Chapter EMB, Problem 5MCQ

To determine

To choose: The option that states the reason for criminals committing more of the rational number of crimes.

Answer to Problem 5MCQ

The correct option is a, i.e., excessive optimism.

Explanation of Solution

Crime provides an important example of bounded rationality in the form of excessive optimism—some criminals are unrealistically confident that things will go their way. Neoclassical models treat crime as a rational activity, the price of which is the expected punishment. This implies that more severe punishments or higher rates of apprehension or conviction will deter crime.

Yet a study by one of the authors, of the knowledge and mindset of criminals, found that most criminals do not have the information required to perform a cost-benefit analysis before committing their crimes. Specifically, 76% of the convicted criminals in the study either had no thought that they might be caught or had no idea of the punishment for their crime, or both. Among the violent offenders, 89% lacked the information needed for cost-benefit analysis. So in order to solve the crime problem, policymakers must go beyond the tenets of neoclassical economics and be open to solutions that address psychological problems and informational shortcomings.

Unfortunately, crime is just the tip of the iceberg of poor decisions caused by excessive optimism.

So, the correct option is a, i.e. excessive optimism.

Economics Concept Introduction

Introduction:

Excessive optimism is a mental bias that bases someone to consider that they are not expected to experience a negative event. It is also known as comparative optimism or unrealistic optimism. Optimism bias is common and surpasses ethnicity, gender, age, and nationality.