Economic and Social Effects of Crime

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Economic and Social Effects of Crime

Crime is a major part of every society. Its costs and effects touch just about everyone to some degree. The types of costs and effects are widely varied. In addition, some costs are short-term while others last a lifetime. Of course the ultimate cost is loss of life. Other costs to victims can include medical costs, property losses, and loss of income.

Losses to both victims and nonvictims can also come in the form of increased security expenses including stronger locks, extra lighting, parking in more expensive secure lots, security alarms for homes and cars, and maintaining guard dogs. Considerable money is spent to avoid being victimized. Other types of expenses can include a victim or person fearful of crime moving to a new neighborhood, funeral expenses, legal fees, and loss of school days.

Some costs of crime are less tangible (not easily or precisely identified). These kinds of costs can include pain and suffering, and a lower quality of life. There are also the traumatic impacts on friends and the disruption of family. Behavior can be forever changed and shaped by crime, whether it be weighing the risks of going to certain places or even the fear of making new friends.

Crime not only affects economic productivity when victims miss work, but communities also are affected through loss of tourism and retail sales. Even the so-called victimless crimes of prostitution, drug abuse, and gambling have major social consequences. Drug abuse affects worker productivity, uses public funds for drug treatment programs and medical attention, and leads to criminal activity to support the expenses of a drug habit.

Communities and governments spend public funds for police departments, prisons and jails, courts, and treatment programs, including the salaries of prosecutors, judges, public defenders, social workers, security guards, and probation officers. The amount of time spent by victims, offenders, their families, and juries during court trials also take away from community productivity. By the beginning of the twenty-first century it was estimated that the annual cost of crime in the United States was reaching upward toward $1.7 trillion.

Growing interest in the costs of crime

Though crime has always posed economic and social effects on U.S. society throughout history, the actual costs of crime did not become a major political issue until the late 1920s. Because of the rise of organized crime during the 1920s, chiefly from selling illegal liquor during Prohibition (1919–33), newly elected President Herbert Hoover (1874–1964; served 1929–33) created the Wickersham Commission in 1929 to assess crime and punishment in the nation. The commission released fourteen volumes of its findings in 1931, reporting on the major influence of crime on American society.

Further studies focused on victim expenses, costs for security, and the cost of the criminal justice system. Crime and its costs and effects soon became a dominant issue in American politics, often influencing voters after World War II (1939–45).

Determining costs

Estimating the costs and effects of crime is important to authorities in the criminal justice system. Policymakers weigh the various costs posed by different crimes to determine which crime prevention measures have the highest priority. Researchers have tried different approaches in assessing the costs of crime. One approach has been to look at jury awards in civil suits. Juries in civil trials are often asked to determine the amount of money to be awarded to victims of crime. They consider medical expenses and property loss as well as compensation for pain and suffering.

Another source is insurance and government claims. When a victim suffers losses from crime, he may receive compensation from insurance companies or government relief agencies. These figures can also be used in determining the costs of crime. A third source in measuring the cost of crime is to study how much a person is willing to pay to avoid crime through such actions as purchasing expensive security devices.

Using these various sources, studies have estimated the cost associated with various types of crime. For example, the cost of larceny (theft) in 1993 was around $370 for each victim while murder was $2.9 million. One study estimated the savings to society by diverting a high-risk youth from potential crime was as much as $1.5 million per youth.

The High Cost of Crime

The following annual figures estimating the various costs of crime in the mid-1990s come from the National Institute of Justice and a study by David A. Anderson called "The Aggregate Burden of Crime." The study was published in the October 1999 issue of the Journal of Law and Economics. Crime costs are based on approximately 49 million annual crimes and attempted crimes in the United States.

