April 20th will mark the one year anniversary of the massacre at Columbine High School in Colorado. While the event was tragic, it represents only a small part of the total amount of crime in the US in any given year.

A recent paper by David Anderson of Centre College in the Journal of Law and Economics tries to tackle the monumental task of quantifying the total yearly cost of all crime in the US. The thought experiment to conduct is to ask how much we would save if we lived in a totally crime free environment. For those of you who are impatient, the total is 1.7 trillion dollars per year.

So where does this number come from?

Crime related production
A significant part of the U.S. economy is devoted to the production of goods and services that would be unnecessary of we lived in world with no crime.

Think of all the money spent on locks and safes ($4 billion), police protection (47 billion), surveillance cameras (1.4 billion), jails (35 billion), computer virus screening and security (8 billion), airport security (448 million), and even guard dogs (49 million). The biggest part of this production comes from drug trafficking ($160 billion). A crime-free society would mean that we would not need federal agencies to fight crime (23 billion) and we would not need the medical care to treat the victims of crime (8.9 billion) or children born with exposure to cocaine and heroine (28 billion).

The total of these and other sub-categories adds up to over $397 billion annually.

Opportunity costs
In addition to the direct cost of resources devoted to crime, there is a sizable loss of time by people who are potential victims of crime and by those who have committed crime. And as the saying goes - time is money.

How much time do you spend locking and unlocking your home, office, car, and gym locker each and every day? Anderson suggests that 2 minutes a day is a reasonable estimate for the average time spent per person per day, and that people spend on average another 2 minutes looking for their keys (based on a survey and by direct observation).

So, 4 minutes a day in total is wasted because we fear leaving our possessions unlocked. This may not seem to be much until you consider that there are 365 days a year and around 200 million adults in the country. Multiply this by the hourly value of your time (which is given by what you could be making from working for an extra hour or having an extra hour of leisure), and this gives a whopping $89.6 billion cost in lost time simply from locking and unlocking!

In addition, if there were no crime, there would be no criminals. Instead of working or sitting idle in jails, these people - over 1 million of them - could be productive members of the economy, chalk up another $35 billion. Also, there is much time lost in planning and executing crimes - 4.1 billion worth.

Then add to that the value of work time lost by victims (876 million) and the time spent on neighborhood watches (655 million).

The grand total for lost time comes to $130 billion.

Life and Health.
Above, we accounted for the cost of medical expenses, but surely we should also value life and health in addition to the direct costs incurred by the medical system.

With the approximately 72,000 crime related deaths a year and the 2.5 million crime related injuries every year, we would expect this to be a large number.

To get the total, we now have to put a dollar value on a life and also on injuries. No problem, a life is worth $6.1 million and an injury is worth $52,637. (See sidebar).

With these numbers, the total cost of crime for lost life and health comes to $574 billion.

Transfers
In addition to the above we might wish to add the cost of property and money that is stolen or obtained through fraud.

Included in this category are fraud at work ($203 billion), unpaid taxes (123 Billion), health insurance fraud (108 billion), auto theft (8.9 billion) and many others. In case you were wondering, coupon fraud racks up $912 million annually.

But should we count this as a cost of crime? It simply represents money (or property) moving from the hands of one person to the next - your loss is my gain, and so the net cost may be zero! However, there are also significant resources devoted to committing these crimes, and so there may be a loss.

In any case, the total comes to $603 billion.

Total

So lets review, the table below shows the total costs of crime, and it comes to either 1.7 trillion including transfers or 1.1 trillion without.

The total bill then comes to $4,118 per person per year -- crime is not cheap.
 
 

Links From the Web

David Anderson's web site
The Aggregate Burden of Crime: Download

An exploration of the total cost of crime in the US. | Posted April 13, 2000 01:10 AM by John Irons