Crime Economic Costs

Objectives Analyze Crime as an economic problem Identify types of crime and associated costs/benefits Examine alternatives to crime C2 PO1e

3 Economic Costs of Crime Lost Return on Investment – Society loses return on money invested in criminal’s education (victims also possibly) Opportunity Costs – Society can’t spend prison money on other needs Financial Costs – Crime increases risk of doing business, owning home and therefore adds to insurance rates, security costs, cuts property value….

What are the economic factors behind crime? Funding Failures in mental health counseling – Majority of murders & assaults anger related Lack of neighborhood business leaders – Few training/role model opportunities Failures in educational outreach from schools – Teacher ever visit your house with good news? – 1 in 4 prisoners has a learning disability – 1 in 4 completed high school Low net worth of criminals and victims – 50 % of first felonies are before age 18 – 50% commit 3 or more felonies – Average career 15 years of crime – 65% unemployment rate after felony release

Types of Crime Property Direct Costs: – Replace stolen goods – Clean vandalized goods – Investigate crime – Prosecute Crime Secondary Costs: – Higher Insurance rates – Higher Prices at stores – Lower property value Violent Direct Costs – Medical Treatment – Counseling – Funeral Expense – Lost income to family Secondary Costs – Higher insurance rates – Higher levels of unemployment – Limits on employment options – Lower Educational achievement – Higher rates of depression and suicide – Higher rates of drug/alcohol abuse – Higher rates of homelessness – Higher rates of STD & abortion

Costs of Crime US 2.1 million in prisons (2009) 1 in 11 African-Americans in jail, 1 in 18 men 16.5 billion in costs/yr Lost income generation at minimum wage =31.6 billion/yr Total Cost 48.1 billion What could that buy? AZ 40,514 inmates (4-8-10) – 1 in 33 Arizonans – 83% 2 nd + felony conviction Cost to state = 1 billion/yr Lost income min wage= 84.2 million/yr Total cost $1,084,000,000 What could that buy?

That money could have been… US 24 Space Shuttles 8 fully armed USN aircraft carriers 16 million $3 school lunches 17 million gallons of $2.75/g 9.6 million Papa Johns 2 for $10 AZ Full Ride 4 yr Scholarships for 33,300 ASU

“Benefits” of Crime Minor offenders frequently get mental health and social skills training to help avoid crime. Some criminals become “white hats” to help law enforcement intervene in crimes Brings some temporary money into impoverished households

The Black Market Economic activity in illegal goods and services Estimated to be worth about $1.4 billion in untaxed economic activity, employing 2 million at least half-time Marijuana is the USA’s #1 dollar value agricultural product Stolen Music and Movies cost media companies $14 billion/yr

Reducing the Costs Given that crime is economically undesirable how can economics help solve the problems? – 1) – 2) – 3) – 4) – 5) – 6) – 7)