The Price of Crime Is Real--and Society Pays

Will we get a “peace dividend” because violent crime is down appreciably everywhere in Southern California--down 16.5% in Los Angeles and 25% in Santa Ana, for example, according to FBI statistics?

Yes, we will get a big dividend from crime reduction, although that doesn’t necessarily mean that we’ll be spending less on crime prevention.

A reduction in crime has an economic value, just as crime has an enormous economic cost. But we need to understand what we’re talking about, for there is a multitude of ways to express the costs of crime, the benefits of crime reduction and the reasons crimes occur in the first place.

Crime prevention costs money. When Mayor Richard Riordan took office in 1993, he launched Project Safety L.A. to hire more police and upgrade neighborhood policing. A safer city was needed for the Los Angeles economy to improve, the mayor said.


This year the additional expenditure on Project Safety L.A. amounts to $138.4 million, with $85 million coming from Los Angeles taxpayers and the balance from federal grants.

That’s only part of the $1.2 billion Los Angeles will spend this year on its Police Department--or the overall total of more than $2 billion that all Southern California’s communities will spend on police and sheriff’s departments.

Yet whatever the billions, the costs are small compared to the economic burden of crime.

“Crime exacts a heavy toll on governments, open society at large and especially on its victims,” writes Professor Mark A. Cohen in a research paper for the U.S. Department of Justice.


Cohen, a professor of management at Vanderbilt University, worked on the Justice Department’s Commission on Sentencing, which attempted to determine the economic cost of specific crimes, from murder to burglary.

Researchers found that cost has two dimensions, Cohen explains. There is a “tangible” dollar amount calculated by adding up property and productivity losses and medical bills. And there is “an amount less quantifiable because it takes the forms of pain, emotional trauma and risk of death from victimization,” he says.

In the aggregate, the tangible costs of crime in the United States added up to $105 billion a year--a crime “tax” of $420 for each U.S. resident. But when the costs of pain, emotional trauma and long-term disability were added in, the national costs of crime rose to $450 billion, or $1,800 per person.

Murder is the most expensive crime, $3 million in tangible and intangible costs for each fatality, commission researchers found.

The costs of each rape, tangible $5,100 and intangible $81,400, added up to $86,500 in the researchers’ findings. That looks low and probably is, because “overall, rape is the costliest crime, with annual victim costs of $127 billion a year,” Cohen reports.

Robbery with injury was found to cost $19,000 each occurrence. But society spends a lot of money to prevent robbery with injury, and that’s not to mention the incalculable losses of economic activity in areas and neighborhoods where fear keeps people away or trembling behind double-locked doors.

U.S. business spends $16.5 billion annually on security guards and alarms services, according to Pinkerton’s Inc., the Encino-based security firm.

And that figure undoubtedly understates overall expenditures. Right now in downtown Los Angeles and an area south extending to USC, for example, property and business owners are assessing themselves $3.4 million to improve private security. That’s in addition to the taxes those property owners pay for municipal police protection.


Do such expenditures prevent crime? Probably they do, but it’s hard to say. The U.S. prison population has tripled to more than 1 million persons in the last two decades, and federal, state and local governments now spend $40 billion a year on prisons. But all that incarceration and expenditure brought no discernible reduction in crime--unless the latest FBI figures are proof that 20 years of steadily increasing imprisonment reduces crime.

The truth is, there are as many reasons for the decline in violent crime as there were reasons for the long rise in such crimes.

And the expanding economy has to be part of the solution, as it was part of the problem. Declining real wages, more evident in poor neighborhoods than nicer suburbs in recent years, were accompanied by rising levels of youth crime, economist Jeff Grogger found in a report for the National Bureau of Economic Research in Cambridge, Mass.

Simply put, Grogger found that if crime pays more than a job, young men will choose the crime. But, of course, not all young men or all neighborhoods and circumstances are included in that calculation.

To truly understand the economics of crime, we have to understand the cost to society of unproductive lives.

There is an axiom going around that “it costs as much to send a kid to prison as to send him, or her, to Harvard.”

But in fact it costs much, much more to send the kid to prison. Because a life spent in prison is not as productive, for the person or society, as a life would be if the kid went to Harvard or community college or just went out, got a job, earned money and paid taxes.

Some years ago in Rochester, N.Y., Eastman Kodak sponsored research that calculated the cost of a high school dropout at $4,600 a year in lost taxes and productivity. The cost of a whole class of dropouts over a lifetime was calculated at $240 billion.


Fortunately the opposite is also true--an improving economy, providing jobs and hope, education and opportunity for its people can give society more productivity and less crime.

The bottom line is that the economics of crime are very simple: Everybody pays for the criminal and everybody benefits from the productive efforts of our fellow citizens.

We may not pay less for crime prevention, at least immediately, but if violent crime totals continue to fall, we’ll all reap many benefits, economic and otherwise.