When the murder rate goes up or down significantly, does it have an effect on the economy? I can see how the economy would affect murder rates since an increase in economic stress could put people in more hostile states of mind and push a certain number of them over the edge into murderous intent. But does it work in reverse? That is, an increase or decrease in murders driving the economy.
In general, crime is a deadweight loss for the economy. it costs money to prevent, money to deter, money to clean up after, money to prosecute, money to incarcerate, victims lose goods, money, potential earnings, etc. There’s no upside to more crime.
If you assume an equilibrium volume of crime and crime management now, we have X resources (dollars and manhours) dedicated to crime management in all its facets. X is a big number.
If a miracle then occurred and criminality disappeared for good, we could fire all the police and private security guards, close all the locksmith shops, eventually close all the jails & prisons, etc. A really, really big fraction of government and commerce would become obsolete overnight. A LOT of economic dislocation would occur, as happens with any abrupt exogenous change in a mature economy. But the new equilibrium ought to be collectively wealthier and more productive than the situation before.
As to murder specifically, I don’t see that as a huge driver of the costs and harms of crime in general. More is worse, less is better economically. But over the plausible range of murdering in a civilized country it’s a pretty small pimple on the total economic elephant.
Now consider a case where lawfulness breaks down and rival gangs are machinegunning each other in public squares and suddenly armed gangs are shaking down every storefront leaving a couple dead shopkeepers in every block. That extreme level of lawlessness and murder (see post-invasion Iraq, current Chiapas, Syria, etc.) would grind a modern economy almost to a standstill. Triggering recession, depression, price spikes and hordeing as goods disappear, etc.
But that’s probably not the scenario you were thinking of.
Still, some good information.
But of course, even if something were to happen to significantly reduce the crime rate (such as what happened when leaded gasoline was phased out), it wouldn’t happen overnight, so there’d be time for the economy to adapt.
Agree completely.
Like most thought experiments in the social/economic sciences, the idea is to isolate and highlight one particular aspect of the usual multiply-interconnected and interdependent Gordian knot which is human society. Positing a huge exogenous change and then seeing what suddenly crumbles to dust and what it knocks over on the way down is a good way to identify which parts will move and in what direction.
As you say, any real incremental change, even a permanent one will happen slowly enough that adjustments can be made.
I will point out though that politics and hence government, can be very, very slow to recognize changes that business and consumers will have reacted to comparative ages ago. In this example, we might still have politicians propagandizing about high crime and police departments agitating for increased budgets and fancier weaponry years or decades after the criminal tide had peaked and begun its permanent irreversible ebb.
I believe it was Freakonoomics that attributed some of the decline to wider availablity of abortion- the generation of children likely to grow up criminals themselves, from broken homes, single parents, and unwanted, declined significantly.
It seems to me that policing costs specifically for murder are out of proportion to other crimes. Murder (or attempted) is a fairly rare crime compared to robberies, theft, property crimes - and much more time is spent on investigating and prosecuting it, plus the cost of incarceration, given much longer sentences than most other crimes.
Not sure if there’s a “pyramid” effect - that for every X murders, there would be 10 times as many, say, thefts or armed robberies or arsons or drug dealings - is the murder rate an indicator for the general level of crime in an area? Of course, the USA is anomalous in the developed world because of the ease of acquiring firearms, which make murder far easier.
Murder could add to the Gross National Product: more murders might spur gun sales, increase spending on home security, police, lawyers, building and staffing prisons, demand for home entertainment as people are more afraid to go out, etc. I mean, sure, it’s a personal drag if I get murdered, but hey, think of the economy!
Yes and no. I recall an article talking baout the benefit of more educated people to the GDP of a country - doctors, lawyers, engineers, research scientists, teachers, etc… The article posed the question - is the country really that much more efficient, richer or more productive with with twice as many lawyers?
This is a variation on Bastiat’s “Broken Window Fallacy” – on the surface, it might seem that breaking windows stimulates the economy by generating business for the glazier; however, this conclusion is shown to be erroneous when one considers that the resources spent to replace the window would otherwise be spent elsewhere.
I can imagine well-publicised murders damaging, say, a suburb’s reputation relative to others. if you want to buy into an area at a certain standard of living the one with the murders weighs up against the ones with a good school or has lots of parks.
Murder could be a net positive if most of the people that get murdered are themselves a net negative for society. That might even be possible if most of the victims are drug dealers or the like.
Freakonomics did make that attribution, yes. But from what I understand, once you account for the effect of unleading gasoline (the size of which effect can be determined from the many different countries which phased out leaded gasoline at different times), there really isn’t any statistically-significant effect left to be attributed to abortion.
But that is basically true, in most US cities.
Most murder victims are:
- gang-bangers shooting each other
- bystanders accidentally shot by gangbangers
- drug dealers/customers shot in a drug deal gone bad
- domestic abusers/victims shot during the abuse
So very few truly victims not involved in some criminal activity.
Our former Mayor got a big outcry when he said that if you weren’t involved in crime and drugs, there’s very little likelihood of being shot in this city. But it’s basically true.
Most crimes of ALL TYPES go on between people who know each other.
Murder rate can be a proxy for economic issues as much as a driver.
But it is interesting to compare countries. Roughly:
- Japan 0.2
- Australia 0.9
- USA 5.0
So the US has a murder rate 25 times that of Japan and over 5 times that of Australia. Japan is pretty much the lowest on the planet.
It would be hard to make a case that the economic impact of these rates is discernible much past the increased cost of law enforcement. Curiously the number of police officers per head of population across Japan Australia and the US is about the same.
The US has one of the worlds highest incarceration rates of 500 per 100,000, Japan one of the lowest at 36, and Australia in the middle with 165. So the US spends vastly more on prisons.
Obviously the elephant in the room is substance abuse and the drug trade in general. That seems to drive a huge fraction of crime and the extent of the problem in any country drives the other numbers. I would suspect that murder rates are at least in part a proxy for drugs and economic ills rather than a driver of economic effects.
Could well be.
But I’ll suggest the net positive would be far larger if the victims were mostly drug users, not drug dealers.
If a dealer is killed, the economic demand remains and everything we know about commerce and human nature suggests they’ll be immediately replaced. If a user is killed, there’s a permanent net reduction in demand.
An interesting side question is that if we posit a world where a large fraction of dealers and a large fraction of users gets murdered, which group of potential replacement recruits would be more deterred by this bleak situation? I’m not sure that’s an answerable question. Vast numbers of murders or no, going into either activity already bespeaks a real weak sense of self-preservation.
Based on the videos I’ve seen of killers buying shovels, bleach and muriatic acid at home improvement stores, at least some segments of the economy benefit from murder.
Just a data point, but I’ve seen private attorneys charge roughly $75,000 - $150,000 to defend a murder trial.
Yes, but Chronos’ point refutes these “yields” - it’s not like the shovel & bleach / attorney money would be left out of the economy if murder didn’t happen.
Yes, the obvious comeback - like the story of the broken window - is the question of whether there is a more productive use for the resources spent in the commission of a crime. Even a drug dealer, if he hadn’t been murdered, would have bought a new Cadillac eventually, maybe a few more gold chains and designer sunglasses. 
Repairs that extend productive life of something (someone) are a net positive. Simply repairing something that normally should not need fixing in the normal course of things, is a drain on the economy. At least with the broken window story, we can say statistically that X windows will be accidentally broken each year and is a normal part of the economy. Mitigating unneccessary damage isn’t.