In a classic study of the precipitous fall in US crime rates in the 1990s in the Journal of Economic Perspectives (2004), Steve Levitt (of Freakonomics fame) found that increased numbers of police and a rising prison population were two of the four main causes of the fall. He found that for every 1% increase in police the crime rate dropped about 0.5% He also found that for every 1% increase in the number of persons incarcerated, there was somewhere between a 0.1% to 0.4% drop in crime rates (depending on the type of crime). It is worth noting that here, as in most other studies of incarceration and crime, it is impossible to distinguish how much of that drop is due to the deterrence effect of incarceration (people not in prison who choose not to commit crimes for fear of being put in jail) and how much is due to incapacitation (criminals unable to commit crimes because they are behind bars). Nevertheless, Levitt concludes:
"...a Dollar spent on prisons yields as estimated crime reduction that is 20% less than a dollar spent on police."
So, if we are looking for good public policy to address crime, the evidence strongly suggests that police, not prisons are a more effective investment. Note that both increasing sentences and more police increase the expected cost of crime. Increased sentences increase the cost of crime conditional on being caught, and increased police increase the likelihood of being caught.
The other two main drivers of the reduction in crime were, by the way, the waning crack epidemic and the legalization of abortion (which I am not going to touch).
Levitt also studies juvenile crime in a paper in 1998 that was published in Journal of Political Economy and found one very interesting result: being punitive (very harsh punishments) on crime early in life, does not translate into lower crime later. This is a pretty strong statement: jail time, it appears does not 'scare off' or 'scare straight' criminals. However, Levitt cites anecdotal evidence that many juvenile offenders stop offending at the age of majority due to the increased punishments attached to crimes committed by adults. So, once again, incentives do matter.
What about treatment for drug addicts? Well here the economic literature is of little help so let me turn to the Kentucky Treatment Outcome Study, which appears to be a very well designed study of addicts in Kentucky that received treatment for alcohol and drug addiction. They found a 48.2% drop in arrests in the 12 months following treatment. Make of this figure what you will - it is still relatively short term, does not contain the counter-factual, etc. - it is a pretty powerful result in my opinion.
Finally, let me leave you with this last bit of research: Lochner and Moretti, in a 2004 article in the American Economic Review, found that a 1% increase in US male high school graduation rates save about $2,100 per male high school graduate in costs associated with crime. In other words, if we do a better job keeping kids in school, we should see big improvements in crime rates. Oregon, right now, is on the wrong track in this regard.
My conclusion from all of this is simple: wasting state money on incarceration is an inefficient way to address crime. Treatment is good, focusing on kids and education is better.
From the notes of a January OUS meeting citing OUS Chancellor George Pernsteiner:
[Oregon is] one of the few states in the U.S. with the following profile: in the 60’s we had one of the highest education levels in America, and America had the highest in the world. In every decade since, we have dropped; so that the 55 year olds are now better educated than the 45 year olds, the 35 year olds are now better educated than the 25-year olds. In a world that requires a higher level of educational attainment, we are not going in the right direction. There have been many reasons cited, one of which is funding. There will be data released later this week that shows we will slip from 45th to 47th for per student funding in America.
This is disgusting and unacceptable. What are we doing spending more money on prisons?