Crime has complex economics. One can examine it at the micro level in terms of why people commit crimes and what they gain by it, and also in its differing effects on victims’ and perpetrators’ wellbeing. Then one can move to the macro level of how much society is willing to tax itself to control crime and how that money is spent.
This second is a huge issue locally right now. Minneapolis is one of the cities where “defund the police” started, following George Floyd’s murder, and its city council voted for that generally, principally by putting the question on the ballot that voters there are now considering. If passed, it then must grapple with the specifics.
In St. Paul, spending on police versus other measures that might reduce crime is an ever-contentious issue in Mayor Melvin Carter’s budgets. Ramsey County Sheriff Bob Fletcher has been sparring with county’s commissioners over his budget since December.
All this falls into “public finance.” But these specific local problems serve to exemplify general economic principles that show up everywhere sooner or later.
People don’t want to be the victims of crimes. People don’t like to pay taxes. The tradeoffs between these conflicting desires lie at the core of the public-finance problem. In a democracy, no one runs for office on a platform of “crime is fine!” Few ever say “I’ll raise taxes!” Both are political suicide. Yet crime continues, and taxes end up going up.
So instead we hear conservatives claim to be “tough on crime,” while liberals may prefer, “tough on crime, tough on the causes of crime.” Some progressives may even argue that police are part of the problem, as they have in Minneapolis.
“Tough on crime,” can mean the level of policing or it can mean the judicial system of indicting, trying and carrying out sentences. All these affect crime rates to some degree. All take tax dollars.
Policing works in at least two ways.
First, the very presence of police, beat cops, patrol cars or, increasingly, electronic surveillance, is an immediate hindrance to criminal acts just as fences keep toddlers out of swimming pools.
Secondly, beyond this immediate presence, policing deters some people from potential crime. If you know there is a high probability of being arrested eventually, regardless of cops on the street at the time, rational people are less likely to commit criminal acts.
The full effect of this hinges, however, on the probability of punishment after arrest. It is like the old military problem of “what is the probability of this weapon hitting a tank?,” followed by the conditional, “If hit, what is the probability the tank will be destroyed.”
Intensive policing is ineffective if not followed by effective trial and sentencing. Yet spending a lot of money on prosecutors, courts and prisons is ineffective if the chance of being caught in the first place is low. That is why income tax fraud now comes to hundreds of billions a year.
And all of this depends on the assumption, as that of Chicago Nobel laureate Gary Becker, that crime results from rational decision making. Some do, including much tax fraud. But many others are irrational “crimes of passion,” including murder and assaults. Many financial crimes such as embezzlement stem from addictions to drugs or gambling, which can retard judgment.
Yes, the prospect of harsh punishment can cool some heads some times. But the deterring effect of capital punishment, for example, is overestimated among the public. Minnesota has not executed anyone in more than a century, yet our murder rate is less than a fourth that of several states with the death penalty. Incarceration rates have increased dramatically in some states, such as California, but the changes in their crime rates generally follow national trends or of states that have not become more punitive. So many voters are rightly skeptical about slogans.
“Tough on the causes of crime,” may resonate but these are unclear and diffuse. There is the classic public-finance problem of the lack of “correspondence” between the area paying the taxes — middle- or upper-class low-crime neighborhoods, and the areas seeing the effects of the spending — poorer higher crime neighborhoods. Yes, Minneapolis could choose to tax more than St. Paul and put more police on the streets and beef up public prosecutors. This does have some immediate barrier and deterrence effects. Voters there this fall could also choose to eliminate the City Charter requirement to fund the cops, which could lead to lower taxes — and then what?
But if one city or county spends much more on poverty reduction, addiction treatment, improved education, help to troubled families and the like, the overall results may be very worthwhile. But any specific reduction in crime rates will spill over widely to jurisdictions that don’t choose to so spend tax money.
There also are “collective action” problems. People who have been assaulted or burgled are angry and may be willing to pay higher taxes. Those unaffected may tsk-tsk about crime problems but lack equal motivation. The large mass of those tepid about the issue outweigh the smaller number of those outraged when votes are tallied.
Physical isolation and ethnic or racial differences compound this effect. Many people in a high-education, high-employment, white, physical enclave like my home neighborhood of St. Anthony Park certainly have moral and religious feelings about shootings and murders in Frogtown or North Phalen, but there isn’t the same level of visceral outrage as when such crimes occur a block from our homes. Is it cynical for well-to-do progressives to tell people in crime-ridden neighborhoods what level of policing should be good for them?
Another effect is that when a collective decision to not raise taxes results in ineffective public safety, total private spending increases. The United States is a high-crime nation compared to most countries in Europe or in Australia and New Zealand having income levels and lifestyles similar to ours. And we spend far more on private security companies for businesses, home and car alarm systems and now, shields for catalytic converters, than they do in those countries. Ditto for millions of people spending $1,000 for an AR-15 clone or Glock, just to have in the house, mostly because everyone else seems to be buying one and they don’t want to be outgunned or the only household left unarmed.
We thus spend one way or another without much serious collective consideration of which mode of spending is most effective and most just for our society as a whole. Tragically, with the growing political divisions and burgeoning appeals to divisiveness, both on social media and within politics, we are headed in the wrong direction.
St. Paul economist and writer Edward Lotterman can be reached at firstname.lastname@example.org.