Profiting from Crime (in a Recession)

I’ve been wondering if hard economic times would cause people to commit more crimes. The Wall Street Journal wrote an interesting article about this last Wednesday: “Evidence Suggests That People Don’t Suddenly Commit Murder After Losing Their Jobs; But Theft, Yes” (subscription required). You can read the entire article for free at Financial Armageddon. Here are some money quotes:

By and large, the studies show that lousy job markets — particularly for young or unskilled men — are linked to more thefts. But the connection isn’t so plain with violent crimes like murder and rape. That bolsters the theory of a more rational criminal: When the economy flags, people inclined to crime opt for dishonest income; they don’t start shooting people.

……

In a 2002 study, Eric Gould, Bruce Weinberg and Mr. Mustard sliced up nearly two decades of wage, unemployment and crime data, using regression analyses to probe whether economic factors were causing changes in crime rates. The relationships were strong for crimes like burglary and larceny. Violent crimes were harder to pin down.

……

In a forthcoming paper, Naci Mocan at Louisiana State University studied state-level unemployment and crime data, as well as the histories of a cohort of 27,000 people born in Philadelphia in 1958. For both sets of data, property crimes showed a link to unemployment, while murder and rape had little connection, if any.

The evidence, then, seems to support the idea that economic recession and unemployment are correlated with property crimes like theft, though not so clearly with violent crimes like murder. Makes sense.

If you want to look into profiting from crime, take a look at Corrections Corp of America (CXW), the largest private owner of prisons. They house and operate prisons for governments for money. Interesting stock.

Comments

[henarl:]

The problem with this analysis is that armed robbery, which is a property crime, sometimes escalates to violent assault and even murder.

Apr 21 05:11 PM

[Old Trader:]

I have to agree with henart on that.

Apr 21 09:07 PM

[jaymar:]

CXW just commited its own crime. After posting record growth AGAIN it told its employees they will get no raise this year! They claim it's the economy and I guess they think thier employees are too stupid to read the financials...watch out CXW the unions are chomping at the bit and you just gave them the ammo!!!!!!

May 07 07:14 PM

[Fiquant:]

This is a highly unethical practice of privatizing prisons.
Too much conflict of interest here.
Whats stopping this firm and its lobbyists from having stricter sentences .....and the likes ?

May 08 11:37 AM