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The Economic Impact of Crime Transcript

March 2009

Moderator: Welcome to the Federal Reserve Bank of Atlanta's EconSouth Now podcast. Today, we're joined by Dr. Robert Friedman, professor of Criminal Justice at Georgia State University in Atlanta. He'll be speaking about the economics of crime. Thank you for joining us today, Dr. Friedman.

Robert Friedman: Pleasure to be here.

Moderator: To get started, how do you expect the downturn in the economy to impact the crime rate?

Friedman: Well, typically, when we look at the last 40, 60, and perhaps more years for which we have data, it appears that when there's a downturn in the economy there's an increase in what we call street crime, violent crimes, and property crimes. It's not simply the rise in crime that provides the whole picture. I think we also need to look at the societal expenditures for, say, security measures or the total costs of a larger number of people that go through the criminal justice system. In addition to the direct cost of crime there's also indirect cost of crime, such as days of work lost, injuries, treatment in hospitals, and so on and so forth, and that could pile up to even more significant numbers. If we talk about not just traditional crime, but if we tie the economy into the unfortunate modern plague of international terrorism, then the dangers are even far larger than ever before.

Moderator: In responding to crime, do you think there are better alternatives to locking people up and just building more prisons?

Friedman: Well, it's all an issue of priority, mindset, and then policy and political decisions. There are always alternatives to any social and public policy. The problem with public policy—that if you build prisons, as the saying goes, if you build them they will come, and they will be housed—because with larger number of prison beds you will be able to have more people sentenced to prisons.

With the "three strikes and you're out" sentencing guidelines, more and more people have been ending up in prisons. The U.S. actually has the highest proportion of the population, close to 2 percent, larger than any other country in the world that is being in prisons, that includes prisons and county jails. When you look at all of that, that is quite a tax on society. Now, if you look at the alternatives, sure, there are various diversion programs, there are drug courts, mental health courts, and other kinds of diversion programs that are trying to actually move people away from prisons if there's some hope that they will be rehabilitated and not recidivate back into the world of crime.

Moderator: Of course, in a lot of metro areas, particularly in the south where they're cutting back on the number of police officers walking the streets, it would seem that housing prisoners is the least of the issues with the increasing crime rate. It seems like the bigger issue might be the apprehension of criminals.

Friedman: Well, it's an excellent point, because what you are sort of referring to is the caseload that the police departments have to deal with. And that case load, as indicated before, increases. With the cuts of budgets, we have an opposite effect of actually increasing the caseload per law enforcement officer, and then, if you add to that furloughs and layoffs or freezing of budgets, that could be quite serious.

Moderator: Well, let's shift from the law enforcement side of it with prisons and police officers to the American side of it, the citizen side. One report estimated approximately 14 percent of Americans' income is spent on expenditures related to crime. Now the report talked about some things that are obvious, such as the prisons, the surveillance cameras, offsets for shoplifting, but it also talked about expenses that people might not think about such as extra commuting expense to live in an area that's less crime ridden. So, why do you think Americans are willing to tolerate spending so much money to address crime-related expenses?

Friedman: Well, it's, it's rooted in two ideologies, philosophies, mindsets that basically built this country. One is the principal of home rule, which resulted in the creation of the multijurisdictional structure of law enforcement. That basically means duplication of efforts, duplication of budgets, and some would say even wasteful expenditures. But it is very important to emphasize that the reason that that has taken place is because most of the citizens did not, and still do not, trust the central government, and that's what sort of created the United States: the running away, if you will, from European tyranny. And the notion of the home rule is extremely important and you can see that in, for example, in the metro Atlanta area, you see the cessation of several new cities from counties and the creation of their own police department and fire department because the citizens want to have the direct service that will benefit them and not some general population that they feel they pay the taxes for and do not get the services.

The second ideology—the sense of individualism that is the bedrock of this nation—is also very important. So people will spend the necessary expenses on what they perceive will provide for the general welfare, and that is food, shelter, and security. But, that statement could be misleading, so let me qualify that for a second. The business community does not always spend the money either adequately or sufficiently. For example, corporations do not provide enough training for their employees and their visitors because their argument is that time is money, so evacuating a building for, for half a day doesn't seem to be conducive for business. Yet that's a very short-sighted view because, for the long term, if you do not do that and there's an unfortunate tragedy, and you do not know how to evacuate people well, and in addition to the actual damage you have secondary damage of the evacuation process itself. The cost in terms of insurance, the property and life, is far greater than if the training would have taken place and less of the panic would have been there. The second issue is the spending of money on regular security issues. Corporations typically try to save money wherever they can, which is reasonable and understandable, but security typically suffers from that.

Moderator: Well, let's talk about the Southeast. Does this region face any unique challenges?

Friedman: Well, yes, actually every region in the country, and various places in the world, has its own characteristics that have to do with history, culture, demography, climate, temperatures, being a transportation hub—which metropolitan Atlanta area actually serves as—and all of that can impact the import and export of crime. Namely, how much of the crime is established and generated and maintained locally, how much of it is imported from other sources and other sites. The fact is that in some places, the likelihood of resorting to criminal means might be higher than in other places because it depends on ethics, it depends on culture, it depends on religious convictions, it depends on the extent of public shame, and so on and so forth.

Having discussed all these various factors, typically in the South, because of the climate, because of various cultural heritage, there are a couple of things that are fairly observable here: A) the crime rate is higher, particularly violent crime, but also the sentencing is stiffer, and even within the region, the more you move outside of the metro centers, the stiffer the penalty.

Moderator: Well, Dr. Friedman, I'd like to thank you for shedding some light on crime with us today, specifically the economics of crime. Again, we've been today with Dr. Robert Friedman, professor of criminal justice at Georgia State University in Atlanta. This concludes our EconSouth Now podcast on the economics of crime. For more information, please see the first quarter 2009 edition of EconSouth. On our Web site, frbatlanta.org, you can read our article about this topic. Thanks for listening, and please return for more podcasts. If you have comments, please send us an e-mail at podcast@frbatlanta.org.