Editor's Note: Reason columnist and Mercatus Center economist Veronique de Rugy appears weekly on Bloomberg TV to separate economic fact from economic myth.

Myth 1: Incarceration rates in the U.S. are comparable to the rates in other industrial countries.

Fact 1: U.S. incarceration rates are significantly larger than those in any other liberal democracy.

In 2009, according to the Bureau of Justice Statistics, there were 1,524,513 prisoners in state and federal prisons in the United States. When local jails are included, the total climbs to 2,284,913. These numbers are not just staggering; they are far above those of any other liberal democracy in both absolute and per capita terms. The International Centre for Prison Studies at King's College, London calculates that the United States has an incarceration rate of 743 per 100,000 people, compared to 325 in Israel, 217 in Poland, 154 in England and Wales, 96 in France, 71 in Denmark, and 32 in India.

America's enormously high incarceration rate is a relatively recent phenomenon. According to a 2010 report from the Center for Economic and Policy Research (CEPR), U.S. incarceration rates between 1880 and 1970 ranged from about 100 to 200 prisoners per 100,000 people. After 1980, however, the inmate population began to grow much more rapidly than the overall population, climbing from about 220 per 100,000 in 1980 to 458 in 1990, 683 in 2000, and 753 in 2008.

Myth 2: The rise in the incarceration rate reflects a commensurate rise in crime.

Fact 2: Crime rates have collapsed.

Why are American incarceration rates so high by international standards, and why have they increased so much during the last three decades? The simplest explanation would be that the rise in the incarceration rate reflects a commensurate rise in crime. But according to data from the Federal Bureau of Investigation and the Bureau of Justice Statistics (BJS), the total number of violent crimes was only about 3 percent higher in 2008 than it was in 1980, while the violent crime rate was much lower: 19 per 1,000 people in 2008 vs. 49.4 in 1980. Meanwhile, the BJS data shows that the total number of property crimes dropped to 134.7 per 1,000 people in 2008 from 496.1 in 1980. The growth in the prison population mainly reflects changes in the correctional policies that determine who goes to prison and for how long.

Mandatory minimum sentencing laws enacted in the 1980s played an important role. According to the CEPR study, nonviolent offenders make up more than 60 percent of the prison and jail population. Nonviolent drug offenders now account for about one-fourth of all inmates, up from less than 10 percent in 1980. Much of this increase can be traced back to the "three strikes" bills adopted by many states in the 1990s. The laws require state courts to hand down mandatory and extended periods of incarceration to people who have been convicted of felonies on three or more separate occasions. The felonies can include relatively minor crimes such as shoplifting.

Myth 3: The drop in violent crimes is the result of "tough on crime" policies, particularly expanded prison sentences.

Fact 3: Only a small share of the drop in violent crime is the result of expanded incarceration.

For many, America's soaring incarceration rate and the drop in crime that began 20 years ago are connected. The theory is that if you punish people and make it very costly to commit a crime (expand incarceration), they will have an incentive to live a more virtuous life.

A good question then is whether or not tough sentences have accomplished this? Research by the Pew Center on the States suggests that expanded incarceration accounts for about 25 percent of the drop in violent crime that began in the mid-1990s—leaving the other 75 percent to be explained by things that have nothing to do with keeping people locked up.

If it wasn't incarceration, what caused the drop?

As Reason contributing editor Radley Balko explains, "There is no shortage of theories: Scholars have pointed to everything from the legalization of abortion to the prohibition of lead-based paints. Other theories credit America's aging population (the vast majority of criminals are under 30), President Bill Clinton's program to put more cops on the street, and either stronger gun control laws or an increase in gun carrying by law-abiding Americans."

He concludes:

More likely, crime scholars argue, we probably have less crime now not because of any anti-crime initiatives dreamed up by academics and politicians but because civil society has quietly churned out benefits independent of those policies. Basically, we are wealthier and the opportunity cost of being incarcerated is high at all level of income.

On that point, it is also worth reading this great piece by Reason Senior Editor Tim Cavanaugh about the drop in New York City's crime rate.

Contributing Editor Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.