Facts speak louder than statistics

Tuesday, 20 January 2015

Criminal Economics.

Crime would appear to be a necessity to the economy.

Basically Australia has a post industrial service economy which was underwritten by a mining boom.

Because one major economic performance measure looks more towards sales and services made by companies and not by the manufacturing of goods it’s pretty much the more sales the better.

Where crime fits in to the picture is really quite simple, a criminal breaks into your home and for example steals your DVD player and other sundries, there are then several expenses you face.

First of all you hopefully have insurance, your insurance company has been receiving money from you and the money you have been paying has been contributing to the insurance company’s bottom line.

Then you need to get the break in damage repaired. Usually someone needs to be employed for this task. That person will be doing a job and earning money that they otherwise would not be earning.

Then you need to buy a new DVD player and other items, retailers make sales that they would not otherwise be making if a crime had not been committed.

If you are assaulted maybe you will need medical treatment, medication will be prescribed, money for the chemist and if your clothes are damaged they will need to be replaced which means more money for a clothes retailer.

Maybe the experience has traumatised you so you seek help from an appropriate health professional, another patient for them and more money for their practice or maybe you just start drinking heavily which is more sales for a bottle shop.

Money is spent that otherwise wouldn’t have been spent. 

Because of crime more money is spent and in the process it’s helping keep people employed, helping keep businesses running and helping the economy so if a crime is committed against you don’t feel bad because it’s actually for the greater good since crime is helping this nation to have a strong economy.


Wayne Wilson said...

I just read that link Jeremy. I would disagree with it, I think crime takes far more away from the economy than contributes. It's an interesting point though.

Jeremy Michaels said...

Thank you for taking the time to read it, I'll qualify the article by saying that from a solely humanitarian aspect crime seriously reprehensible but I'm looking from the perspective that the strength of the economy is largely measured in sales and profits, the more the better because when you're dealing with a service economy you are largely using smoke and mirrors. It's only strong and the money in that economy is only strong because people perceive it to be as opposed to it actually being that way when you look at a largely industrial economy which has actual proof, as in what is manufactured, as to it's output. If crime was really a big drag on the economy the governments would act on it because there'd be less tax dollars coming in.

Wayne Wilson said...

I'm a bit inclined to look at the balance...when a parent purchases a gram of speed, that's the equivalent amount of money lost to a supermarket or savings account. The cost to the State of hospitalising and perhaps fully subsidising the recovery of a badly beaten person would outweigh the economical benefit gained by their treatment.

Wayne Wilson said...

Perhaps it's time for a whole new approach to how crime is dealt with, and what constitutes a crime. Obviously, there are some crimes such as rape and murder which can only be dealt with by incarceration. Perhaps it may be a good idea to look at regulating and taxing a drug market, and in doing so undermining a critical source of income for organised crime groups. I doubt if Australia or Queensland would be that forward thinking however

Jeremy Michaels said...

Well at least a regulated drug markets profits could be counted towards the GDP and deliver taxes. One requirement I feel would be removing the "I was off my face" defense in criminal cases. If someone took drugs by their own free choice then they need to accept responsibility for their own actions. If someone can't control themselves then we need to say "then don't take drugs".

Jeremy Michaels said...

On the point of the cost to the State of hospitalising and perhaps fully subsidising the recovery of a badly beaten person would outweigh the economical benefit gained by their treatment, if the money used to subsidise the recovery was just handed over to a business for no reason then people would question it whereas the cost of the hospitals is an accepted cost. Also the money given to the hospital finds its way back into the economy when it is used to buy hospital equipment from businesses or paying hospital wages.

Unknown said...

funny you should say that...in the US the government breaks directly into your bank account...

Unknown said...

This is the problem, people do not understand the broken window fallacy. The author states that "Money is spent that otherwise wouldn’t have been spent.", but that is wrong the money would of been spent on something else. So based on the story above you would of still had you DVD and other things the thief stole, and your money to spend on other things. You would of had a whole window and your money. You would of had you health and been able to work and produce something and in the process kept your money.

Even if you put your money in the bank and did not spend it on things, unless the above happen, the money is spent by others.

The bank loans that money out to home owners to purchase a new house. That new house was built by labor from others, and they were paid for it. The products in that new home were purchase and those that produced them were paid for their labor. This continues down the stream, until you get to those that extract the raw materials.

The bank could also lend the money, so that others can purchase a new car, a new boat, or a new RV. Each of these items spreads the money that is just sitting in the bank, to others. The same thing happens when people purchase things using credit cards, the money to back those purchases come from the money that is just sitting in the bank, not being spent.

Sorry you need to read some book on basic economics.

Jeremy Michaels said...

Thank you for your comment and your suggestion but I can assure you I do not need to read a book on basic economics, I wouldn’t have done any kind of economic article without some knowledge in the field.

As I have previously commented the strength of the economy is largely measured in sales and profits.

Money is being spent that would otherwise not be spent, tradespeople repairing damages, the people dealing in mental health etc. have business and therefore jobs that otherwise wouldn't have if the crimes hadn't been committed.

And on top of that many will still go out of their way to get what they would have brought if they hadn’t been victims of crime because more often than not they have obtained that new DVD etc. using insurance money and the only reason they have insurance is because the crime rates and therefore the likelihood of being robbed is high.

More revenue earning work is created for the insurance companies. Their assessors and private detectives are kept busy investigating possible claim frauds etc.

If all this work didn’t exist jobs wouldn’t miraculously appear for these people elsewhere since capitalism works on supply and demand. If there is no demand then there is no work in a particular field.

Service economies are not big on manufacturing jobs but any economy requires money to circulate. If there is too much money in an economy its value is not that high.

If your economic measures are sales and profits with limited money then you need to keep what money you have available in regular circulation.