Previously, I wrote about the cause and effect of a city’s crime level and it’s immigration level ( How Crime Affects Trenton). However, this is a very small part of the story. First, we have to agree on what it is about a city that we’d like to improve. In general, the best measure of a city’s health is its per capita income. Cities with high crime rates have low per capita incomes and vice-a-versa (The Economics of Crime).

But do we know how crime and more importantly crime fighting is related to the job of increasing per capita income (CPI)?

This is the question a competent Mayor, Police Director and Budget Director should be able to answer. They should be well versed on the linkage between the elements of our city budget and the city’s eventual success, especially the crime fighting budget.

I’ll help by framing the questions, but we need thoughtful criminal scientists and economists working on the problem.

The following graphic illustrates the linkages we need to understand.

Urban Dynamics and the Crime Budget

First, what are the best investments a city can make to raise CPI?

• Economic development?
• Lower taxes?
• More inspections?
• Better public works?
• Crime fighting?

What level of crime fighting investment is “break even”

• If increasing crime fighting is not the best investment …
• what level is needed to not lose ground?

What is the optimum balance of spending?

• More policing to generate more arrests?
• More prisons to hold inmates longer?
• More prosecutors and judges to increase the conviction rate?

The answers on spending aren’t obvious.

• There is some economic evidence that longer sentences are an important aspect of crime fighting.
• Long sentences have a deterrent affect on other criminals
• They also have a multiplying affect on prevention in that the convicted criminal commits many crimes for every one he’s arrested for.
• More is better, but what’s the best balance among tactics and other investments a city can make?
  

What are the policy changes that we should pursue?

• Given that longer sentences have a profound affect on crime rates, should we seek power to appoint tougher judges?
• Should we push for harsher punishments for first time offenders?
• Should we do more to publicize the efficacy of judges and prosecutors in keeping us safe?

There is research that helps to guide the development of policy and budget in this area. Given that most of Trenton’s budget is spent on crime fighting, those that are responsible for it, should feel obligated to answer the above questions and provide research citings.

Perhaps some of my city critic colleagues that attend more council meetings than I am able to, will help ask the tough questions.

]]> http://livingonthenet.com/wordpress/questions-the-mayor-and-police-director-should-anser/feed 0 http://livingonthenet.com/wordpress/an-economist%e2%80%99s-analysis-of-crime%e2%80%99s-impact http://livingonthenet.com/wordpress/an-economist%e2%80%99s-analysis-of-crime%e2%80%99s-impact#comments Wed, 02 Jul 2008 06:44:12 +0000 admin http://livingonthenet.com/wordpress/?p=11 All Trentonians know that our high crime rate isn’t good for the economy. However, not many of us know just how bad it is. It turns out that economists have studied the subject and have asked themselves that very question.

In “CRIME, URBAN FLIGHT, AND THE CONSEQUENCES FOR CITIES”, economists Julie Berry Cullen and Steven D. Levitt worked through quite a bit of crime, census and other data in addition to third party research to build up an econometric model of the effects of crime. It’s worth noting that Steven Levitt later went on to write Freakonomics which is referenced in my earlier article on the economics of crime.

I’ve provided a link to the article but I’ve summarize it fairly simply below. I’ll warn readers of the report in advance that this is an academic paper and some of the conclusions it draws are a bit disturbing to the politically correct mind.

Each crime pushes one of us away

Levitt and Cullen have found that each FBI index crime leads directly to one person moving out of an inner city, like Trenton. That’s bad enough but high income residents are 5 times more likely to leave due to crime than average. Families with children are 3 times more likely to leave. Finally crime rate is negatively correlated with de-population, home values and per capita income.

These conclusions alone are quite damming for Trenton. However, it gets worse.

If a city becomes de-populated the crime rate goes up because the criminals stay behind. Also, because high income people leave poverty becomes more concentrated.

Those that are left, have to pay the bill

Now that the crime rate is high and poverty is concentrated, real estate values go down and therefore so do property tax revenues. Also, sales tax receipts are down because disposable income is down. On the other hand, the concentrated poverty results in a higher per capita cost to serve the population including a high proportion of the budget allocated to police protection.

As a result, the researchers find that crime rate differences between the top quartile of cities and bottom accounts for 40% of tax revenue. This is easy to see in reviewing Trenton’s budget.

Well now you know. Every crime in Trenton chases away one more resident and 88% of the time it will be a high income resident.

Those of use that stay are left holding the financial bag and the terrible budget burden of funding a disproportionately high police presence and level of social service support including education.

A lower crime rate won’t fix things

The news gets even worse. Changes in crime rate don’t affect immigration rates into a city only emigration out. Meaning, the impact of crime mostly affects people already living in Trenton and a lower rate won’t attract new residents. The people that move to Trenton are moving here for some other reason.

The effect of this imbalance in cause and effect is that net migration can be turned around but only if there are strong new reasons to attract residents to the city. The upshot of this logic is that any increase in crime prevention that leads to an eventual lowering of the crime rate must be accompanied by separate efforts to increase the population of high income residents.

