The Hidden Cost of Crime

Some crimes provide benefits that exceed their costs to society. If you must double park to make a crucial job interview, steal food to survive, or speed a dying person to the hospital, it may be best to commit the offense. More often, crime presents an externality problem because the burdens of crime are felt beyond—or external to—those causing them. Since criminals don’t bear the full cost of their behavior, they often commit crimes with larger costs than benefits.

Clarity on crime’s cost helps us prioritize crime-prevention efforts. It also helps individuals grapple with decisions as potential offenders. We face daily dilemmas about speed limits, drinking laws, piracy of copyrighted music and images, and other assorted temptations for mischief. To the extent that we care about the people around us, hidden consequences matter to our decision making.

Early crime-cost studies that focused on direct losses due to theft and vandalism misrepresented the extent of crime’s burden on society. The indirect costs have society reaching far deeper into its pocketbook. Even minor crimes such as spray painting on walls and shoplifting trigger large hidden costs. By creating an environment of fear and distrust, seemingly petty crimes erode property values and divert money to defensive expenditures. This includes the purchase of security cameras, alarms, fencing, lighting, gates, guards, theft insurance, protective firearms, locks, safes, and self-defense training.

Growing crime rates cause residents to spend time and money on neighborhood watch programs, and bring communities to invest in more police, replete with pricey police cruisers and equipment. And then there are the costs of the expansive criminal justice system and the prison system, where it costs as much to house an inmate as it does to send a student to college. Although this spending creates jobs, the same spending could have created jobs in schools, parks, and hospitals if it had not been spent in response to crime.

The total cost of crime eclipses the direct costs of theft and vandalism. In the United States we lose $3.5 trillion to crime each year, about the same amount we spend on all U.S. health care. That figure highlights the value of high moral standards.

More information

David A. Anderson (2012), “The Cost of Crime”, Foundations and Trends in Microeconomics: Vol. 7: No. 3, pp 209-265. http://dx.doi.org/10.1561/0700000047

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