
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Economic Studies on the Opioid Crisis: Costs, Causes, and Policy Responses
Johanna Catherine Maclean, Justine Mallatt, Christopher J. Ruhm, and Kosali Simon
The United States has experienced an unprecedented crisis related to the misuse of and addiction to opioids. As of 2018, 128 Americans die each day of an opioid overdose, and total economic costs associated with opioid misuse are estimated to be more than $500 billion annually. The crisis evolved in three phases, starting in the 1990s and continuing through 2010 with a massive increase in use of prescribed opioids associated with lax prescribing regulations and aggressive marketing efforts by the pharmaceutical industry. A second phase included tightening restrictions on prescribed opioids, reformulation of some commonly misused prescription medications, and a shift to heroin consumption over the period 2010 to 2013. Since 2013, the third phase of the crisis has included a movement toward synthetic opioids, especially fentanyl, and a continued tightening of opioid prescribing regulations, along with the growth of both harm reduction and addiction treatment access policies, including a possible 2021 relaxation of buprenorphine prescribing regulations.
Economic research, using innovative frameworks, causal methods, and rich data, has added to our understanding of the causes and consequences of the crisis. This body of research identifies intended and unintended impacts of policies designed to address the crisis. Although there is general agreement that the causes of the crisis include a combination of supply- and demand-side factors, and interactions between them, there is less consensus regarding the relative importance of each. Studies show that regulations can reduce opioid prescribing but may have less impact on root causes of the crisis and, in some cases, have spillover effects resulting in greater use of more harmful substances obtained in illicit markets, where regulation is less possible. There are effective opioid use disorder treatments available, but access, stigma, and cost hurdles have stifled utilization, resulting in a large degree of under-treatment in the United States.
How challenges brought about by the COVID-19 pandemic may intersect with the opioid crisis is unclear. Emerging areas for future research include understanding how societal and health care systems disruptions affect opioid use, as well as which regulations and policies most effectively reduce potentially inappropriate prescription opioid use and illicit opioid sources without unintended negative consequences.
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Economic Theory of Criminal Law
Keith N. Hylton
Criminal law consists of substantive and procedural parts. Substantive law is the set of rules defining conduct that violates the law. Procedural criminal law is the set of rules regulating the process of punishment. Substantive rules apply mostly to individual actors, and procedural rules apply to public enforcement agencies and adjudicators.
Economic theory of criminal law consists of normative and positive parts. Normative economic theory, which began with writings by Beccaria and Bentham, aims to recommend an ideal criminal punishment scheme. Positive economic theory, which appeared later in writings by Holmes and Posner, aims to justify and to better understand the criminal law rules that exist. Since the purpose of criminal law is to deter socially undesirable conduct, economic theory, which emphasizes incentives, would appear to be an important perspective from which to examine criminal law.
Positive economic theory, applied to substantive criminal law, seeks to explain and to justify criminal law doctrine in economic terms—that is, in terms that emphasize the incentive effects created by the law. The positive economic theory of criminal law literature can be divided into three phases: Classical deterrence theory, neoclassical deterrence, and modern synthesis. The modern synthesis provides a rationale for fundamental criminal law doctrines and also more puzzling portions of the law such as the doctrines of intent and necessity. Positive economic theory also provides a rationale for the allocation of enforcement responsibilities.
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Tax Audits, Economics, and Racism
Francine J. Lipman
Since 2010, Congress has significantly cut the annual budget of the Internal Revenue Service (IRS) while requiring the IRS to manage more responsibilities, including last-minute comprehensive tax reform, health care, broad-based antipoverty relief, and a variety of economic stimulus provisions. As a result, the IRS has sustained across-the-board decreases in staffing, with the most significant decreases in tax enforcement personnel. The IRS has fewer auditors than at any time since World War II, despite an explosion of concentrated income and wealth. Predictably, the tax gap, the difference between what taxpayers owe and what taxpayers pay, has skyrocketed to almost $1 trillion a year. Economists have estimated that funding the IRS will pay for itself severalfold, raising more than a trillion dollars of uncollected tax revenues over a decade.
Despite evidence that funding will remedy budget shortfalls severalfold, Congress continues to defund the IRS. While the bulk of the tax gap is due to unreported income by high-income individuals, the audit rate of these households has dropped precipitously. By comparison, the lowest income wage earners are being audited five times more often than all other taxpayers. Given centuries of racist policies in the United States, households of color are disproportionately impoverished and white households are disproportionately wealthy. Accordingly, lower income working families of color, especially in the South, are audited at rates higher than their white northern counterparts. Moreover, because these households and the IRS have limited resources, many of these audits result in taxpayers losing antipoverty benefits that they have properly claimed. This discriminatory treatment is counter to Congressional intent to support these families and exacerbates existing racial income and wealth gaps. With President Biden’s 2021 executive order on advancing racial equity and support for underserved communities through the federal government, the U.S. Treasury, IRS, and Congress have been charged to “recognize and work to redress inequities in their policies and programs that serve as barriers to equal opportunity.” Properly funding the IRS is a necessary step to advancing racial equity.