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Economical Crime Control: Perspectives from Both Sides of the Ledger

The surge in incarceration since 1980 has been fueled in part by the mistaken belief that the population can be divided neatly into "good guys" and "bad guys." In fact, crime rates are not determined by the number of at-large criminals, any more than farm production is determined by the number of farmers. Crime is a choice, a choice that is influenced by available opportunities as much as by character. This perspective, drawn from economic theory, supports a multi-faceted approach to crime control. Dr. Cook's presentation includes examples of effective programs and policies from both sides of the ledger — both people-changing, and opportunity-changing.

Dr. Philip J. Cook, ITT/Sanford University, Professor of Economics and Sociology, Duke University

Philip J. Cook: He had just published his article and it was already immediately a hit. And what I think is not understood widely is that it's a normative article; that is, his main interest is in the question of how many resources and how much punishment should be used to enforce different kinds of legislation. So, he's already putting this into an evaluation framework and saying — pointing out that it's quite possible to have too little crime, that is, to spend too much on crime control and that in any case we should be balancing different considerations and making judgments about how much to put into it.

The other thing that he did, which I — and I think this is a question that was not being asked by criminology at the time, by the way — but the other thing he did to distance himself and distance the field subsequently from criminology was — as part of his introduction, he says a useful theory of criminal behavior can dispense with special theories of anomie, psychological inadequacies, or inheritance of special traits and simply extend the economists' usual analysis of choice.

So, it was kind of a backhand swipe to the entire field that did away in one sentence with sociology, psychology, and biology and all of those approaches and said that's all easily dispensed with; we can pick up where we left off.  And where did we leave off? 

Well, it's with Bentham in the 18th Century. So the British philosopher, moral philosopher and utilitarian. And in fact if you look at the references in Becker's article, you'll see the only person who might be called a criminologist who's cited is Jeremy Bentham in that whole article.

So, and this, by the way, is a picture of Gary Becker dressed up to receive the Nobel prize, so he's gone on to good things, and there's a certain similarity between the two of them [laughter], which struck me in looking at these two pictures along the way. OK.

All right, so let's get personal about this and say that, you know, I have been working on this a long time, as John hinted, at least 40 years. And I've been researching — among other things — but I've been researching crime and crime control, and so the question comes up from time to time in my own mind — is am I a criminologist? And, you know, the fact is that I don't know of any economists who call themselves a criminologist. And the criminologists never refer to me or anybody who has a Ph.D. in economics as a criminologist. And so if there's a mixed gathering of some kind, you'll say yes, this is a group of criminologists and economists where even though the economists may be spending their entire career studying crime, they have not made it into this.

And my personal experience of, for example, the ASC meetings is — has some of the same feeling that I have when I'm in Chapel Hill hanging out with Tar Heel fans [laugher], you know, that if they're being polite they won't say anything.  They just scowl, but sometimes you can overhear some really nasty commentary.

And whether that's the reason, the response, or the reaction to Gary Becker's initial move in this area of saying, "the hell with all of this, or what, I don't know, but it's a curious fact that there has been kind of this mutual hostility and distancing.

But there are what I would consider hopeful signs. Some of what's going on here is that the economists are becoming more and more invested as a group in the study of crime. It used to be when I started on this that there would be dabblers, the economists who occasionally would turn their mind to that. But now there are young economists who spend all of their time essentially working on crime and crime control.

Jens Ludwig and I and Justin started a working group within the National Bureau of Economic Research that's dedicated to the study of crime, and incidentally we bring in people who do not have Ph.D.'s in economics, because we see this as a chance to learn from each other. Economists are often naive about the data sources and about the institutions that they're writing about and have, again, often bypassed a lot of things they should know, and so there's a lot of mutual exchange that goes on there.

The University of Chicago Crime Lab that Jens Ludwig started and that I helped direct is certainly a very pragmatic effort without regard to discipline to evaluate alternative approaches to crime and control, and it brings in a variety of people in that area.

I just was down in Santiago, Chile, in a meeting with the Latin American economists, and they started a group that has the acronym AL CAPONE.  And AL CAPONE is a group of South American and Caribbean economists who are spending their careers studying crime, which is a very big issue in South America, needless to say.

And then, you know, the same thing is happening in Europe.  There's a lot of energy around economics and crime there, a number of meetings I've been to.  Vera Institute of Justice just started a cost benefit analysis group, and if you are familiar with the journal, Criminology and Public Policy, you'll see that on a routine basis economists are publishing in that, which is not true in Criminology magazine or the others. Although I am the only one of 50 members of the editorial board who has a Ph.D. in economics I think. So, we're not quite there yet. But it's moving.

There's other things. You know, John Jay College has an economics department, and so I think that there is this kind of gradual move of integration and embrace that I can only see as a good thing.

OK.  So, that's part one about what's going on and the awkwardness of being an economist, often hanging out with criminologists.

