A review of basic microeconomic concepts relevant to criminal justice policy proposals considers supply and demand theory, the meaning of equilibrium, marginal costs and benefits, opportunity costs, discounting, risk preference, and optimization under conditions of risk and uncertainty. The author explains how the welfare economist determines the level of crime in a society, along with ways that policymakers have measured crime. An investigation of current literature on law enforcement planning focuses on the degree to which policymakers respond to evidence that supports the superiority of the welfare economic model and potential improvements that this approach could make in planning law enforcement policy. The author argues that cost-benefit analysis suffers from technical problems and that over-reliance on citizen and consumer preference may lead to policies incompatible with American political traditions and respect for human rights. Tables, approximately 150 references, and an index. (Author abstract modified)