Thou shalt not steal
Fri 23 Jul 2010 by Nigel Pinkerton.

Left unchecked crime would create winners (criminals) and losers (victims), a fact which has obvious equity implications.   But crime also has economic costs, not just to victims but to society as a whole.   The vast majority of crimes do not simply involve a transfer of wealth or enjoyment from one person to another, but a net loss to society.

Take property crime for example, which leads to inefficient allocation of resources.   If someone steels your TV, chances are they will need to pawn it off at a fraction of what it is worth to you.   Unlike voluntary trade, crime does not allocated goods to the people who value them the most.   

Because most people understandably take precautions against crime, theft usually creates collateral damage to property.   Consider the cost of broken windows, forced locks, and property that is taken but then discarded during escape.   An offender may cause thousands of dollars of damage in order to steal just a few hundred dollars worth of goods.   Think also of the amount of money spent on locks, security services and insurance premiums that would not be required if we lived in a more honest society.

Violent crime comes with its own set of costs such as injuries, hurt feelings, and quality of life impacts for the victims of crime.  Some psychologists dedicate their lives to figuring out what motivates offenders to commit crimes such as assault, rape, and murder.   But whatever the criminal’s motivation may be, the costs imposed on victims are huge.

Such huge costs provide a strong justification for spending money on fighting crime, but society’s resources are limited.

A police officer on every street corner would probably see crime all but wiped out, but there is a point at which the cost of eliminating some of the more minor crime exceeds the benefits.   At this point it is cheaper to compensate victims (or let them wear the cost) than to throw more money at trying to completely eradicate crime.

The politicians decide how much money will be spent on the police and the justice system.   Any perceived increase in violent crime is usually met by a promise for more police resources, otherwise policy makers face political backlash.   But politicians know that crime cannot be completely wiped out with current technology and resources.   Furthermore, the public have largely come to accept that the police have limited resources to deal with less serious crime such as minor thefts.

The police have a virtual monopoly on the use of force to fight crime, but there is still a lot that private individuals can do.   Burglar alarms have become increasingly common over the last decade or so as the costs have come down.   Many businesses and even homes now have security cameras and other equipment to protect their valuables.

If we can’t stop all crime then the next best alternative is to be able to catch the criminals, which raises the issue of punishment.   As an economist, I tend to take a deterrent rather than a retributive view of sentencing.   Those who have crimes committed against them or their loved ones understandably cry out for "justice".   But when forming a legal framework we should keep the end goal of lower future crime in mind.

Take the three strikes law for example, which has been widely criticised by legal experts.   It violates the principle that a more serious crime should carry a more serious sentence.   Marginal deterrence can be effective in stopping a less serious crime escalating.   An armed robbery can easily turn into murder or manslaughter.     If the criminal is on their third strike, they could already be facing a lengthy jail sentence if caught.   Killing the witnesses could in fact lower the probability of being caught and hence increase the expected return to their crime.

We may laugh at the notion that criminals are rational people who respond to incentives like the rest of us.   But for those without a strong moral compass, the decision to go through with a crime is generally based on the cost of getting caught, multiplied by the probability of getting caught, weighed up against the expected gain from committing the crime.

Of course most criminals don’t sit down and perform these calculations, gun at the ready, before deciding whether to commit a crime.   But the same could be said about going shopping, or engaging in risky activities such as adventure sports.   On some level we are always weighing up the expected costs and benefits of what we do.

We need to accept that crime cannot be completely eradicated with current technology and resources.     But with the right combination of policing, deterrents, and private efforts, we can minimise the harm caused by crime.

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