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How does crime affect the economy?

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Quick Answer

Crime affects the economy by placing a financial burden on taxpayers and governments because of increased needs for police, courts and corrections facilities, as well as intangible costs including psychological trauma and reduced quality of life for crime victims, according to Scott Erickson. In an article for The Daily Caller, Erickson cites a 1999 study conducted by economist David Anderson that estimated the cost of crime at $1.7 billion annually.

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Full Answer

This cost includes lost opportunities for victims and lost earnings by those serving time for criminal activity. Anderson estimates that each incarcerated person represents a productivity loss of $23,000. His study also estimates asset transfers due to crime at a half-trillion dollars. Asset transfers result from crimes such as insurance fraud, theft and graft. Anderson also estimates a $200 billion cost for the criminal justice system. This includes costs for local, state and federal law enforcement, courts and prisons.

According to Citylab, crime is episodic and does not necessarily go up or down during hard economic times. Studies and statistics show that crime has risen and fallen during times of economic decline, depending on many factors, including location. Criminologists tend to argue that crime rises when the economy falters, while economists tend to argue that crime falls along with the economy.

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