Economics focuses on incentives, trade-offs, and resource constraints—financial and otherwise—to predict and explain individuals’ behaviors and choices. The field also offers an explicit, normative framework for evaluating policies and programs by accounting for individuals’ preferences and willingness to pay for goods and services and to avoid burdens and costs. Through the emerging discipline of behavioral economics, economists also seek to incorporate insights from cognitive psychology and other fields to explore behaviors, particularly those of individuals acting with imperfect information in situations where the neoclassical framework, which is predicated on humans being relatively sophisticated utility maximizers, provides a poor empirical guide. In the gun control debate, for example, one might consider confrontations leading to violence in which personal honor is at stake, or individuals purchasing firearms legally for illegal transfer when they imperfectly understand the probability of detection and punishment (
Pickett 2018; Pogarsky, Roche, and
Pickett 2018).
Though imperfect, economics provides a useful lens through which to scrutinize and address the American gun violence epidemic:
Societal costs of firearm injury
Firearms were involved in an estimated 381,420 deaths in the U.S., including 137,785 homicides, between 2009 and 2019. Nonfatal gunshot wounds were implicated in more than one million emergency department visits and hospitalizations over the same period (
Centers for Disease Control and Prevention [CDC] 2022). Rates of firearm injury may have worsened during the COVID-19 pandemic beginning in 2020, though researchers have not reached consensus on the extent of the increase and underlying causal mechanisms.
The direct and associated medical care costs of firearm injury are high. In 2019, medical costs associated with firearm fatalities totaled an estimated $233 million (
CDC 2022). For nonfatal firearm injuries in 2019, the estimated 12-month attributable medical care cost was $24,859 per patient (
Peterson et al. 2019;
Peterson, Xu, and Florence 2021). While further research is needed to estimate long-term-care costs, the annual direct medical cost of firearm injuries has been conservatively estimated to exceed $2.8 billion (
CDC 2022).
Firearm injury, particularly firearm violence, also drives significant law enforcement and security spending. Research has shown guns are more efficient at homicide and suicide than other types of weapons (Cook and Ludwig 2022;
Cook et al. 2017a, 2017b, 2018) and uniquely capable of killing indiscriminately, at a distance, and with a blast that can be heard far off (
Alba and Messner 1995;
Cook 2018). Citing guns’ heightened lethality, many cities adopt proactive policing strategies targeting gun-related crimes (
Cook 2022;
Koper and Mayo-Wilson 2006). According to one widely cited 2019 analysis by Hunt and colleagues, the estimated inflation-adjusted law enforcement costs associated with responding to and investigating homicides is approximately $215,000. Comparable costs for aggravated assault are approximately $14,000 (
Hunt, Saunders, and Kilmer 2019, Table 2). Utilizing an annual rate of 13,750 firearm homicides and 100,00 additional nonfatal gunshot wounds, that corresponds to approximately $4.4 billion in direct policing costs alone.
Firearm-crime-related prosecution and incarceration is also costly. In 2016, U.S. district courts prosecuted 7,652 of the 10,384 suspects investigated for federal firearms offenses. Among the defendants, 5,920 unique individuals were sentenced to an average of 74.1 months in federal prison. The accompanying incarceration costs, at an estimated $39,158 per year, were approximately $1.43 billion (
Qureshi 2021). State-level gun crime investigations, prosecutions, and incarcerations are even costlier than those at the federal level. An estimated 250,412 prisoners in a 2016 state prison inmate survey reported they were carrying a firearm during the crime for which they were incarcerated.
1 Their annual incarceration costs totaled roughly $9.8 billion (
McCollister et al. 2017).
Additionally, criminal justice measures to address firearm injury and gun violence have alienated or antagonized many communities most at risk for firearm-related crimes and associated social dislocation, as evidenced by George Floyd’s 2020 murder and the resulting surge in the Black Lives Matter movement. The result is a collective action problem that research has shown to complicate illegal gun enforcement (
Curtis 2012;
Gau and Brunson 2010;
Meares 2014).