The second thing I'd like to talk about is what I'm calling this "economistic framework for crime control and picking up on Becker's idea of saying what is the normative issue here? What's the "should issue? And that what Becker pointed out in his article is, sure enough, crime is costly but also crime control is costly, and that the social cost is the sum of the two. So, very simple idea. I don't think anybody would argue with that particularly. You could expand on that, and say let's also talk about the distribution of those costs, and the first thing that you notice is that distribution of crime control costs falls very heavily on, for example, young minority men who lack much education.

If you ask what's the distribution of crime costs, it falls very heavily on poor neighborhoods of cities, and in fact, there's a good deal of overlap between the two of them, and so if we're talking about reducing either one or the other, we're talking about a program that is likely to have a disproportionate effect on people with less education and less income and neighborhoods accordingly.

Asking the question or posing it this way, then, leads us to say well, then, how much crime control is too much? And of course the efficiency question, which is some crime control is more effective and more cost-effective than others, and how can we achieve the current level of crime control or, even better, at lower social costs? What are the possibilities in this area?

And I think that these questions are very much on the minds of the state legislators right now, that this is a set of questions that deserves an answer and that we set out to answer with a book that we didn't.

All right, so let's take a look at the equation in red there and remind ourselves what's been happening over, say, the last 30 years in these two areas. I think for most of you this will not come as a surprise, but the first thing — what's happening to crime and the direct costs of crime, and the answer is this phenomenal reduction. This is from the National Crime Victimization Survey and chose the draft that began around 1980, where, according to the NCVS, the current property crime victimization rate is about 20 percent of what it was in 1980. So, we have had a revolutionary change in the amount of property crime.

If you look at the same graph for violent crime, what you will see is that the drop doesn't start that soon. In fact, it starts in 1991 about 11 or 12 years later, but it also has had a remarkable reduction since that time. The cities are far safer today than they were 20 years ago along the way. So, if we're looking at the first part of the equation, the direct cost of crime, we would of course conclude that there has been an extraordinary reduction in the direct cost. But, remember, there's this other half to the equation, and that is the cost of crime control.

Unfortunately, this diagram is very dim, taken from the BJS, and so it's available to you. It's showing you the combined expenditures — local, state and federal — divided accordingly between the courts and the corrections and police.

Where we end up at the end of this period, which is around 2007, is so three numbers that you might want to carry around with you as the per capita cost. The per capita cost. You want to multiply all these by 300 million to get the total. So, it's at 150, 250 and 350. That's how it works out. So, $150 for the courts, $250 that we're spending on corrections and $350 that we're spending on police, adding up to a total of $750 per person.

OK, so that's where we end up. But if you look at this sequence, it goes back to 1982, so about the same period of time that I just showed you. But, of course, what is remarkable about this is the growth in all three of those.

Now, that is real. So, it's adjusted for inflation. These are all 2008 dollars. It's adjusted for population growth. This is per capita. So, what you're seeing here is that the police expenditures per capita in real terms have doubled during this 30-year period; the courts' expenditures have nearly doubled; and the corrections' expenditures have more than doubled during that period.

And, you know, there are lots of things to be said about that. One is that — of course there's, rightfully so, tremendous attention that's been given to the prison population and the growth in prisons during this time, but that's the middle line.  And those other two lines are growing almost as fast as the corrections cost during this period.

So, if you want to ask what's going on in terms of the cost of crime control, this begins to give you an answer about that in terms of public expenditures. Now, what's missing from this is all of the personal costs for the people who are caught up in the system as prisoners or as defendants and the private costs and the imposition on them. So, the true numbers in terms of the public response to crime would be far higher than that.

Of course, the other thing that's going on during this period is that the private sector is spending a lot of money on crime control, too, and that certainly is part of Becker's formula. So, we can't just limit it to the public expenditures but also have to look at the private. Unfortunately, I don't have dollar figures — and it would be hard to calculate — but I think any reasonable guess is that the total private expenditures are considerably larger once you include all of the efforts of prevention and avoidance that we all make on a daily basis, including the problems of getting into this building and how much that's costing.

All right, so what this graph is showing you is only that on a per capita basis we see the private security, the number of people working in private security. The red line is at all points in this period higher than the number who are police officers, and in fact it's growing slightly faster. But both of them are growing during this period. And so that's a slice of what's going on with the private costs.

All right, so what's the bottom line then in the Becker formula? The first thing — absolutely, crime has dropped; the direct costs of crime have dropped. But crime control costs, both public and private have increased during this period. And we can actually pose the question: Is the crime problem greater or lesser than it was in 1980?

So, I mean, that becomes the true bottom line on this issue, right? That if we had less crime but we have it at a great cost to other activities, whether it's education or money available for private expenditures, then what have we accomplished? And so while I can't tell you the answer to that, I would just say that it's a question that should be on the table, and it highlights the point, which is that, again, the social costs of crime must include the costs of crime control. Something we need to keep in mind.

OK, so let's move on, now, to the third topic that I wanted to talk about, and that is now not a normative topic but rather the behavior and how economists might want to talk about the question of crime commission and crime control as a behavioral issue — certainly the strong feelings, as Becker pointed out right from the beginning.

