The Economics of Crime

When Los Angeles crime statistics showed that homicides were up early this year, Police Chief William J. Bratton said the buck stopped with him. "I take responsibility when it goes down, I take responsibility when it goes up," he said at a news conference this month.

Bratton has, in fact, built a career on the idea that the police are responsible for the crime rate. When there are fewer crimes, cops get the credit, and when there are more, they are held accountable. It is a winning attitude -- but one based on a myth.

The police have no more control over the economic and social forces that drive crime than doctors and nurses have over fluctuations in disease. No one holds the local hospital director responsible when rates of heart disease or diabetes increase. We understand that these conditions are influenced by lifestyle, nutrition, environment -- factors that transcend local boundaries. Crime is no different.

So if Angelenos are worried about this uptick in homicides, they should also brace themselves for more crime to come. Why? In a word, the economy.

A particularly sensitive economic indicator for tracking crime rates is consumer confidence, which is measured in monthly surveys that ask people about their financial circumstances and the general state of the economy. Consumer confidence has plummeted in recent months amid concerns about the mortgage crisis, rising prices and stagnant incomes.

My own research has shown that crime rates tend to rise when consumers become pessimistic. Why? Economic theory predicts that people weigh the costs and benefits of law-abiding versus criminal behavior. Like it or not, a failing economy increases the temptations of crime.

Worried consumers do not necessarily resort to street crime. But some will resort to buying stolen goods when they can no longer afford the prices at Target or Wal-Mart. As that demand increases, so does the incentive for the street criminals who supply underground markets. Other factors contribute too, but sooner or later more robberies, thefts and other crimes drive up homicide rates.

For more than 20 years, Los Angeles' homicide rates have climbed and dropped in a reverse image of national consumer attitudes. Homicides went up as consumer confidence plummeted during the late 1980s and fell again when confidence soared during the roaring 1990s.

Americans are fond of saying that "all crime is local." That too is a myth. Crime is universal. Crime rates are higher in some places than others, and higher in some years than others. But the things that cause crime in Los Angeles also cause crime in New York.