Firearm injury imposes further economic costs through lost productivity among the killed and injured. Using a value of lost output methodology, the American economy loses about $15 billion per year (about 0.1 percent of gross domestic product [GDP]) in fatal shooting victims’ lost productivity. These estimates do not include lost economic output from nonfatally injured victims and the costs imposed on loved ones and caregivers (
Peters et al. 2020).
At the neighborhood level, endemic gun violence contributes to a cycle of outmigration, struggling schools, eroded community cohesion, lack of employment, and disinvestment (Cook and Ludwig 2022). The threat of being shot—or of a friend or loved one being shot—leads to fear and drives costly protective strategies, such as mothers keeping children indoors (
Cook and Ludwig 2002). Medical literature documents associations between adverse childhood exposures (ACEs) and adult chronic disease (
Felitti et al. 1998). While exposure to community gun violence is not included in early ACE studies, subsequent scholarship finds that even hearing gunshots can be classified as an adverse exposure and induce behaviors like aggression, substance use, and having difficulty in school, as well as mental health symptoms, all of which incur significant costs (
Agrawal et al. 2021).
Community levels of gun violence have been shown to reduce property values and local business profitability, leading to community disinvestment in high violence neighborhoods. By one estimate, a single homicide is associated with seventy people leaving a community (
Cullen and Levitt 1999;
Ellen and O’Regan, 2010). A 2021 report suggests community gun violence accelerated African American outmigration from Chicago’s south and west sides (
Lee 2021). Education quality may also decline as neighborhood dislocation impacts children’s mental health and school readiness (
Stein et al. 2003). In a randomized trial of Chicago Head Start, children assessed within a week of a homicide occurring within 2,500 feet of their home showed lower levels of attention, impulse control, and preacademic skills (
Sharkey et al. 2012). The researchers note high levels of parental distress associated with local violence, suggesting a possible causal link with childhood development. Other evidence suggests gun violence exposure has similarly adverse effects on education attainment among school-aged and adolescent children (
Sharkey 2010). Further, tax revenues used for law enforcement and other activities intended to deter and address community firearm violence could be invested into education, infrastructure, and healthcare (
Cook et al. 1999).
Valuation of firearm-violence-related loss of life, health, and safety
While it is impossible to quantify the social, emotional, and educational burdens of fear, suffering, avoidance, injury, and mortality associated with firearm injury, economists have developed mechanisms to value them monetarily. Uniquely, the economics perspective focuses on valuing quality of life, rather than finding the direct material costs associated with specific crimes or other processes—the “costs of illness” or “costs of injury.” While material cost approaches provide an
ex post assessment of injury to identified lives, the economics approach looks forward to consider the value of safety (
Cook and Ludwig 2019).
Economists can estimate the value of a statistical life (VSL) by considering trade-offs between money and fatality risk (
Viscusi and Aldy 2003). Using VSL, researchers suggest the monetized burden of 2019 firearm fatalities across the U.S. was more than $392 billion (CDC 2022;
Peterson et al. 2019;
Peterson, Xu, and Florence 2021). Such valuation methods, however, raise normative, empirical, and conceptual challenges. For example, is a single VSL justifiable across individuals in different life circumstances and with different resources and risk-preferences?
Contingent valuation (CV) is another method that attempts to monetize the neighborhood-level economic burdens of firearm violence. The measure draws on local or national surveys exploring respondents’ willingness to pay taxes for measures aimed at reducing local crime by a fixed percentage. Associated research shows respondents would pay $24 billion for a 30 percent reduction in firearm crime (
Cook et al. 1999;
Ludwig and Cook 2000).
Cohen et al. (2004) apply CV methodology to estimate that Americans were willing to pay $253,000 per averted armed robbery in 2004, or $383,000 in inflation-adjusted 2022 dollars. In 2019, the Federal Bureau of Investigation (FBI) reported 95,281 domestic robberies in which a firearm was used (FBI 2019); using the combined metrics, armed robbery’s inflation-adjusted U.S. economic burden in 2019 equated to approximately $33 billion.