And what I wanted to say here,  there's a complex interplay here, so on the one hand we have what you might call the character and capability side of the equation. You might think of this as supply. Economists are not reluctant to talk about supply and demand. Here's a supply of offenders, the potential criminals and what their characteristics are, the propensity to commit crimes. On the other hand, we have the environment of opportunities, what the potential criminals find as options that are available to them when it comes to committing crime — and to doing other things, which might also influence how much crime they commit.

And then I think it's useful to separate out the criminogenic commodities as a set of markets that are also important to pay attention to. Criminogenic commodities, your choice but it would include alcohol, drugs, guns and possibly some of the popular culture — anything that you might think would increase the criminal propensity or reduce it.                        

OK, so that's the basic bookkeeping setup here, OK, that we have these three areas that you might want to pay attention to, that if you're going to be talking about crime control and criminal behavior, good to keep track of all of this along the way in the search for more efficient approaches in this area.

Let me start with the first one and talk very briefly about that — the character and capacity issue and as a matter of crime control, what might we do here to shift the supply along the way. Lots and lots of possibilities have been suggested, but a lot of us believe had more or less good evidence associated with them.

Getting the lead out of gasoline, according to some studies, has reduced crime rates by leading to healthier brain development in children. Certainly, competent parenting, the preschool education, the supplements to parenting, if you will, has some promising results, going back to the peri-preschool idea.

There's some research on family income support that suggests that families win the lottery, for example, of a Chicago housing voucher and therefore have a higher standard of living, that the adolescents in the family commit fewer crimes following that, suggesting that just giving people money might be effective — giving families money.

Certainly, lots of promising results on cognitive behavioral therapy and systems therapy interventions as a tertiary response.

And fascinating, fascinating literature on simply raising the school leaving age, that a number of states have done that. North Carolina's at 16, but in a lot of states it's 18, and economists have studied what has happened when states have increased the age from 16 to 17 to 18. And what they've found is that those cohorts that are directly affected by that increase commit fewer crimes over their lifetimes than the ones who were under the previous regimes. This research has been replicated in Britain where they have also had major changes in the school leaving age and with the same result.

So, I think a lot of us would say come on, you're kidding me about this. Can it really help to take kids that are disaffected and force them to stay in school another year or two? And the answer's yes, as a group it does help. All right.

So, this is a very fertile area, very familiar area for intervening. The problem is that often the discussion starts and ends here, and it says just the character — that's what we have to worry about. If we have a lot of crime, it's because we have a lot of bad kids. In fact, you know, it's easy to kind of fall into this language that basically takes the view that there is a neat division of the general population into good guys and bad guys, and our job is to do something to the bad guys to make them into good guys, or else to lock them up or to deport them.

And so that's, I think, a conversation probably we've all been in a number of times, and it has, in an extreme form, the implicit formula that says the crime rate is always just a multiple of the number of bad guys that are at large, that they're not in prison.

This reached its kind of nadir, depending on your view of it, during the 1980s and early 1990s when we had the epidemic of youth violence. And we had very prominent commentators who were offering an explanation of what was happening during that time — John Dilulio and William Bennett — and that their explanation was the super predator. They said what's going on here is that we have a generation of young men who are growing up without appropriate parenting in neighborhoods that are filled with crime and they are learning from that to be remorseless killers and so that what we see is a lot of killing; the reason we have a lot of killing is because we have a lot of killers.

Now, this has a kind of plausibility to it, and it's very simple. It's like saying the reason we have a lot of wheat production in the U.S. is we have a lot of wheat farmers, and it has the same kind of intellectual satisfaction that that explanation has to it. But at the time, it was enormously influential, and it led to revision in one state after another and the juvenile waiver laws and other things, because the view was these kids are incorrigible, the only thing we can do is lock them up.

And one of the various projects that John and I did together was to actually try to analyze this by looking at some very simple graphs, just looking at different cohorts, and what we were able to demonstrate is that those cohorts that got caught up in the surge of youth violence in the late 1980s, they all got caught up together, and in fact if you looked at their younger years they were perfectly normal. If you look those same cohorts later in life, after the epidemic passed, they went back to being normal. There was nothing unusual. There were no super predators in sight any more than there ever is. What there was, was some environmental shock that occurred during that time.

Now, of course, what we believe that environmental shock was was the crack epidemic along the way. But the idea that it was bad kids were the explanation for that has been very popular — various articles we've written and I've written at other times have documented this theme — what's the matter with kids today.  It's come up over and over again for the last hundred or two hundred years in the literature.

OK, so the answer is: Character is not destiny, and the character and capabilities of the youths do not determine the crime rate, that in fact crime is a choice and the choice is influenced not just by character but also by opportunity.

One result that we had was that during that crack epidemic, if you looked at the homicide victimization rate, for example, for youthful African-American men in Washington, D.C., it increased by a factor of 10. And nothing particularly had changed in terms of character or upbringing or circumstances for these kids except that they were now in a different environment. And that environment took those same youths and multiplied the number of killings by 10.

