How is the economy related to crime?

economy : Economy and Crime: A high crime rate affects growth

Murder and manslaughter, extortion and theft - why should an economist grapple with these issues? Aren't legal experts, sociologists and psychologists responsible for this? Not only, says Horst Entorf, Professor of Econometrics at the University of W├╝rzburg. In his view, there is more than one good reason why economists should also examine the causes and effects of crime. "There are many indications that crime has direct economic causes - such as poverty, unemployment and an unequal distribution of income," Entorf explains his assessment. In addition, crime causes considerable economic damage. The "optimal" fight against crime is therefore a classic economic problem.

Like many other human behaviors, economists also use rational calculus to explain crime. The impetus for this came in 1968 from the US economist and later Nobel Prize winner Gary Becker. His core thesis is: "A person becomes a criminal when the expected benefit derived from the criminal act outweighs the benefit that he could obtain from an alternative use of his time and other resources." Criminality as a result of rational calculation - Becker met with criticism with this provocative thesis - this explanation is too economic, too one-dimensional. Entorf would also consider it wrong to use them alone. Nonetheless, a number of empirical studies have shown that the expected benefits of certain criminal offenses actually have an impact on the frequency of the offenses. In Becker's model, this expected benefit depends on three variables: the income the potential criminal can earn from his crime, the likelihood that he will be convicted for it, and the amount of the sentence. The higher the risk of conviction and the higher the sentence, the less "attractiveness" of a crime. Becker's conclusion: The crime rate can be reduced by a high clearing-up rate and a high level of punishment.

Entorf has empirically corroborated this thesis for Germany: The number of criminal offenses will decrease by three percent if the clearing-up rate increases by ten percent. Entorf and his doctoral student Hannes Spengler from the Center for European Economic Research (ZEW) in Mannheim prove this connection in a study that has now been published for the EU Commission. It contains no fewer than 36 indicators whose influence on the crime rate has already been proven in empirical studies. Demographic influencing factors, for example, are quite clear. Young men between the ages of 14 and 25 commit a particularly large number of crimes. There is also good evidence that poverty, a high unemployment rate and unequal income distribution promote crime.

At least as important for the two economists is a rather non-economic factor: the lack of stability in family ties. The crime rate increases significantly as the divorce rate rises and the proportion of single parents increases. And finally: a one percent increase in the female employment rate increases the number of robberies by 1.3 percent. The authors recommend more intensive out-of-school childcare.

Economists find it difficult to quantify the absolute cost of crime. On the one hand, there are factors such as the victims' immediate loss of property or the costs of their medical treatment, but also what the state spends on combating and preventing crime. But how should one measure the economic losses that result from the fact that crime victims are no longer able to work or suffer incurable psychological damage? Most economists estimate the cost of crime to be four to six percent of gross domestic product (GDP).

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