US Crime Trends: The Role of Inflation Richard Rosenfeld University of Missouri – St. Louis USA

The Great Anomaly: Crime Rates and the Great Recession of 2008 Crime typically rises during economic downturns and falls during recoveries US crime rates fell during the 2008-09 “Great Recession” Why did crime rates not respond to the recent recession as they had in the past? The role of inflation

Was the Great Recession Different? Unlike in previous recessions, inflation rates at historic lows Prices dropped in 2009 for first time in over 60 years Impressionistic evidence of inflation – crime connection 1930s: price deflation 1950s: low inflation 1960s: rising inflation 1970s: stagflation Falling crime rates Rising crime rates

Prior Research

Price Revolutions and Crime Over Time Four major inflation epochs Medieval price revolution (1180 – 1350) Sixteenth century Eighteenth century Twentieth century Each price revolution followed by a period of “equilibrium” – falling or stable prices Crime and disorder rise during price revolutions and decline as prices equilibrate Source: David Hacket Fischer, The Great Wave: Price Revolutions and the Rythm of History (New York: Oxford, 1996)

The Contemporary Period Scattered studies of inflation effects on crime All show significant positive effect Little theoretical development Why does inflation matter? How does inflation differ from other indicators of economic adversity? More widespread More immediate Closer relationship to demand for stolen goods

Inflation and the Market for Stolen Goods Supply Offenders sell or trade goods they do not consume or give away Offenders respond to incentives, including demand for stolen goods Demand Consumers “trade down” as prices rise Stolen goods are “inferior goods”: demand increases as prices rise (or aggregate income falls) Acquisitive crime rises with increases in demand for stolen goods

Inflation and Acquisitive Crime Rates in the USA, 1960 – 2012

Great Recession

Do Inflation Effects on US Crime Rates Withstand Controls for Other Economic Indicators?

Current Study* Effects of multiple economic conditions on US property and violent crime rates, 1960 – 2012 Exploratory model averaging Unemployment Real GDP per capita Real household income Consumer sentiment Inflation Controls Imprisonment rate Age 15-24 Quadratic time function Short and long run effects Error correction models Forecasting future crime rates *Rosenfeld, Richard, and Aaron Levin. 2016. “Acquisitive Crime and Inflation in the United States: 1960 - 2012.” Journal of Quantitative Criminology (Online: DOI 10.1007/s10940-016-9279-8).

Single Equation Error Correction Modela Δyt = a + b0ΔXt + b1Yt-1 + b2X t-1 + et Error correction rate Short run effect of X Long run effect of X Total long-run impact of X (long-run multiplier) = b2 / - b1 a Adapted from Best (2008)

Forecasts

Does the Drop in Inflation Explain Why Acquisitive Crime Rates Fell During the 2008-09 Recession? Acquisitive crime decreased by 5% between 2008 and 2009 or by -183 crimes per 100k Inflation fell from 3.8% in 2008 to -.4% in 2009 Predicted change in acquisitive crime given the change in inflation (all other variables at their means) = -197 crimes per 100k Had inflation remained unchanged, the predicted change in acquisitive crime = -17 crimes per 100k

Diagnostic and Sensitivity Tests

Crime and Inflation in Europe* European robbery and burglary rates have declined since the mid-1990s Inflation rates in Europe track those in the USA and have converged across nations Robbery and burglary reductions significantly associated with declining inflation in Europe *Rosenfeld, Richard. 2014. “Crime and Inflation in Cross-National Perspective.” Crime and Justice 43: 341-366.

Outstanding Issues Does inflation condition the effects on crime of other economic indicators? Does inflation influence other conditions related to crime (e.g., family disruption, alcohol and drug use, criminal justice spending)? Is violent crime linked to inflation, directly or indirectly through acquisitive crime? Measuring the missing link in the relationship between crime and inflation: change over time in the price of stolen goods Have the US and Europe entered a new period of equilibrium after the price revolution of the twentieth century?

Further Reading Arvanites, Thomas M., and Robert H. Defina. 2006. Business cycles and street crime. Criminology 44: 139-164. Blumstein, Alfred, and Joel Wallman, eds. 2005. The Crime Drop in America. Revised edition. New York: Cambridge University Press. Cantor, David, and Kenneth C. Land. 1985. Unemployment and crime rates in the Post-World War II United States: A theoretical and empirical analysis. American Sociological Review 50: 317–332. Chiricos, Theodore G. 1987. Rates of crime and unemployment: An analysis of aggregate research evidence. Social Problems 34: 187-212. Cook, Philip J., and Gary A. Zarkin. 1985. Crime and the business cycle. Journal of Legal Studies 14: 115–28. Easterly, William, and Stanley Fischer. 2001. Inflation and the poor. Journal of Money, Credit, and Banking 33: 160-178. Ehrlich, Isaac. 1973. Participation in illegitimate activities: A theoretical and empirical investigation. Journal of Political Economy 81: 521-565. Gould, Eric D., Bruce A. Weinberg, and David B. Mustard. 2002. Crime rates and local labor market opportunities in the United States: 1979-1997. Review of Economics and Statistics 84: 45-61.

Reading, cont. Grogger, Jeffrey T. 1998. Market wages and youth crime. Journal of Labor Economics 16: 756-791. Lauritsen, Janet L., and Karen Heimer. 2010. Violent victimization among males and economic conditions. Criminology & Public Policy 9: 665–692. Raphael, Steven, and Rudolf Winter-Ebmer. 2001. Identifying the effect of unemployment on crime. Journal of Law and Economics 44:259-283. Rosenfeld, Richard. 2009. Crime is the problem: Homicide, acquisitive crime, and economic conditions. Journal of Quantitative Criminology 25: 287-306. Rosenfeld, Richard. 2011. Changing crime rates. In Crime and Public Policy, edited by James Q. Wilson and Joan Petersilia. New York: Oxford University Press. Rosenfeld, Richard and Robert Fornango. 2007. The impact of economic conditions on robbery and property crime: The role of consumer sentiment. Criminology 45: 735-769. Rosenfeld, Richard and Steven F. Messner. 2009. The crime drop in comparative perspective: The impact of the economy and imprisonment on American and European burglary rates. British Journal of Sociology 60: 445-471. Sutton, Mike. 1995. Supply by theft: Does the market for second-hand goods play a role in keeping crime figures high? British Journal of Criminology 38: 400-416. Venkatesh, Sudhir Alladi. 2006. Off the Books: The Underground Economy of the Urban Poor. Cambridge, MA: Harvard University Press.