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Economics of the Broken Window Theory

  • Nathan Berg and Jeong-Yoo Kim EMAIL logo
Published/Copyright: December 7, 2019
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Abstract

In this paper, we argue that there is strategic complementarity in criminal behavior. Strategic complementarity arises because the apprehension probability that affects the crime rate depends on the crime rate itself. The natural consequence is the possible multiplicity of the equilibrium crime rate. The actual crime rate is realized by the self-fulfilling nature of the crime rate. Our analysis provides an economic rationalization of the broken window theory as the result of strategic complementarity and self-fulfilling crime rates. Regardless of how effective polices prescribed by the broken window theory are (e.g. removing graffiti, reducing trash in the street, and repairing broken windows), our model demonstrates the theory’s important contribution of introducing to the economics of crime the idea of belief-based deterrence. We also show that the equilibrium crime rate is stable whenever the broken window policy targets the lowest among multiple equilibrium crime rates.

JEL Classification: K42

Acknowledgment

This research was begun while we were visiting Hitotsubashi University. We gratefully acknowledge Taiji Furusawa for his hospitality and participants at the 9th annual conference of Asian Law and Economics Association held in Tokyo for helpful comments.

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Published Online: 2019-12-07

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