$105 billion each year in medical bills and lost earnings; $450 billion when including pain and suffering and lost quality of life

$400 billion to operate corrections facilities

$130 billion for crime prevention and loss of potential productivity of criminals and inmates

$1 trillion when including the cost of the criminal justice systems, as well as private individuals and companies taking security measures

$426 billion of the $450 billion is related to violent crime, the remaining $24 billion to property crime

$4,118 is the annual cost of crime to each U.S. citizen

$603 billion lost to the economy from fraud and unpaid taxes

$500 million of money or valuables taken in robberies

$15 billion in property stolen

$127 billion from rape offenses; assault $93 billion, murder $61 billion, and child abuse $56 billion

$45 billion paid by insurance programs to crime victims

$8 billion paid to victims by U.S. government annually for restorative and emergency services

3 percent of all medical expenses in the nation is related to violent crimes

1 percent of annual U.S. earnings is equal to wage losses from violent crime

10 to 20 percent of mental healthcare costs are attributed to crime

$54,000 is the average cost of each arson incident; $31,000 for each assault

$25,000 to $30,000 is the annual cost of an inmate in prison

4 out of 5 gunshot victims end up on public assistance and uninsured, costing the government $4.5 billion annually

(From the National Center For Policy Analysis Web site at

As opposed to street crime, white-collar crime is considered far more costly to society. It was estimated in the mid- 1990s that white-collar crime cost U.S. businesses as much as $400 billion a year, or about 6 percent of total revenue in the nation. Consumer fraud alone cost Americans about $45 billion each year.

Various agencies and organizations maintain statistics on the cost of crime in the United States though none cover the entire range of costs. They mainly focus on different aspects of criminal justice. The Bureau of Justice Statistics keeps track of expenses required to maintain effective criminal justice systems around the nation including employment costs. Other data addressing the costs to victims is available through the National Crime Victimization Survey (NCVS). No data gathering group, however, can accurately assess all of the long-term costs of crime.

Community efforts to avoid crime costs

Crime can cause property values to decline in certain areas of a town and even increase the cost of housing in other areas not suffering from crime. Studies have shown certain
neighborhoods with high crime rates will maintain these rates unless there is a community-wide effort to stop it. In the early 1990s studies concluded that certain neighborhoods become crime ridden as the number of abandoned buildings and cars increase, if there are unkempt vacant lots, and broken windows. Such areas tend to attract criminal activity. Crime can grow from minor offenses to major ones.

Fear of crime in these areas steadily increases and the resulting economic and social effects can span out into the surrounding city. Residents become more withdrawn and defensive and less committed to their communities. The very social fiber of the community is weakened. Some communities adopt neighborhood watch programs to revitalize the community or avoid its decay.

The rising cost of crime prevention and criminal justice systems reflects the rising cost of crime to society. Studies in the early 1990s suggested that for every one dollar spent on crime prevention programs, seven dollars were saved in crime victimization costs. Not only is the cost of crime reduced, but community tax revenues increase due to higher earnings and greater economic productivity, costs of social service programs are reduced, and healthcare expenses fall.

Such cost savings have led more communities to focus on crime prevention programs. These programs, both outside prison walls and within, concentrate on attacking the causes of crime and juvenile delinquency including poverty, inadequate housing, broken families, and limited educational opportunities. These programs can include increased vocational training, healthcare facilities, family counseling, and family planning.

Prison programs designed to prevent released offenders from becoming repeat offenders include education programs, employment training, and substance abuse treatment.

Making personal adjustments

Though violent attacks account for only about 10 percent of crime, they affect people's lives the most. Fear is a major factor influencing how people lead their lives. Violent crimes are not only the most costly crimes but also the most reported in the media. The high costs and publicity further raise the fear of crime. The costs are both monetary and emotional.

Most people fear attacks by strangers despite the fact that most assaults are by someone familiar to the victim. As a result people will seek daily routines that provide a feeling of security. These routines, however, can have the opposite effect. If a person follows the exact same routine every day, a criminal can easily predict where that person will be at a certain time. In such cases, the most important factor in crime prevention is to be aware of one's surroundings and avoid high risk areas.

