Thursday, October 28, 2021

Real world economics: Public safety is a public good

Crime has complex economics. It can be examined at a microscopic level in the context of why people commit crimes and how it benefits them, and its different effects on the well-being of victims and perpetrators. One can then go into the macro level of how much tax society is willing to impose on itself to control crime and how that money is spent.

edward loterman

This second one is a huge issue at the local level right now. Minneapolis is one of the cities where “police defiance” began after the killing of George Floyd, and its city council voted generally, largely by questioning the ballot, which voters are now considering. If passed, it will have to contend with specifications.

In St. Paul, spending on police versus other measures that can reduce crime is an always controversial issue in Mayor Melvin Carter’s budget. Ramsey County Sheriff Bob Fletcher has been in dispute with county commissioners over his budget since December.

It all comes down to “public finance”. But these specific local problems exemplify general economic principles that sooner or later appear everywhere.

People don’t want to be victims of crime. People don’t like to pay taxes. The compromise between these conflicting desires is at the core of the public-finance problem. In a democracy, “crime is okay!” No one is running for office on the platform of! Some people sometimes say “I’ll raise taxes!” Both are political suicides. Yet crime continues, and taxes end up rising.

So instead we hear conservatives claiming to be “tough on crime,” while liberals might prefer, “hard on crime, tough on causes of crime.” Some progressives may even argue that the police are part of the problem, as in Minneapolis.

“Tough on crime,” can mean the level of policing or it can mean the judicial system of punishing, trying, and punishing. All these affect the crime rate to some extent. All take tax dollars.

The police work in at least two ways.

First, the presence of police, beat police, patrol cars or, increasingly, electronic surveillance, is an immediate deterrent to criminal acts, such as a fence keeping children out of swimming pools.

Secondly, beyond this immediate presence, the police deter some people from potential crime. If you know that there is a high probability of eventually being arrested, rational people are less likely to commit criminal acts, regardless of the police on the street at that time.

However, its full impact depends on the possibility of punishment after arrest. It’s like the old military problem “What’s the probability of this weapon hitting a tank?” This is followed by the conditional, “If hit, what are the chances of the tank being destroyed.”

Intensive policing is ineffective if effective trial and punishment is not followed. Yet spending a lot of money on prosecutors, courts and prisons is ineffective if the chances of getting caught in the first place are slim. This is why income tax fraud now amounts to hundreds of billions annually.

And it all hinges on the belief of Chicago Nobel laureate Gary Baker, that crime stems from rational decision-making. Some do, including a lot of tax fraud. But there are many other irrational “offenses of passion,” including murder and assault. Many financial crimes, such as embezzlement, range from addictions to drugs or gambling, which can retard judgment.

Yes, the prospect of severe punishment can sometimes cool the mind of some people. But, for example, the devastating effect of the death penalty is underestimated among the public. Minnesota has not executed anyone in over a century, yet our murder rate is less than a quarter that of many states with the death penalty. Incarceration rates have increased dramatically in some states, such as California, but changes in their crime rates generally follow national trends or states that have not become more punitive. So many voters are rightly skeptical about the slogans.

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“Tough on the causes of crime,” may resonate but these are vague and diffuse. There is the classic public-finance problem of a lack of “correspondence” between the area paying taxes – middle- or upper-class low-crime neighborhoods, and the areas seeing the impact of spending – poorer high-crime neighborhoods. Yes, Minneapolis could choose to tax more than St. Paul and police the streets and strengthen public prosecutors. It has some immediate deterrence and deterrence effects. Voters there could also choose to eliminate the need for city charters to fund the police, thereby reducing taxes – and then what?

But if a city or county spends a lot on poverty reduction, drug treatment, better education, helping troubled families, and so on, the overall results can be very meaningful. But any significant reduction in crime rates would be widely spread in jurisdictions that choose not to spend the tax money.

There are also “collective action” problems. People who have been attacked or stolen are angry and may be willing to pay higher taxes. Disaffected people can tsk-tsk about crime problems but lack the same motivation. The large number of people concerned about the issue outweigh the small number of people who are angry when the votes are counted.

Physical isolation and ethnic or racial differences add to this effect. Many people in higher-education, high-employment, white, physical enclaves like my home neighborhood of St. Anthony Park certainly have moral and religious sentiments about the shootings and killings in Frogtown or North Phallen, but not the same level there. There is terror when such crimes happen one block from our homes. Is it reprehensible for prosperous progressives to tell people in crime-ridden areas what level of policing should be good for them?

Another effect is that when the collective decision not to raise taxes results in ineffective public security, total private spending increases. The United States is a high-crime country compared to most countries in Europe or Australia and New Zealand, with income levels and lifestyles similar to ours. And we spend far more on businesses, private security companies for home and car alarm systems and, now, shields for catalytic converters, than in those countries. For the millions of people who spent $1,000 for an AR-15 clone or Glock, just being in the house, mostly because everyone else is buying one and they don’t want to be outgunned or the only house left unarmed.

Thus we spend one way or another without any serious collective consideration as to which way of spending is most effective and most appropriate for our society as a whole. Sadly, with growing political divisions and increasing appeals for division in both social media and politics, we are headed in the wrong direction.

Nation World News Desk
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