Economic policy implications of the full social cost model
Economics additionally provides a lens for evaluating firearm injury reduction measures. The technique most closely associated with the field is cost-benefit analysis, which provides an explicit normative framework for evaluating policies, programs, treatment, and prevention interventions (
McCollister et al. 2017). The methodology can broadly capture social costs, allowing greater monetized account of firearm injury’s effects and thus more explicit comparison of the social costs of community firearm violence to the costs of violence prevention interventions. Similar approaches have proven beneficial in the medical and public health communities for evaluating other sorts of prevention and treatment interventions.
However, when applied to community firearm violence, cost-benefit calculations can suggest that any intervention that appreciably prevents future crimes against persons is likely to produce positive net social benefits (
Basu, Paltiel, and Pollack 2008). The same approaches have also been used to document the way low-social-cost offenses (
McCollister et al. 2017) can result in significant, often-excessive sentences, for example, minor property crimes committed by chronic offenders with behavioral health disorders. Medical and public health stakeholders often object to such cost-benefit methodologies, when these are used to evaluate law enforcement and incarceration policies. For example,
Cohen et al. (2004) surveyed respondents’ willingness to pay for crime reduction measures. These authors reported an inflation-adjusted willingness to pay of $383,000 for each armed robbery averted by crime-control efforts (
Cohen et al. 2004). By this standard, highly punitive sentences with even small impacts on the often-chronic behavior can pass cost-benefit tests. Cost-benefit analyses reflect a genuine human reality—the high social costs associated with violent crimes against persons. Yet their strict application can ignore equity, social justice, and proportionality. Full cost-benefit analyses must also account for harms imposed on individual offenders, families, and communities with widespread incarceration and criminal legal system involvement—harms frequently omitted from standard policy calculations (
Gifford 2019;
Lynch and Sabol 2004;
Thomas and Torrone 2008).
Underground firearm markets
U.S. firearms regulations are uniquely lenient among high-income countries. This leniency was enhanced by Supreme Court decisions from 2010 to 2022 (
Gostin and Duranske 2018;
Liptak 2022;
Vernick et al. 2011). The resulting patchwork of federal, state, and local regulations is fertile ground for a thriving national underground firearm market, which supplies most firearms used in interpersonal crimes (
Braga et al. 2012,
2021;
Cook, Parker, and Pollack 2015;
Hasegawa, Webster, and Small 2019;
Webster and Wintemute 2015). Like other markets, the underground firearm trade responds to supply- and demand-side pressures and shocks, as well as incentives and constraints (
Braga et al. 2021;
Cook, Parker, and Pollack 2015;
Cook, Pollack, and White 2019;
Crifasi et al. 2020).
A burgeoning literature highlights the importance of underground markets in syphoning firearms to criminal offenders. Firearms used in crimes typically change hands many times, legally or illegally, after their first retail sale (
Braga and Hureau 2015). In 2016 national survey data, 20 percent of all state prison inmates reported carrying a firearm at the time of their controlling offense.
2 Virtually all the firearms were illegally obtained. Few of the firearms were directly stolen or overtly purchased from a federally licensed dealer (
Alper and Glaze 2019). More commonly, the firearms were obtained via underground markets or purchased, traded, rented, borrowed, or gifted from family or friends (
Alper and Glaze 2019;
Cook, Parker, and Pollack 2015).
Inmates arrested in 2014 to 2016 and surveyed as part of the 2016 state prison survey provide a valuable population for examining firearm acquisition.
