From a criminological perspective, people choose to commit crime because of a decision they have made after choosing between illegal activity and legal activity based on the overall utility that they perceive will come from those acts. It is assumed that participation in criminal activity is a result of the individual optimizing individual response to incentives.
According to Freeman (1999), these are the main issues in the economics of crime literature:
the effects of incentive on criminal behavior;
how decisions interact in the market-setting; and,
the use of cost-benefit analysis to assess alternative policies to reduce crime
These are the factors that influence an individual's decision to engage in criminal activity:
expected gains from the crime relative to earnings from legal work, e.g. weighing the gain from illegal activities vs low salary
chance or risk of being caught and convicted
extent or severity of punishment
legal opportunities or a lack thereof, e.g. unemployment
The following are some economic frameworks that are used to explain criminal behavior.
An individual's decision to commit crime is based on a cost-benefit analysis completed by said individual. This is consistent in both the short- and long-term.
As the name implies, an individual's decision to commit crime was based on short-term gains without regard for the long-term consequences of their actions.
This model says that there are three key factors that sustain crime: relative deprivation, poverty, and inequality.
It is said that any crime theory is a political theory. This is because any form of crime could be politically-motivated and any crime could be used for political purposes.
Emphasizing social conflict and power relationships are the main characteristics of political theories of crime.
Political crime theories thus propose that:
criminology has always been a politically-oriented discipline
conservative, liberal, and radical political ideologies characterize the differences among theories
any crime may have political significance
political crimes can be viewed through any other theories, not simply labeling and conflict theories
political theory is the basis of every theory