A crime victim or someone especially fearful of crime may alter his or her normal routine, take self-defense classes, avoid certain areas, and even carry weapons. The hazards in every part of life are constantly being determined in a person's mind to estimate the possible danger. In crime prevention, law enforcement uses a similar calculation of risks in deciding where
to assign patrols or to alter an area to reduce potential of crime. Such measures might include adding more lighting or reducing the amount of cover in a park where a criminal might hide in wait of a victim.

Who crime affects most

The social effects of crime vary among the various segments of the general population. Statistics show that men are far more likely to be victims of crime than women. Studies show that women, however, fear crime far more than men. Other patterns reveal that the elderly fear crime more than younger adults, and children fear crime more than adults.

While women have less chance of being a victim, the crimes they suffer are more violent including rape and domestic abuse. Another factor is that women, the elderly, and the very young are physically weaker than the common offender making them feel more susceptible to crime.

Regarding factors of race and ethnicity (people who share a common culture), minorities, particularly black Americans, fear crime far more than whites. Studies show blacks are much more likely to be a victim or witness a crime. An exception to this rule is that whites commonly fear young black males. Based on these two patterns, it is evident that a strong racial distrust is another social consequence of crime in the United States. Race and ethnicity also strongly influence people's perception of crime in particular areas, which in turn influences their daily behavior patterns.

Crime and politics

Given the extensive economic and social costs of crime, it often has a major impact in politics. Since the 1970s calls for law and order have led to tough stances by politicians on crime. Public safety is a major issue, and the fear of crime is frequently used by politicians to influence voters. Even with the decrease in crime rates through the 1990s, fear of crime remained a political issue since building more prisons, making sentences longer, and expanding police forces require taxpayer dollars.

In the early 2000s the cost of crime increased dramatically after the terrorist attacks in New York City and Washington, D.C., in September 2001. The attacks killed three thousand people and presented staggering costs in terms of destruction. Congress created the Department of Homeland Security, which became operational in March 2003. The department's budget in 2004 was almost $37 billion, which was used to increase security in airports and at our nation's borders, and to develop counterterrorism and bioterrorism (the use of biological weapons such as poisons or gases) measures. Fear of further crime or terrorism drove up the costs of crime and in many cases drastically altered people's daily habits as the War on Terror unfolded.

Costs Affecting the Offender

Victims and their families are not the only individuals to directly suffer from crime. The offender and his family also suffer costs. There are lost wages of the offender while in jail or prison, lost future earnings because of the criminal record, loss of productivity to industry, and loss of a family member to others including children.

Offenders are often forced to pay a fine for their crime, the oldest form of criminal penalty in history. They may also face civil penalties to compensate the losses of their victims. Fines and civil penalties may be paid not only to the crime victim but also to local communities to reimburse the costs of prosecuting cases.

For More Information


Anderson, Elijah. Streetwise: Race, Class and Change in an Urban Community. Chicago, IL: University of Chicago Press, 1990.

Beckett, Katherine. Making Crime Pay: Law and Order in Contemporary American Politics. New York: Oxford University Press, 1997.

Cook, Philip J., and Jens Ludwig. Gun Violence: The Real Costs. New York: Oxford University Press, 2000.

Felson, Marcus. Crime and Everyday Life. 2nd ed. Thousand Oaks, CA: Pine Forge Press, 1998.

Gray, Charles M., ed. The Costs of Crime. Beverly Hills, CA: Sage, 1979.

Madriz, Esther. Nothing Bad Happens to Good Girls: Fear of Crime in Women's Lives. Berkeley, CA: University of California Press, 1997.

Skogan, Wesley G. Disorder and Decline: Crime and the Spiral of Decay in American Neighborhoods. New York: Free Press, 1990.

Welsh, Brandon C., David P. Farrington, and Lawrence W. Sherman, eds. Costs and Benefits of Preventing Crime. Boulder, CO: Westview Press, 2001.


Anderson, David A. "The Aggregate Burden of Crime," Journal of Law and Economics, October 1999, pp. 611–642.

Web Site

National Center For Policy Analysis. (accessed on August 20, 2004).

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Economic and Social Effects of Crime

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