3 Table 1 shows a snapshot of the offenders’ firearm sources.
Regulating local firearm commerce in a national market
When individual U.S. states or municipalities impose stringent firearm purchase and carry requirements, less strict regulations in nearby jurisdictions provide workarounds for potential offenders. Chicago, for example, imposes tight restrictions on firearm transactions and possession, but firearm violence in the city remains widespread (
Cook, Parker, and Pollack 2015). However, of 15,930 firearms recovered by the Chicago Police Department in connection with 2009 to 2016 arrests, 67 percent were traced to their first sale and had complete owner information. Only 6.6 percent of the traceable firearms were fewer than six months old, and only 7.3 percent were recovered from the individual who initially bought them (
Cook, Pollack, and White 2019). More than 60 percent of the traceable firearms were first purchased out of state, primarily in Indiana (
Cook, Parker, and Pollack 2015). Most of the remainder were purchased outside of Chicago’s Cook County. The data were confirmed by interviews with Chicago firearm offenders, many of whom described going “out of state” to purchase firearms, then reporting them stolen before selling and distributing them (
Cook, Parker, and Pollack 2015).
Such patterns match Braga et al.’s (2021) qualitative studies of New York’s underground firearm market. Though New York historically reports more success curbing illegal firearm possession and related crime than Chicago, the studies showed the city struggled with gang-related firearm crimes. As in Chicago, most of New York’s illegal firearms were traced to out-of-state purchases, with 49 percent of firearms used in crimes being traced to states connected to New York via Interstate 95.
Underground markets: Supply-side insights for policy-makers
Given policy decentralization challenges, an economics perspective can help identify areas where enforcement could curb underground firearm markets and community firearm violence. Understanding economic mechanisms and enforcement gaps can help policy-makers design more effective deterrence and enforcement mechanisms.
Survey data suggest that criminal offenders know specific firearm retailers as illegal firearms sources. Thirty-one percent of male Baltimore City parolees and probationers surveyed by
Crifasi et al. (2020) reported knowing certain gun shop employees “sell guns off the record or make sales to obvious straw purchasers.” Twenty-four percent of the respondents reported knowing some Maryland gun shops where one could obtain firearms without a background check; 16 percent reported knowing shops from which firearms could be easily stolen (
Crifasi et al. 2020). Other available data confirm that certain licensed firearm retailers are responsible for disproportionate amounts of firearms linked to crime (
Braga et al. 2012). While retailers are key underground market suppliers, they do not resemble the large, organized crime syndicates or gunrunners drawing enforcement agencies’ attention (
Braga et al. 2012). They typically divert twenty or fewer firearms into underground markets (
Braga et al. 2012). And while most firearms used in crimes change hands numerous times, many are purchased directly from retailers by future criminals or as indirect “straw” purchases specifically for the individual intending to commit a crime (
Braga et al. 2012).
Braga and colleagues find that between 2007 and 2013, the Boston Police Department recovered 492 firearms from someone other than the original retail purchaser (
Braga and Hureau 2015). Only 11 percent had been reported stolen; only 29 percent were accompanied by the secondhand firearm transfer records required by Massachusetts law. Sixty-three percent of recovered handguns originating from in-state retail sales were missing transaction paperwork.
Regulatory gaps and enforcement oversights allow firearms to move freely through underground markets. They also suggest opportunities for heightened deterrence, such as through a focus on unreported firearm transfers and real or alleged firearm thefts.
Existing research also highlights the importance of gangs, social networks, and neighborhood sources in illicit firearm distribution (
Cook, Parker, and Pollack 2015;
Cook, Pollack, and White 2019). Surveyed firearm offenders note the importance of trustworthy and personal connections in underground transactions (
Braga et al. 2021;
Cook, Parker, and Pollack 2015;
Cook, Pollack, and White 2019). Fearing undercover police activity and predatory crimes, firearm buyers and sellers prefer to deal with individuals they know directly or have reasons to trust. Cook County Jail firearm offenders candidly discussed such issues in a 2015 survey. In the study, forty of the forty-eight primary firearms referenced had been obtained from family members, fellow gang members, or other social connections (
Cook, Parker, and Pollack 2015). Baltimore parolees reported similar patterns in 2020; among offenders reporting efforts to obtain firearms in the previous six months, 53 percent reported encountering difficulties (
Crifasi et al. 2020). Increased efforts to disrupt these local networks are essential to adding friction to the supply of firearms in underground markets.
