The Hindu Business Line : Crime and economics

THE crime rate in Bangalore may be going up. The motive behind the frequent thefts and burglary, the murder of a software executive and the recent shootout at the Indian Institute of Science may be different. Yet, there is some economic motive behind every crime committed. What is the link between economics and crime?

The reward for committing burglary is the proceeds received from the sale of the stolen articles. The reward may be non-monetary too. The terrorists may, for instance, demand the release of their fellow terrorists held in prison.

What about the costs of crime? If a person is not a burglar, he may be engaged in some gainful employment, perhaps, earning Rs 10,000 per month. The cost of engaging in a crime is the opportunity lost in earning Rs 10,000 a month.

Of course, the opportunity cost is low for criminals. If a person can earn a decent salary, why would he engage in criminal activity? Which brings us to the second and the most important cost of crime — punishment. If a criminal is caught, he may be jailed.

So, just like you weigh the pros and cons before starting a business or taking up a new job, a criminal will also weigh the costs and benefits before engaging in unlawful activity.

Consider a person who does not buy a ticket in the local train. The cost of the crime is the fine levied if caught by the ticket inspector. The reward is the money saved by not buying the ticket. A person will commit this crime if he believes that the benefits far outweigh costs. Criminals in Bangalore may be no different.

(The author is Head- Research at Navia Markets.)

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