Economics of Crime: Why does it Happen?

In the 1990s, across the United States of America (USA) crime rates dropped, across every state without exception. Over the years, many academics have come up with explanations on why this mysterious decline in crime started on such a massive scale. There are broadly two sides to this discussion, one which attributes the drop in crime to ‘tougher’ policing and one which looks for reasons other than law enforcement such as improved standard of living and changes in society. See the debt trap.

Periods before the 1990s, the US populace elected government on the promises of being ‘tougher on crime.’ Both leaders of the Republican and Democratic party attribute the decline in crime to more people being put in prisons, more police on the street and in some cases greater access to guns. The general claim is that incarceration rates have been rising in the US post-1990s, and the rate of crime has been declining, seems intuitive. Statistics from the Brenan Center for justice suggests that incarcerating people has diminishing returns, after some point, it has no further impact.

After a certain point, more and more people end up going to prison who were not contributing to crime on the streets or people who would not have had any further offenses, adding nothing to a further drop in crime. Furthermore, it is suggested that putting more people in prison only impacts violent crime, not non-violent crime. Statistics have shown non-violent crimes have not declined even as more people were going to prison for doing as such for periods before the 1990s. More people going to prison perhaps contributes to a fraction of a drop in crime, but even if that fraction is substantial, why did crime drop in places where more people were not going to prison?

Many states passed laws which allowed people the right to carry arms, even being able to conceal them in some states. The usual case made here is that if someone is planning to rob a bank but expects everyone in that bank to be carrying a firearm, that person is less likely to go ahead with the robbery or at least not shoot someone when engaging in the robbery due to the increased risk of being shot at. Over the years, this thesis has been challenging to prove with the data that is available. In fact, there is more violent in crimes in states where there are laxer gun control laws.

Perhaps a rising economy and improved standards of living have contributed to this drop in crime? The data does not seem to back it. In the 1980s, when crime was at its peak, there was lesser unemployment compared to the periods of recession in the late 2000s. Despite all this, even with much greater levels of unemployment in the late 2000s, the crime rate continued to drop. Crime dropped in places even when compared to different areas facing a greater rise in unemployment. But perhaps completely dismissing this particular claim may not present an entirely accurate picture.

Questions such as ‘how much’ the economy improved or worsened are important, ‘what level’ of economic well-being of an individual are we talking about? Someone who got laid off due to the crash in 2007-8 from a mid-level managerial post at a bank is probably unlikely to resort to crime because of having some savings to fall back on versus someone on the verge of starvation or seeking life-saving healthcare for their children. Maybe, if you’re beyond a certain level of economic wellbeing, you’re less likely to commit violent crime?

In 2005 Steven Levitt and Stephen J. Dubner, in their book titled Freakonomics suggested that the drop in the rate of crime has been because of the legalization of abortion by the US Supreme Court in 1973. Sounds far fetched, yes. But it also happens to be the case that this theory has the greatest amount of empirical evidence. The intuitive argument to the theory is that if women are able to exercise the right to an abortion, they’re better able to plan families or simply not have children that they can not economically support. This would mean being able to provide a better life and increased support for the children that you do have, leading to a lesser chance of crime in the future. The empirical evidence seems to support this claim.

The states of Washington, Alaska, and New York legalized abortion before the US Supreme Court made it legal all over the country. Those states found crime dropping much before the other states did. The rate at which crime has declined has also varied, it has dropped more in states where abortion is more accessible and easier compared to places where it is increasingly difficult.

A significant chunk of the drop in crime has also been in people below the age of twenty-five, while people above that age commit crime on more or less the same level. This leads to the idea that generations which have had the time to benefit from legalized abortion are the ones committing less crime. Levitt and Dubner are extremely clear in communicating that they are not advocating abortion as a crime fighting tool nor exploring it as a moral question but simply that the data suggests that it plays some part in a decrease of crime over the years.

The economics behind entire households ending up better off because of having smaller households due to abortion makes sense. Does that mean that this can and will work everywhere including Pakistan? No. Is the theory discussed by Levitt and Dubner wholly correct? Wouldn’t be accurate to say so.

To think that one factor led to a decline in something as complex as crime is too simplistic. It is well thought out government policy and stability, which is likely to lead to better outcomes; everything needs to be balanced. The ability to access a good life and find enough of a deterrent from violent crime is the answer to crime. That balance in Pakistan may as well be similar to what seems to have worked in the US but would probably also have to be different in many ways to tackle the unique problems that exist in Pakistan.