The Desperation Threshold Model: Extreme Poverty, Risk Taking, and Crime

• In Event: Advancing our Understanding of Choice and Decision Making

Abstract

Most rational choice models assume that people aim to maximise their payoff. What if, instead, people aim first to meet some 'basic needs', like food and accomodation? We build a formal model to reflect this intuitive notion, assuming that agents try to keep their level of resources above a ‘desperation threshold’. Above the threshold, the most important concern is not falling down, and people should avoid risk. Below it, there is little left to lose, the most important concern is jumping up, and people should take risk to obtain resources, for instance through property crime. At the population level, a deprived or unequal population is likely to contain a substantial minority of ‘desperate’ agents, hence high crime and low trust, in line with empirical evidence. Finally, deterrence is likely to be very ineffective on 'desperate' crime, again, in line with empirical evidence. We conducted an empirical test of this prediction at the individual level, using a longitudinal survey of 472 individuals in France and the UK. As predicted by our model, we find clear evidence for both more extreme risk avoidance and more extreme risk taking in this group.

Authors

• Benoît de Courson, Max Planck Institute for the Study of Crime, Security and Law

• Jean-Louis van Gelder, Max-Planck-Institute