Earlier this week I was debating various topics to write a WallStreetOasis post about. I was having trouble deciding on a current event to write about. Then my car was stolen.
Therefore, this post is going to be about crime, how the economy plays a role in crime, and how people that steal cars (or anything really) are scum.
Anyone that's been a victim of theft or crime has likely had a moment of thinking, "Why didn't the police just do their job so this wouldn't have happened?". The LA Times had an article regarding crime and economics that included this quote:
The police have no more control over the economic and social forces that drive crime than doctors and nurses have over fluctuations in disease. No one holds the local hospital director responsible when rates of heart disease or diabetes increase. We understand that these conditions are influenced by lifestyle, nutrition, environment -- factors that transcend local boundaries. Crime is no different.
A senior economist from the Atlanta Federal Reserve's research department explains the prevalence of crime exactly how you'd expect an economist to, simply explaining in terms of supply and demand.
Criminals determine the supply of crime, the rest of society determines the demand for crime (protection), and the government affects both (directly on demand and indirectly through supply).
http://www.frbatlanta.org/filelegacydocs/zbecsi.pdf
(Lots of graphs for you to enjoy)
But is crime really that easy to explain? What about the criminals that get no economic or monetary benefit out of the illegal activities they choose? What would be a better system of preventing crime, considering our fully booked prisons seem to imply the reward of criminal activity outweighs the risk of jail time? In light of my recent experience, I find myself newly in favor of the old Islamic punishment (correct me if I'm wrong) for theft, in which a thief's hands are cut off. But hey, perhaps I'm biased.
I think it's a 'Freakonomics' type argument to lump all criminals in the same category and claim that they collectively mirror the economic conditions of the time. Under that assumption, one might think that your car wouldn't have been stolen in March of '07 when the housing market was roaring, because hey, the thief's emerging markets small-cap growth portfolio was probably killing it.
That being said, it's undeniable that crime rates augment in times/places of economic hardship. There's a reason the most affluent communities tend to be the safest (unless you consider ponzi schemes a crime), and conversely, why poor neighborhoods are hotbeds for illegality. With the exception of certain types of violence (domestic) and drug use, I feel like most crime is committed for ecnomic gain (indirectly or directly).
I think it ties in really closely with education, which someone else posted about last week. I think education and crime are very closely intertwined, and of course, the two are almost inseperable from the economy. Good economy = money for education, education = less crime. So, while I think that 'supply and demand' idea is largely thoeretical and will never actually get anything done, it's certainly true that tackling one or more of the aforementioned will lessen the crime rate.
This would probably be true now as well.
I think most everyone would consider ponzi schemes a crime
Money is the most common variable that married couples fight about. Those fight have a high propensity for escalation to domestic abuse if one party has a propensity for that type of behavior, so I would be careful about thinking of domestic violence as somehow insulated from being tied to economic rewards.
I don't think that this is necessarily accurate. In terms of education, I am pretty sure the literature tends to agree that this falls along the type of crime that it is and not crime in the aggregate. You don't see a lot of PhD students being arrested for armed robbery, but you also don't see a lot of high school drop outs being arrested for securities fraud. Part of the reason we have a cognitive bias in viewing "crime" in the aggregate as something that uneducated do is in part media representation and in part because the types of crimes that the more educated people are charged with are either nonviolent or do not carry the same penalties in terms of jail time. Instead, the more educated people could more probably afford a lawyer to get the charges reduced and only have to pay a fine or whatever. Also, they are simply less likely to get caught. A lawyer in a Mercedes is less likely to get searched if it is pulled over for speeding than a 17 year old in car that we associate with young urban lifestyles, though the probability for them smoking marijuana are pretty similar.
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