Firearm demand and use
Firearm possession and violence reflect a collective action problem present in many high-violence neighborhoods. As economic actors, illegal market participants typically seek to earn money and remain safe. Few seek violence for its own sake. Yet they face tangible threats from suppliers, customers, rivals, and others. Forty-seven percent of incarcerated Chicago firearm offenders report personal histories of gunfire wounds (
Cook, Parker, and Pollack 2015;
White, Cook, and Pollack 2021).
Illegal market participants also understand that the usual mechanisms available to curb misconduct and protect consumers are unavailable to them. They cannot contact conventional legal authorities to adjudicate disputes or deter predatory behavior. When surveyed Chicago offenders were targets of firearm violence, few cooperated with police investigations, though at least half could have provided useful information, and almost 40 percent had information about the person who shot them (
Cook, Pollack, and White 2019;
White, Cook, and Pollack 2021). Witness noncooperation is one factor in the city’s low case clearance rates; just one in ten nonfatal shootings in Chicago leads to an arrest.
The same surveyed victims were more likely to engage with police when they did not have assailant information. Respondents cited their desire to retaliate when they believed they knew who shot them. They also cited “street codes” prohibiting testifying against assailants, as well as mistrust of police, frequently based on prior interactions. One incarcerated respondent told University of Chicago researchers that authorities did not care about solving shootings involving gang members: “To them, it’s like, okay, that’s one less guy we got to worry about.” Another respondent cited similar themes: “Growing up, you see it all the time that they don’t really care. Then they go off, probably, my background from being in jail a couple of times for guns or gang-related, and left it alone” (
White, Cook, and Pollack 2021).
The result is an acute collective action problem. The illicit market participants acquire firearms because they fear one another. To explain their carrying illegal firearms, individuals often use a common adage: “I’d rather be judged by twelve than carried by six.”
Economic considerations and recommendations
As noted above, American firearm injury creates an economic burden of more than $300 billion annually. The burden is linked to crimes against persons, both due to their direct harms and the indirect impacts of collateral terror, which are highlighted by the expenses people say they are willing to pay to avoid, deter, and prevent firearm-related crimes.
The economics perspective on firearm injury is imperfect and incomplete. Blunt cost-benefit analyses that are applied without concern for broader social justice concerns may be used to promote overly harsh firearm offender sentences. Other perspectives to complement economic analysis are needed to account for community firearm injury and violence’s disproportionate impact on low-income communities and people of color, and to engage the ongoing social, economic, and policy arrangements that undergird these disparities. Sociological, historical, community-based, and human developmental perspectives often recognize unintended consequences of punitive policies an economic perspective might otherwise recommend.
Nonetheless, the economic costs imposed by firearm violence underscore the need for reform and the accompanying high returns to policies and interventions that reduce this violence. An economics lens can also help policy-makers compare investments in different firearm injury reduction strategies, while also harnessing economic insights about market dynamics to focus law enforcement resources on deterrence efforts and illegal firearm market disruption.
For instance, data show that underground firearm markets, while often clumsy and inefficient, offer pathways for prospective offenders to access firearms. Imperfect law enforcement efforts that hinder these markets and provide some regulation to firearm access can correspondingly thwart criminal offenders and those vulnerable to self-harm from obtaining weapons (
Hasegawa, Webster, and Small 2019;
Crifasi et al. 2020;
McCourt et al. 2020;
Zeoli and Webster 2019).
Disparities in firearm access and use (e.g., between Boston, New York, and Los Angeles versus Detroit, Saint Louis, and Chicago) indicate the potential for effective nationwide interventions. These findings suggest that regulatory measures—expanded permit-to-purchase efforts and administrative capacity and budgetary resources for the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), among other organizations—may effectively reduce illegal firearm access within a legal national market. Even modest firearm injury and violence reductions might justify the efforts’ cost. ATF’s 2022 annual budget was roughly $1.5 billion; if doubling the budget disrupted the flow of firearms to high-risk offenders and reduced U.S. firearm homicides by 1 percent (roughly 200 homicides), the effort would be a cost-effective use of public resources.