So, when I say crime is a choice and is influenced by the environment, I'm saying this is not a marginal issue; this is a huge, potentially huge factor in terms of determining actual observed crime rates over and beyond, on top of character, upbringing and all the rest of it. You have to have both sides of the picture, and all of the work you can do in investing and making kids better. Make beef or nothing as the environment has been.

So, what do we do to curtail the attractiveness of criminal opportunities? Certainly we have Mark Kleiman in the audience, and I don't need to say much about deterrence, but the gold standard there is swift and sure from the time of Becker, [Unclear] forward, that that has been the wisdom that severity is much less influential in deterrence. And what Mark, particularly, has done is shown how that can be built into the design of criminal justice policies to make them much more cost effective.

And I think of course it's also important to increase the stake. In straight society that can be a deterrent. We can talk about that later.

Intoxication leads to bad decisions, so my own work has focused a lot on alcohol in particular and how raising tax and reducing availability has a direct effect on crime. We've been able to demonstrate that.

And then, finally, the role of private actors I think is really important in this area and relatively neglected as a source of curtailing criminal opportunities.

All right, so let me just then turn to that final topic, which is private action as a way of controlling opportunity that's available to potential criminals. And what I'd like to do now is to talk generally about this but also talk some about the original research that I've done mainly with John MacDonald, who's the chair of criminology at Penn.

So, the private action — as I say, it often gets neglected, but we all know about situational crime prevention, and there's a debate that always come up around situational, that is, target hardening, for example. What — the evidence on that is often that there is much less displacement than you might guess. And I think that one reason is that if you say well, what stuff is really being protected? The answer is it's often the most valuable. If you go to a jewelry store, for example, the costume jewelry is sitting out on top of the counter on a stand that anybody can play with. The good stuff, the diamonds and the gold, are behind locked glass cases, and the only way you get to handle them is if you ask a clerk to bring them out.

Now, what the effect is there is to remove essentially the possibility of the theft of the good stuff and to make theft from jewelry stores a good deal less profitable overall. It seems like by cutting off that possibility, it's not likely to produce a lot of displacement.

The other thing that private citizens do is they provide vital inputs into law enforcement, and the system just doesn't work without that. There is a co-production process, and it starts with reporting crimes and it goes on to acting as witnesses, providing evidence at every step in the process.

So, those are the two areas that I think should be on the table in any discussion, and that's what I want to talk about.

What MacDonald and I did was a case study of private action looking at this peculiar institution of the business improvement district. You know what a business improvement district is?  Is that — I didn't before I got involved in this.  There's maybe 800 or 1,000 of these in the U.S. They get organized as nonprofit organizations, usually of merchants, in a particular neighborhood of a city, and they — what they do is tax themselves voluntarily to provide services just to the members and to the particular neighborhood that they're in.

The goal in Los Angeles at least was typically that they wanted their neighborhood to be safe and clean. Those were the watch words that they were using, although they also spent some money marketing their neighborhoods to shoppers and doing that kind of thing.

Most of them — most of the ones that we looked at in Los Angeles were spending some money on private security. The Hollywood Business Improvement District was spending over a million a year in hiring ex-LAPD, who actually were wearing guns and the whole thing.

So, that was a high priority — was crime control and making those areas safer. And what we set out to do was find out whether it was successful, and one thing that I learned along the way was that California paves the way for the creation and effective operation of business improvement districts by allowing a petitioning process so that the — and if it's successful, the city then acts as this voluntary tax collector. So, it's no longer voluntary is what it amounts to, and free-riding goes out the window. In fact, the merchants who are in that neighborhood get a tax bill from the city, that has the addition of the payment that they have to make to the business improvement district, which the city that transfers to the NGO along the way.

All right, so we looked at the 30 that were created during that seven-year period, and we had annual data on reporting districts, which are allowed 2,000 people each during that period. And this gives you some idea of what we were looking at. The business improvement districts were created in high-crime neighborhoods. That's the black line on top, but it's going down everywhere. It's going down faster in the areas that have the business improvement districts. And what we ended up doing was a regression analysis that was controlling for the area and for the year by division, and this is what we got.

Now, what you'll see here then, again, for these reporting districts is that for every — the far right-hand column — for every $10,000 that is spent in a particular district on security, there are a little over three crimes prevented per year, including kind of half a robbery, half an assault, and half a burglary. 

So, that was the kind of dose response that we were seeing in this area, and the question is: Is that worth it?

And we went ahead and used Mark Cohen's estimates about the value of crime. I won't go through this, but this is a very quick lesson in how he went ahead and estimated the value of a robbery or the value of an assault to the public using a willingness-to-pay measure.

And so how do we value a robbery prevented? Well, according to him, the public would pay a total of $263,000, a little more than half a robbery prevented for 10,000, and so that gives us a $155,000 of social cost savings. And we can do the same thing for assault and for burglary. So, this is in the spirit of doing a cost-benefit analysis, and if you add it all up, it turned out to be $200,000. So, $200,000 worth of crime prevention for every $10,000 they spent, the benefit- cost ratio of 20.

Now, I'm sure some of you are thinking well, this calculation leaves out X, Y, Z. So, let me give you this X.

