Economic effects of anti-crime security measures

Security measures aiming to manage crime risk impose economic effects on society, the so-called economic effects of anti-crime security measures.

Description
Urban security has a cost at the point of build or refurbishment, and typically, the benefits come later. This page attempts to introduce the possible types of benefits and the costs. The impact of security measures on actual criminal behaviour is addressed elsewhere in Securipedia.

Direct (primary) costs of security
There are several types of security measures. Some of these measures involve monetary expenditures (e.g. locks, money safes, alarm systems, security guards, insurances, etc.), and others only involve opportunity cost, such as the time required to take protective measures (e.g. training a guard dog, or avoiding a high crime area). Public spending on security measures could also involve investment in civilian matters such as education, prevention and protection programmes in addition to security-related spending on judiciary, police and military items.

The magnitude of the direct (primary) costs of security measures is significant, but very difficult to quantify in financial terms. One of the main reasons for this is that a lot of expenditures on safety measures have multiple purposes, and do not automatically translate into higher costs or spending.

Examples of direct costs:
 * A Dutch study by SEO economic research(2007) states that preventive measures (including insurances) are primarily deployed to prevent property crimes and vandalism (83 percent of all registered criminal offences in the Netherlands). The measured total prevention costs for property crimes are estimated by SEO at almost 3 billion euro in 2005; The insurance costs at 275 million euro, and the insurance costs for vandalism at 178 million euro.
 * An internet survey of the costs of security related to organising the Summer Olympics illustrated that these costs increased from 2 to 3 percent in the nineties, to more than 6 percent for the Summer Olympics in Athens (2004) . According to an article by The Guardian, the projected security costs for the 2012 London Olympics and Paralympics are estimated at GBP 553 million (± 5.7 percent of the total budget of GBP 9.3 billion).
 * US Real estate studies suggest a sharp increase in the cost of security in privately owned buildings since 2001, covering items such as identity cards, scanners, security cameras and security personnel.

Direct costs can have both a temporary and permanent character. This distinction is relevant since, for example, security cameras require significant maintenance next to the start-up costs.

Indirect (secondary) costs of security
Security measures can also have an indirect (secondary) economic impact on the home economy.
 * Tighter security, for example, may imply longer delivery times and disruption of global supply chains and of finely-tuned just-in-time delivery systems.
 * According to OECD simulations, measures introduced in the wake of September 11 could increase trading costs by 1 percent, leading to global welfare losses of around USD 75 billion per year. According to Brück, a one-day delay in border controls has been estimated to generate costs of 0.5 percent of the value of the goods (Hummels, 2001).
 * A number of researchers have concerns that security measures just displace crime to those that are less protected. Yet, according to the British Home security department "the weight of evidence on displacement (and there are various types) is that it is at worst only partial".
 * Hobijn (2001), nevertheless, claims that on the long term neither private nor public spending on security measures have a major impact on the economy (although also the indirect costs are very difficult to predict/measure).

Benefits of security
Security measures intend to increase the level of security, deterring crime, and/or at least mitigating the negative economic impact of crime. In essence, they increase actual and/or perceived risk to the offender and his or her effort, changing the behaviour of the criminal. Put differently, anti-crime security measures positively influence the costs of crime.

To make the concept of benefits of security measures more concrete, the following equation calculates the net benefit of a measures given estimates of its impact on crime and its costs:

NB = [RISK] x [Reduction of $$RISK_s$$] - $$C_s$$ (1)

where:
 * NB is the annual net benefit of a security measures
 * RISK is the likelihood of an event realising X Impact.
 * Reduction of $$RISK_s$$ is the impact of the security measure in terms of percent risk reduction.
 * $$C_s$$ are the estimated cost of the security measure (annually)

According to the economist Brück (2004), the benefits of security measures that mitigate crime are even harder to determine than the costs. However, in the view of an European research group ", the universal growth in the possession and use of private security measures by households and companies over the past few decades is a significant factor inhibiting crime". The benefits of security include direct effects (such as less property damage, loss of lives, health and physical endowments) and of indirect effects on the economy.

Direct (primary) benefits of security
The inflicted damage of crime (in monetary terms) is the start of an estimation of the economic benefits of security measures since they constitute the direct benefits of the mitigation measures. Examples of direct economic impacts of crime are: loss of property, physical damage to property, business interruption, mental and physical harm, insurance transactions.

Crime rates in Europe and the US decreased since the early nineties while spending on security measures have risen steadily. However, there is not such a thing as a direct robust link between crime rates and security measures, since other factors like a shift in crime (more burglaries instead of robberies), growing international trade, and an increase in terrorist events (in some western countries) are also important factors that explain the increase in demand for security measures.

Indirect (secondary) benefits of security
Improvements in security have similar indirect (secondary) economic effect as an improvement in urban environment, thereby raising the real wealth of households, companies and public authorities in the affected area. Specific examples of indirect effects are:
 * A reduction in insurance premiums
 * The opportunity cost of police presence
 * An increase in tourist income and tourist employment
 * A decrease in long-term health costs (due to the reduction in victim-hood and an increase in psychological well-being)
 * A reduction in the carbon cost of crime
 * A reduction in costs of securing void areas
 * Less people who feel forced to move to another home

Related subjects

 * Economic main page
 * Economic impact
 * Economic impact of urban planning
 * Economic impact of security threats
 * Economic impact of security measures:
 * Economic effects of anti-crime security measures
 * Economic effects of anti-terrorism security measures
 * Economics of criminal and terrorist behaviour
 * Economic tools
 * Economic output