GIVEN THAT THE APPROPRIATE GOAL FOR SOCIETY IS MINIMIZING THE TOTAL COST OF CRIME, TWO RADICALLY DIFFERENT ALTERNATIVES EMERGE: DEALING WITH THE CAUSES OF CRIME BY MODIFYING SOCIAL AND ECONOMIC CONDITIONS SO THAT ECONOMIC INCENTIVES FOR CRIME ARE REDUCED OR ELIMINATED; OR INCREASING THE DETERRENTS TO CRIME BY STRENGTHENING LAW ENFORCEMENT EFFECTIVENESS. THEORETICAL MODELS FOR TESTING A CONCEPT (BASED ON AN ADAPTATION OF THE ECONOMIC ANALYSIS OF CHOICE) THAT LINK ECONOMIC MOTIVATIONS FOR CRIME AND THE DETERRENT EFFECTS OF PUNISHMENT ARE DEVELOPED. THE FUNDAMENTAL APPROACH IS GENERAL IN NATURE AND MAY BE APPLIED TO MANY TYPES OF CRIME. HERE THE FOCUS IS ON ECONOMIC CRIMES (MAJOR FELONIES FOR WHICH THERE IS AN ECONOMIC MOTIVE), MALE OFFENDERS AGED 18 AND 19 (BECAUSE OF THE STRONGLY AGE- AND SEX-SPECIFIC NATURE OF THE CRIMES), AND THE APPREHENSION ASPECTS (AS OPPOSED TO PROSECUTION, ADJUDICATION, AND PUNISHMENT) OF THE CRIMINAL JUSTICE SYSTEM. THE ANALYSIS SUPPORTS BOTH THE INCENTIVE REMOVAL AND DETERRENT APPROACHES TO CRIME REDUCTION. A STRONG LINK BETWEEN ECONOMIC OPPORTUNITIES AND FELONY CRIME RATES FOR YOUTH IS FOUND. EXAMINATION OF LAW ENFORCEMENT PRODUCTION FUNCTIONS DEMONSTRATES THAT LAW ENFORCEMENT AGENCIES CAN BE ASSESSED WITH THE SAME TOOLS USED TO EVALUATE THE PERFORMANCE OF AN INDUSTRY. SIMULTANEOUS EQUATION ANALYSIS CONFIRMS THE EFFECTIVENESS OF LAW ENFORCEMENT ACTIVITIES IN PROVIDING A SUBSTANTIAL DETERRENT EFFECT. IMPLICATIONS OF THE ANALYSIS FOR POLICYMAKERS ARE DISCUSSED. SUPPORTING DATA, MATHEMATICAL FORMULATIONS, AND A LIST OF REFERENCES ARE INCLUDED. (LKM)