So, what we're looking at is simultaneously some bids that spend nothing on private security and then others that spend the positive amount, and we just insert in a linear fashion how much they spent and then look at the coefficient on that as the basis for doing it. So, if it's nonlinear then we're not going to pick that up.  OK.

So, are we ignoring some costs? Let me talk about that briefly.

One, again, the old chestnut, is there displacement? Are these business improvement districts driving crime next door? And so we looked next door. We had the data on the reporting districts that were outside of the BIDS but nearby, and we found no evidence at all that there was any increase in crime in those areas.

Maybe a more compelling question is whether the arrest rate is going up, because you could imagine the way these private security officers operate is if they see a crime, they mobilize the police and maybe even hold the suspect with the result of the arrest might increase, and it's that kind of deterrent through increased arrest rate that is accounting for what's going on. And what we actually saw was just the reverse, that the arrest count is going down in the business improvement districts.

So, what we came to understand, and this, is it's really kind of this direct deterrent of having the private security officers patrolling that is doing the job. It's not going through an increased arrest rate along the way. And as a result, the city is saving a lot of money directly, because they have fewer arrests to process.

And there may be other concerns that we could talk about. I presented this set of results at the Harvard Law School, and the law students hate the idea of private security. So, we can chat about that if you would like. All right.

If we add it all up we say it's certainly passing a cost-benefit test. We could ask:  Are there equity concerns that the merchants who organize somehow end up with safer areas than those that don't?

The other thing that could be said, though, is that those merchants decide to stay in the city because they're safer; otherwise, they would have moved to the suburbs, if that makes sense in Los Angeles.

And then we could ask: Well, what's the policy implication of this? It seems like a good thing, how do we encourage it? And I think the answer is not every state has what California has in terms of organizing these business improvement districts and solving the free-rider problem so that the state law could be changed to encourage the creation of these.

There's kind of a fascinating question about whether the private security officers are more or less effective than just having more police. And I would be glad to talk about that. I don't know the answer. You all may well have some ideas about that. I mean, on the one hand you could say that the police have many different functions, not just protecting the property of a particular group of owners. And so they're constantly distracted by, you know, taking — manning the parade or whatever else they have to do. And the private security are very focused, so it could be that they're actually more effective in that sense. And what we conclude about private action — it seems like it could be very important. I've gone on to look at other examples of private action. I keep track of what's going on with auto theft. You all have heard of immobilizers? Immobilizers is a new locking device that is essentially a hundred percent effective in foiling theft. And about 85 percent of all vehicles in the U.S. are now equipped with an immobilizer; in Europe, it's a hundred percent by mandate. And these immobilizers have eliminated joy riding. They've eliminated teenage theft of new models unless the car has a key in it. And that's basically the only way to do it. There are a few very high-tech criminals that have devices that seem to be able to interact with the immobilizer and get the car started, but ordinary people can't do that.

So, this is just a high-tech — you know, you ask why has the auto theft rate declined while the number of vehicles has doubled over the last 30 years, and I think that this is part of the answer, and some evaluation work in Europe would confirm that.

And then, finally, I wanted to talk just a little about the private co-production process, another arena for private action where you have the obvious fact, that the criminal justice system is effective only to the extent that it has the voluntary cooperation of the public, beginning with reporting to the police. And maybe less well known is the fact that we have seen an extraordinary increase in the propensity of people to report to the police over the last 30 years.

Let me show you this. The top line is from the NCVS where they ask people who report that they were victimized whether they reported it. And there's some upward trend in the burglary rate but not much during this period.

A much stronger upward trend comes if you ignore what people say about whether they report it, but take their response about victimization seriously and then ask what's the ratio of residential burglaries known to the police as reported in the uniform crime reports.

Two, the number of residential burglaries reported in the National Crime Victimization Survey, and as you can see, a very strong increase with that little dip at the point where the reworking of the NCVS.

We see the same thing for motor vehicle theft. A very strong upward trend in the number of thefts known to the police during this time. And, in fact, if you're looking at the left-hand margin, what you'll see is a number in the UCR greatly exceeds the number reported in the NCVS these days. So, it looks like 120 percent of motor vehicle thefts are being reported to the police and you think, ugh, that's not looking so good for the Victimization Survey. But, you know, that might be fraud. Who knows? I mean, maybe it's true, or it might be all of the people who, you know, at 2 a.m. on Saturday can't remember where they parked their car, so they reported it as stolen and then it turns out it was in a different parking lot or something.

But the important thing here, again, is this very strong, upward trend. What's going on here? Well, if you look at the surveys, they show that people's trust in the police during this period have gratefully increased. Greatly increased. I mean, it's been a revolutionary change in people's view of the police. That might be part of it; otherwise, I don't know, but it sure looks like a good thing for crime control, because the first step in acting effectively against crime is to know about it.

All right, what can we do to increase crime reporting and participation? Lots of private incentives along the way, which I go there — here. I think it's haphazard; it's spotty; and we don't have a systematic policy in this area, and we should be thinking about that.

