Question

A city is considering purchasing automated license plate reader software dedicated to detecting a particular type of crime. This change would increase the fraction of offenders who get caught from 15% to 20%. The social cost of each crime is $10,000. The cost of trial and punishment for each convicted criminal is $100,000. Suppose the increase in detection results in a decrease in the number of crimes committed from 1,000 per year to 700 per year.

Calculate the effect of hiring the new software on the social cost of crimes: Before: 1,000 * $10,000 = $10,000,000 After: 700 * $10,000 = $7,000,000 Net Effect: $3,000,000 reduction in social cost of crime.

Answer 1

As given in question, a city is considering to purchase automated license plate reader softwrare dedicated to detecting a particular type of crime which would increase the fraction of offenders who get caught from 15% to 20% for which the social cost of each crime is $10,000, however the cost of trial and punishment for each convicted criminal is $100,000.

Now as per given scenario, this increase in detection results in a decrease in the number of crimes committed from 1,000 per year to 700 per year, which reduces the social cost of crime by $3,000,000 as given in question.

Another aspect which needs to be focused here is cost of trial and punishment for each convicted criminal will also change, as

[1000 - 700] * 100000 = $30,000,000

Here recovery cost from victims is also decreasing by $30 million

So overall gain or loss to the economy comes out to be

= cost saved from social cost of crime - recovery loss from each victim

= $3,000,000 - $30,000,000

= - $27,000,000

Here the economy is suffering loss by $27,000,000 keeping that aspect in mind such automated license plate software shall not be purchased.

On the morality side and keeping the country more offfender free, such software can be purchased as by implementing this software the number of offenders gets reduced from 1000 to 700, which is a indirect benefit to society keeping away the monetary part.