Most crimes have an economic component. To the extent that criminals are motivated by financial gain and ‘recycle’ their proceeds back to the legitimate economy, crime has impact on an economy, and it is not always negative. Crime as an economic activity also obeys some of the ‘laws’ of supply and demand. Criminals supply the crime, the public ‘demands’ either protection or (in the case of Prohibition) can actually be a consumer. Also, if it were not for crime, large wealth and job producing areas of our public and private sectors dedicated to public safety and security would be unnecessary.
Bank robbers, thieves and others who commit property crimes are, in a manner of speaking, a class of entrepreneurs in the underground economy. They choose an occupation that pays better than legitimate work. While legitimate entrepreneurs risk their capital, criminals face the prospect of apprehension and imprisonment, a rather extreme sort of ‘occupational hazard’ that seems to be acceptable to most lawbreakers.
Lawbreakers could not operate without the ‘mainstream’ economic system. For example, bank robbers would not rob banks if it were not for the value everyone attributes to cash (which, after all, is just ‘pieces of paper’). In a sense, criminals want the same financial success everyone else does; they simply want faster access. They seek the ‘big score’ so that they can retire and become anonymous consumers in a legitimate economy with their ill-gotten gains. Many, of course, retire at public expense behind bars. Some, like the Kennedy’s (whose fortune was based on investments that included bootlegging during prohibition) invest their gains and become legit.
Numerous government and private enterprises exist and flourish thanks to crime. The laws of supply and demand alluded to earlier can be applied to crime as an economic activity. The supply side would be the lawbreakers. The demand would be the sum total of the public’s response to the economic loss (or advantage) caused by illegal economic activity.
The private response to the demand side can be illustrated by a Google search using the words ‘home security products’, for example, which resulted in over 87 million “hits.” Likewise “home security companies” yielded about 195 million. Private security firms service virtually every sector of our economy from banks to bedrooms.
In the public sector, our prison system, the warehouse for illegal entrepreneurs who have been taken out of circulation, also provides employment for an enormous workforce that looks after the world’s largest prison population. The economic impact (costs) of our prison system is highlighted by some telling statistics from the US Department of Justice:
- On December 31, 2007, about 2.3 million prisoners were in local jails, federal or state prisons.
- Of that total, 19 percent were jailed for property crimes and 20 percent were for drug violations. The remaining majority was for “violent” crimes, many of which include armed robbery or other economically motivated crimes.
- Supporting this vast prison population are over 1,800 public and private correctional facilities that employ nearly 500,000 well-paid correctional staff (prison guards, administrators, etc.).
Add to the foregoing, our law enforcement officers. According to WikiAnswers, (as of 2006) there were
“683,396 . . . law enforcement officers in the United States. There [were] approx. 120,000 . . . working for the federal government adding up to a total number of 800,000 law enforcement personnel in the U.S.”
Finally, crime does seem to have an inverse relationship to how well our economy is doing. For example, during the 1990s, which were good economic times, the U. S. crime rate dropped. On the other hand, the Federal Government funded a significant increase in local police, and our prison population continued to rise as a result. Also, consider the fact that during the Great Depression of the 1930s, there was no dramatic growth in crimes against property. There are some studies out that attribute the low crime rate to government relief programs of the New Deal, which employed millions.
So crime does have an economic (albeit parasitic) component. Willy Sutton, an accomplished bank robber, who held up around 100 banks knew this connection. When asked why he robbed banks, Willy’s famous response was, “Because that’s where the money is.”