The best example that some of you might be familiar with in terms of citizens providing information to the police. It comes with LoJack, which was evaluated by Ian Ayres and Steve Levitt years ago. And LoJack, you know, is this device hidden on a car that can be switched on from a police station and will tell the police where the car is even if it's under a roof, and they had been able to use that in cities that have support for LoJack to track down chop shops and shut them down and generally to make life hell for whatever car thieves are left now that we have immobilizers. So, that turns out — at the time we didn't have them, but a very large payoff, $1,300 per year for a $700 — all right.

Here's a summary. Why the huge drop in crime since 1980? I would say private action deserves some of the credit. There's all kinds of reasons to think so that I've just gone through. What is kind of remarkable, if you've read Blumstein on the subject of the crime drop or Zimring on the -- or even Steve Levitt, none of them mention private sector action. It's not even mentioned in any of the books or articles that I've seen on this, and yet there are all kinds of reasons to think that that's part of the story, that that's important.

Should private action be encouraged? Well, carefully, carefully, but certainly cooperation looks like a good thing, and some of the precautions that can be taken look like a good thing. I would not endorse everybody buying a pit bull, for example, so we have to be somewhat careful.

And how to do that? Well, there's a variety of incentive techniques that we could build into institutions and just make things friendlier to victims and people who cooperate.

Overall conclusion, crime and crime control are both costly, as Gary Becker taught us, and I claim an economic perspective might be helpful and, yes, I do believe I am a criminologist as well as an economist, so that's it.

I'd like to take any questions.


Jim Lynch:  My name is Dean Martin, and I'm not used to this lounge singing. I'm Jim Lynch. I'm the Director of Bureau of Justice Statistics.

I partly have a question and partly an explanation. Phil said, how come there's this animosity between the native-born criminologists and the new immigrants from economics or not-so-new immigrants?

I think one of the issues — it has to do with data, so let me make two points about data. One of the things that — first of all, that when you look at the motor vehicle stuff and the UCR, you've got to take out the commercial stuff, which is a huge chunk and not readily identifiable, so that can explain a lot of that kind of stuff.

But more to the point, when Phil did his analysis of business districts, which is pretty creative, what you see is the idea of establishing a cost-benefit framework, which is very popular. I just am a little concerned about the availability of data on costs in a way that can allow us to do this in a useful way. I think what we're used to using is what we've got. And I think it's particularly difficult to measure the tertiary and secondary costs of crime, because when you look at the cost of crime to individuals directly, it's not very big. It's when you put these multipliers on. So, we're still referring to Mark Cohen's work initially done in 1987 where he had to value things, like rape for example, and he valued rape by looking at civil jury verdicts, which is a rarified subset of the rape domain. So, I think that we had a very difficult time defining the costs of crime, but they have a huge impact, as we've seen in Phil's analysis, that when you look at it directly it's not much of an effect, but when you put these multipliers on for the secondary and tertiary costs, it becomes quite — so, it really carries the day. And so the question that we at BJS, Mike Planty and Lynn Addington and others are trying to do is get better data on this idea of cost, and especially social cost, and I just — my question is do you have any ideas as to how we might go about pricing these? So, for example, the social cost being, you have a burglary or you have some other crime and it diminishes your activity in some way, your participation in the neighborhood, your participation in collective crime control. These kinds of social costs are difficult to assess. So, if you have some ideas, you might get a convert, you know, sort of.

Cook: OK, you're raising the stakes.  If I can convert you, that would be a worthwhile day. So, a couple of thoughts come to mind but stopping short of the complete answer. First, in the context of the business improvement districts, presumably what the merchants care about is not the social cost of crime in those robberies and burglaries. They care about the effect of crime on their clientele and how many shoppers are showing up. So, by introducing private security and having safer neighborhoods for people to shop in and to frequent, presumably they experience an increase in patronage. So, for them the value of reduced crime would show up in increased revenues and increased profitability, which in principle could be measured. I mean, it's confounded with whatever they're doing to clean things up in other respects. But, you know that's a partial measure, but it strikes me as being extremely relevant to the groups that we're talking about, and they may have a view of what it's worth to them to have eliminated a few robberies and burglaries over the course of a year from the Hollywood Business Improvement District.

Now, about Mark Cohen's work, I think he has followed the approach that has been endorsed by economists working in the environment area, which is to use the willingness-to-pay method for us giving a comprehensive measure, and what's important is that it's, first of all, subjective and, second of all, it's ex-ante, so it's a measure of the value of increased safety. It's not a measure after the fact when you're actually victimized. It's saying: What would I pay to have a safer neighborhood for myself and my family? Would I be willing to pay more for a house, for example, that was in a safer neighborhood but was otherwise had the same amenities and the same general location?

And so that has been a very attractive way of trying to measure the value of safety — is to look at housing values and property values just to see what that adds up to. It's not easy. But to sort out crime from all the other things, it tends to be bundled together with that; but in principle, it seems like there is a market that has a very tangible representation of this value, this subjective value. You know, if you look at what happened in New York City during "the miracle, you know, Harlem is suddenly safe for Bill Clinton to have his office in, right? I mean, it has really transformed the city, and one thing that it's transformed is its support of the huge ramp-up in property values in New York City, and I think a lot of that has to do with crime.

