The Economics of Crime: Why Criminals Do the Math

What if we studied crime the way we study markets? That was the premise of a plenary by Dr. Suryaprakash Mishra, Associate Professor at the National Law School of India University (NLSIU), Bangalore, at Parul University’s ICGCV 2026. Economics, he argued, is not only about business; it is a powerful lens for understanding crime, especially financial crime.

Dr. Mishra began with a key distinction. Crimes have always been viewed wrong thing and something that shall be punished. But not every crime is not easy to be explained by economics. As some are coming from emotion or psychological factors, but many financial crimes, fraud, tax evasion, fraud, corruption are planned before hand. The planning is done with calculations. Planners are mindful and take the steps in a way that they are not caught. The offender thinks about the expected profit against the risk. The followed by questions are how much can be gained, what are the chances of being caught, and what punishment would follow. If the expected benefit outweighs the expected cost, the likelihood of the crime rises. This does not excuse crime; it helps explain why some people offend even knowing the legal consequences, and, crucially, how governments might respond more effectively.

At the heart of this analysis is Rational Choice Theory, widely used in economics to model how people make decisions by comparing benefit and cost. Applied to crime, it suggests an offender’s “payoff” depends on three factors:

• The benefit from the crime: larger frauds or evasion promise larger financial gains, so profit becomes a key driver.
• The probability of detection: bigger crimes tend to attract more attention and investigation, raising the chance of being caught.
• The punishment if caught: fines, imprisonment, and legal action are the costs, but if offenders still expect to gain more than they risk, punishment alone may not deter them.

Dr. Mishra even described how some offenders treat preparation, learning techniques, building networks, as a kind of investment in “criminal capital,” intended to increase their profit, though society sees it as a source of greater harm.

Also Read: Meet The Leading Criminolists at Parul University, Gathered For ICGCV 2026

To make the theory concrete, Dr. Mishra turned to tax evasion, which he called one of the most damaging economic crimes because it harms not one person but the whole society. Governments depend on taxes to fund education, healthcare, infrastructure, policing, courts, and welfare. When taxes go unpaid, the state collects less than it planned, and must borrow more (adding to public debt that future generations bear) or expand the money supply (risking inflation that erodes everyone’s purchasing power). Tax evasion, in other words, quietly weakens public services and the wider economy, its costs spread across society.

Dr. Mishra also connected crime to the economic environment in which it occurs. In many developing economies, large parts of activity happen in the informal sector, outside proper registration and the tax system, often because people have few other options. Those in the informal economy frequently cannot access bank loans, which require documents and collateral, and so turn to private moneylenders charging very high interest, deepening their financial difficulty and keeping them outside the formal system. Weak institutions, poor tax administration, slow legal processes, and limited financial inclusion together create an environment in which economic crime becomes easier, showing that crime is as much an economic and institutional problem as a legal one.

People usually think that giving punishments or increasing the degree of it will be beneficial for the society. But it is not the case. The policy says loud and clear that by increasing punishment would not work out. It will not help in preventing the economic crime. Well the reason is offenders weigh benefit against risk. Government must reduce the profit from illegal activity, improve monitoring, raise the probability of detection, and remove the opportunities for crime. And alongside broader reforms like simpler tax administration, greater transparency, financial inclusion, and faster courts. When crimes, have economic calculations that are less favourable. Hence, fewer people will choose to offend.

It is a reminder that effective crime prevention requires understanding not just the law, but the incentives, and the systems, that shape human behaviour.