Deterrence does help

On a positive note there is evidence, according to Levitt and Cullen that tough policing practices coupled with tough sentencing are deterrents to crime. However, they and other economists, suggest that both a high arrest rate (getting criminals off the street) and long sentences (keeping them off) are necessary to both eliminate the 15 crimes committed by each by the arrested criminal and to deter his peers from trying their luck.

These numbers can be used to calculate the benefit of tougher crime policies. I should point out that these are exactly the type of mathematical relationships necessary to build up an urban dynamics model of a city. Missing are similar relationships related to attracting new residents to Trenton.

Currently, many Trenton activists are calling for a presence by the NJ State Police in patrolling our streets with the expected effect of increasing the arrest rate. I think this is a great tactic. However, higher arrest rates alone just won’t solve anything.

The tactic needs to be coupled with harsher criminal punishments. Rarely do Trentonians complain about our judges but perhaps we should. I can’t tell you anything meaningful about any of them. Do Trenton’s criminals get the book thrown at them? The anecdotal evidence from the police force says we have a bit of a revolving door. Perhaps we should take a break from criticizing Santiago and Capt. Sleepy and start in on the judicial system.

None of this will help without economic development

Likewise, what was the last city policy you can think of that actually made the city more attractive to high income immigrants? Perhaps if we could couple the train station plan with useful policies that increased the attractiveness of our city we’d have something.

In the case of turning Trenton around, half measures aren’t enough. The city has been in a viscous cycle of decline for quite some time. We’ve tried many uncoordinated efforts and to our collective surprise nothing has helped. Maybe it’s time we tried a coordinate approach.

The facts speak for themselves – cities with high crime rates generally have poor growth rates. Cities that have somehow improved their crime rate do much better.

New York and Washington, DC are great examples of cities that have aggressively attacked their crime issues and have unleashed unprecedented economic growth. Washington used to be the most dangerous city in America and New York was supposed to be leading the country into chaos.

Looking just at New Jersey, two cities, New Brunswick and Newark are overcoming their crime issues and generating positive population growth. Meanwhile, Asbury Park, Trenton and Camden continue to scare their populations away.

Lot’s of people have lots of things to say about crime. The police say they do all they can and blame the courts for a revolving door justice system or the public for not cooperating. Children’s advocates blame lack of after-school programs. Civil rights leaders blame racism. Parents blame everybody and Bill Cosby blames parents.

A different way to look at this is by understanding the economics of crime. In the end, we are all driven by an innate internal calculus that either rationally (due to good information and clear thinking) or irrationally (due to false information and deluded thinking) lead us to do what we do. This is the basis of economic thinking and has a lot more to do with survival of the species than just dollars and cents. For a really wonderful explanation of how the economic mind works I strongly recommend readers of this blog to also read the book Freakonomics by Steven Levitt and Stephen Buner.

Freakonomics famously recounts the story of gang drug crime in Chicago in an essay called “Why do drug dealers still live with their moms”. It explores the motivations behind becoming involved in the drug trade. The analysis compares the likelihood of becoming a wealthy drug lord to the likelihood of becoming an A-List Hollywood star. It also points out that the average street pushers makes less than minimum wage. Meanwhile the risk of death at any level in the gang is higher than any other job in the world, including the military, test pilot or policeman.

What drives these young men is a well oiled system of misinformation and delusional thinking likely driven by not only gang peers but also by the media.

The low level gang member, lacking his own copy of Freakonomics, has made an irrational decision to risk his life to join the drug trade.

Let’s turn this into an example:

John has a vague notion that if he works hard at drugs he’ll almost surely, let’s say with a 75% confidence level become a millionaire drug lord. He knows there are risks, but John thinks he’s pretty tough so his risk of getting shot is no more than 1% and even if he’s arrested, let’s say a 50% chance, the likelihood of doing hard time is no more than 10%. John hasn’t written down these percentages but if you pressed him, this is what he’d come up with.

John’s not completely wrong. He’s about right with his arrest statistics because he has many data points (most of his friends have been arrested and none have done hard time). However, he’s way off on the life expectancy estimate and not even close on the odds of becoming a drug lord.

However, given the probabilities, as John sees them, the risk is worth the reward. This is especially true if he doesn’t have any credible alternatives. That is, he’s not done well in school and doesn’t understand the straight job market anyhow. John doesn’t know that a mid-level corporate manager will make much more in a lifetime than a drug lord especially since that life-time will likely be three times as long.

So what can be done to change the economic equation for John?

Look for a ReinventTrenton blogs where we explore John’s economic model in Trenton. We’ll cover the following exciting topics

Increasing the cost and risk

• The economics of police prevention
• How economic development prevents crime
• How cranky old white guys can save the day

Reducing the profit

• Suing your local drug dealer
• Take the bling, then take her ring

A credible alternative to crime

• Do mentoring programs work
• Are schools the answer
• Jobs won’t help

More clearly communicating the above

• Public humiliation as a weapon
• The Most Wanted earnings list
• Homeboys: where are they now
• Dan’s list