So, this is a real phenomenon even though it's subjective, because it translates into market-based values that change. And the challenge is to figure out how to isolate that effect from all the other things that might be going on.

Mark Cohen used a survey method that has been pretty common but is lightly criticized. It may lead to exaggerated numbers. The real estate efforts are difficult but certainly another approach to doing this, and some people would say it has a greater claim to reality, because it's real money that people are spending in that case.

David Johnson:  Thank you for your presentation. My question is about insurance premiums and also insurance claims. Did you look at any relationships there with BIDS? And I'm David Johnson, by the way.

Cook: I mean, the answer is not much. What I'm interested in is the extent to which insurance companies give people a break on their premium if they buy LoJack, for example, or buy some other item which is going to reduce property crime and therefore reduce the claims against insurance companies, among other things. And the answer distressingly, is not unless they're ordered to by the insurance commission in their state. So, it appears like there's not very much of the incentive through that particular kind of private sector action that you might expect.

Of the state that I've looked at, Massachusetts probably does the best job of giving, you know, ordering explicit reductions in theft insurance, for example — for autos — but there's a parallel issue about burglaries and about other kinds of crime so that if you say who's responsible for crime control I would say the insurance commission is one arena that you'd want to look just like you want to look at schools, you want to look at the foster care — I mean, there's many, many different places that show up. But the insurance companies — commissions — certainly deserve part of the heat here.

Marlene Beckman: Hello, Marlene Beckman. I work at OJP. I think many of us are surprised with these very bad economic times that crime continues to go down. I'm wondering how much you think it has to do with what you talked about — private efforts — or your view overall of why we're continuing to see the decline in crime during very bad economic times when we would think it would go the other direction.

Cook: Right. In a sense, this is a question I welcome, because it's one of my hobbies — is studying the effect of the business cycle on crime, and I did a project in 1986 and I just finished another one with John Bushway that updates it, because we've had three more business cycles since the last time I did it.

The results are very consistent, which is the robbery and burglary rates tend to go up during recessions compared to the trend. The motor vehicle theft goes the other way. So, it goes up during good times and down during bad times.

And murder is completely immune to the business cycle, and these are now — we have 13 complete business cycles since the UCR started in 1933. So, what we were able to do is look at not just what's happened this time in this great recession but all 13 of those and look for consistent results.

So, the first thing to be said is robbery and burglary do appear almost in every cycle we looked at to go up, but up relative to the trend that they were already having. And they don't go up very much. So I, if I believe my own results, would say robbery and burglary rates are higher now than they would be if we were in good times but not by much.

And in any case now, as has been true since 1933, the business cycle is the trivial issue relative to whatever else is going on.

So, that's what you want to know — is what else is going on.  And, you know, it's a great question. I mean, I think we've seen some things here, but it's very difficult to be able to make that judgment, and the studies that I did, I just took the trends as given in each business cycle and said that it turned when the recession hit and look at that. But I would be happy to have a beer sometime and we could chat about 27 reasons why crime rates might change. I think, you know, baggy pants, Game Boys, I don't know, there are a lot of things.

Hello, Jim, how are you?

JimBoden: Hello, Phil. Jim Boden from OMB.

You mentioned a little bit about the business improvement efforts. What about public sector investment, for example, in community centers or libraries, that sort of thing? Is there some cost benefit analysis that's been done — some work in that area?

Cook: Say a little more, Jim.

Boden: Well —

Cook: For example, how they affect crime?

Boden: Yeah, one of the things we're doing in Washington, for example, is building libraries in lower-income neighborhoods and spending a considerable amount of money on those libraries, not just, you know, cardboard boxes but, really, community centers with, I think, the goal of promoting community investment and community cohesion.

Cook: Right.

Boden: So, as an indirect way of trying to affect the crime rate.

Cook: Yeah. Really interesting. I don't know of any studies that have been done about that issue, but it sounds like it should be studied.

Boden: One of the examples that I ran across was actually in Medellin, Colombia.

Cook: Yeah.

Boden: Yes. Well, actually, in Medellin, Colombia, of all places is an area where they've actually built 10 libraries at considerable expense, hired architects, well-known architects, and turned them basically into community centers. Now, the crime rate has gone down, and maybe not necessarily just because of that, but there are those who attribute some of the impact to those efforts.

Cook: Yeah, I mean, this seems like a very sensible idea in terms of building kind of this efficacy of the community and turning it into a more cohesive organization. I think it's easier to do with the business community. You know, when you have a compact group of merchants, it's going to be easy for them to organize and get the funding to be able to do that, yeah.

Gary Rohen: Professor, thank you for an excellent presentation. The question I have has to deal with some of the statistics you showed early on. And, one, you said that 1983, if I'm quoting you correctly, it showed a downturn in some of the crime rates that were occurring. The question, the first question is does your statistical analysis take into account the sentencing reformat and some of the other legislative enablers that allow law enforcement to be more effective and sentencing to be more in line with the crime?