The economics perspective also provides insight into where expanded enforcement efforts might best target underground firearm markets’ supply and demand sides. Many firearms used in crimes originate from a relatively small, potentially identifiable firearm retailer cohort and are distributed through social networks, rather than via gunrunners or organized crime syndicates. Focused deterrence strategies may limit illegal or foreseeably criminogenic sales by licensed dealers (
Wintemute 2010,
2013a;
Wintemute, Braga, and Kennedy 2010). ATF and other law enforcement agencies could increase efforts to deter indirect (i.e., straw) firearm purchasing and connected practices, particularly deterring intermediaries who facilitate illegal purchases across state and jurisdictional lines, as well as enforcing existing firearm transfer regulations. Increasing the expected costs of illegal behavior through fines and punitive enforcement may reduce illegal firearm sales incentives. As illegal weapons distribution and sale provide low profit margins in a relatively narrow market, even a small increase in detection probability and punishment could have significant effects.
The intersection of focused deterrence and behavioral economics provides a potentially beneficial avenue for future research. Conventional deterrence theory, as outlined by
Becker (1968), presumes that utility-maximizing individuals weigh the expected costs and benefits of criminal offenses (
Becker, 1968). If criminal sanctions and detection/arrest probability are well known, the optimal penalty is often severe. And while well informed, calculating, and risk-averse offenders may weigh their crimes according to the conventional model, economists and criminologists have long questioned the framework’s applicability in the violent crime context (
Cook 1980).
Recent behavioral economics insights also suggest that the traditional deterrence model may not optimally suit firearm policy evaluations. Experimental evidence and empirical observations indicate that market actors use cognitive heuristics to gauge the costs and benefits of criminal behaviors (
Cook, Parker, and Pollack 2015;
Crifasi et al. 2020;
Pickett 2018; Pogarsky, Roche, and
Pickett 2018), and straw firearm purchasers often misunderstand their arrest risks.
Beyond offense-specific thresholds, the behavioral economics literature suggests that additional punishments’ marginal value declines for many offenses. The research shows detection and punishment immediacy and certainty are more valuable deterrence components (
Nagin 2013). The components may also impose lower social costs than increased sentences, while being more popular among mass incarceration detractors (
Kleiman 2010; Pogarsky, Roche, and
Pickett 2018). Studies specific to firearm offenses, such as
Raphael and Ludwig (2003), make consistent findings, showing that enhanced sentencing-lengths for firearm offenders with felony records yields few additional deterrence effects (
Cook and Ludwig 2006;
Raphael and Ludwig 2003).
The behavioral economics framework suggests incremental improvements in perceived firearm violence detection and punishment probability—rather than increased punishment length—could significantly deter low-level offenders who may be poorly informed about the actions’ consequences. ATF and other agencies might specifically focus on deterring straw purchasing and connected practices to deter intermediaries from facilitating illegal firearm purchases across jurisdictional lines (
Braga et al. 2021).
The U.S. Congress’s bipartisan Safer Communities Act increased penalties for firearm trafficking and straw purchasing in 2022. Complementing the national campaign commonly known as “Don’t Lie for the Other Guy,” a public relations effort might leverage behavioral economics insights and publicize repetitive, vivid antifirearm messaging using imagery of apprehended corrupt or negligent dealers and straw purchasers. A visible increase in ATF funding, dealer audits, and other activities aimed at underground firearm markets might similarly increase perceived offense risks.
Last, in many settings and communities, individuals have strong incentives to acquire firearms for self-protection. The economics perspective on firearm violence suggests that this social ecology and its embedded incentives must change to reduce firearm prevalence. Incremental penalties and heightened law enforcement attention to firearm crimes may be helpful. Less punitive, harm-reduction policing of underground drug markets might also be beneficial, particularly when illegal activities do not involve violence (
Braga and Weisburd 2015;
Braga et al. 2021). Finally, economic development investments in communities plagued by firearm violence may also deter firearm acquisition by altering the decision calculus for the frequently young, low-income Americans who too often find that the benefits of possession and use outweigh the costs.