Cook: So, the graph that I showed you is just a straight victimization rate, national victimization rate series, from the National Crime Victimization Survey, so it is strictly descriptive. So, what it shows us is the crime rate started down around 1980, property crime rates did, and have been heading down pretty steadily since then along the way. There are, I am sure, a lot of different reasons why that is true.

Rohen: And the second part of the question is you talk about private and public law enforcement, and you show the rate, and I can't quote your chart.  I'm getting old and my memory is not that good anymore. But do your numbers take into account — like, 1993 we had the World Trade Center bombing; 2001, obviously we had 9/11. The requirements for security of buildings — just try to get in this building, any other building. I mean, private security is probably one of the biggest businesses in the District of Columbia and other major cities. So, are your numbers accounting for that? You're talking about the economy and the costs and so forth. But are you also accounting for the rise as a factor of the world situation and not really crime? These aren't crimes that the private security are protecting against; it's security per se as opposed to a criminal event. It isn't because you have more larcenies, rapes, assaults, thefts, anything like that. It's a factor of the situation. Are you accounting for that in your explanation — in your economical —

Cook: Right. The private security numbers that we have are from a variety of sources, but they do not make that distinction. They don't make the distinction of exactly what is being protected or what the mission, if you will, of the private security is, whether it's working for Brinks or hanging out in a mall or working upstairs here along the way. And so it's a very interesting idea that you might think about some distinction between preventing terrorist acts and preventing crime, and that certainly has been important for the police as well. I mean, the Washington, D.C. police are devoting quite a bit of their effort to terrorism.

Rohen: So, doesn't that skew the economics that we're talking about in the cost of crime and crime control, because it's not really crime that we're paying to defend against; we're really defending against other factors that affect the public safety. And I just throw that out as a question.

Cook: Yup. No, I think that if you could parse the data, ideally that would be interesting to try to make that distinction. I don't have any intuition about whether that's a big number or a small number. If you say there's a million people working in private security, how many of them are dedicated to antiterrorist activities? Is that 10 percent, 5 percent? I don't know.

Rohen: Well, that's a discussion for another day.  Thank you.

Cook: Yeah.  Yeah, yeah. Yeah, but it's something to be thinking about.

John Laub:  Hi, Phil.  John Laub, Director of the National Institute of Justice. Welcome to the criminology family. It's really brave for an economist to call themselves a criminologist, given most of the economists I know. But I guess I want to push you a little bit to think like a criminologist. I like the idea of the ledger, that there are two competing things here and we need to pay attention to both. But I fear that from the examples and from our discussion we're focusing on the opportunity side as opposed to the character side in terms of the kinds of examples that you're doing, and I guess my question is do you think it would be fruitful to integrate a focus on propensity or capability or character and in conjunction with the environment. 

And what I mean by that is asking the really hard question that per Olof Wikstrom is asking in some of his work in the U.K.  You know, is there such a group of people or can you identify a propensity such that you have such a level of morality that independent of any opportunity you will never commit a crime. Whereas somebody who has different kinds of propensities may well be influenced by the criminogenic conditions that you're talking about. 

And so I guess thinking about as we move ahead — you know, imagine if you were the director of NIJ for a day — would it be worthwhile to think about trying to integrate questions regarding how propensity and environment work together or don't? Is that something you think that's worthwhile, or does that just make things more complicated?

Cook: Yeah, I mean, I think — so, it would — in a way, it's a slow pitch, because I think it's a fascinating area and absolutely we should pursue it. And your intuition, I think, behind the question is the same as mine, that there are — there is a spectrum. You know, there's kind of Mother Theresa at one end and, you know, down to people that probably commit crime regardless of what the circumstances are, and then between there are — probably the bulk of the crime gets committed by people who could be doing other things, given the right payoffs. And trying to understand better about that and how the response to opportunity is affected by intoxication and other immediate circumstances is another topic I think is very interesting. 

I mean, as you know, Megan has done a little of that. No, I think it's a very rich agenda, and it's an agenda that I think is productive in the sense that it will serve to really remind us that crime is a choice. I mean — and I think we have to keep coming back to that, that the game is not, you know, either reform them or lock them up, because that leaves a great territory unexplored about what we might do.

Laub: I was also thinking some of Jim Heckman's work, another economist who's looking at a variety of things with respect to crime, but some of the work he's doing looking at low self-control particularly in an educational context and how one needs to have different educational strategies depending upon one's level of self-control.

Cook:  Yeah, it's a really interesting — you're right, but what he likes to call noncognitive skills and the psychologists hate to hear that, but where the notion is the — especially on — as you say, on self-control and on empathy and on just being able to understand social interaction and a variety of other things, that isn't reflected in standardized test scores, but it is something that can be taught and that has a payoff it appears in a lot of different arenas, including the crime arena. And one way to think about that is the ability to process information about opportunities and to act in your self-interest, right, rather than to be impulsive or to misinterpret the situation.

Laub: Sorry to have hogged the last question, but we're out of time, so please join me in thanking Phil Cook, all right?


Date Created: August 20, 2019