Economic effects of anti-crime security measures

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Households, the private sector (or producers), and the public sector (authorities) invest time and money in the prevention of crime. The avoidance of losses caused by criminal events generates primary and secondary benefits. The costs of crime mitigation contain the relatively straightforward direct expenditures on capital equipment and operational costs. Moreover, the security measures generate various types of secondary effects.

The economic impacts of anti-crime security measures are, in essence, similar to the economic impacts of anti-terrorism measures.

Costs of crime mitigation

Direct expenses of security measures

There are numerous types of security measures aimed at preventing or mitigating criminal events. Some of these measures involve monetary expenditures (e.g., locks, money safes, alarm systems, security guards, insurances, etc.), and others only involve opportunity costs, such as the time required to take protective measures such as training a guard dog, or avoiding a high crime area. Public spending on security measures could also involve consumption and investment in civilian matters (such as education, prevention and protection programmes) in addition to security-related spending on judiciary, police and military items[1].

The magnitude of the costs of security measures is significant, but very difficult to quantify in financial terms, since a lot of expenditures on safety measures have multiple purposes and do not automatically translate into higher costs or spending. An OECD study (2004)[1] estimates the private security sector's global annual turnover at over USD 100 billion. The private sector in the US has an turnover of USD 40 billion a year (Lenain et al., 2002). In Germany, the turnover of the private security sector is thought to be 4 billion euro and in France and the United Kingdom around 3 billion euro. According to Stevens (2004)[2], the industry growth is outpacing economic growth worldwide with 7-8 percent annual growth.

Other examples of direct cost of security

A Dutch study by SEO (2007)[3] 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 organizing the Summer Olympics, illustrates that these costs, increased from 2 to 3 percent in the nineties, to more than 6 percent for the Summer Olympics in Athens (2004)[4]. According to an article by The Guardian[5], 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[6].

Indirect expenses of security measures

Security measures can also impact the economy as a whole. First of all, “tighter security may mean longer delivery times and disruption of global supply chains and of finely-tuned just-in-time delivery systems[7]. 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). Hobijn (2001)[8], however, claims that (on the long term) neither private nor public spending on security measures have a major impact on the economy[9]. Brück (2004), however is a bit more careful since the future costs of security spendings are difficult to predict.

Benefits of crime migitation

According to Brück (2004)[10], the benefits of security measures that mitigate crime are harder to determine than the costs: “They include the prevention of direct effects (such as loss of lives, health and physical endowments) and of indirect effects as well as the inherent benefits of security for risk-averse agents

Investment in police and prisons

According to Levitt (2004)[11], two of the four factors that appear to explain the sharp drop in US crime rates in the 1990s, is the investment in police (5.5 percent) and the increased prison population (8 to 12 percent)[12]. Estimates of Levitt illustrate that the investments in extra police in the period have been attractive from a cost-benefit point of view, just like the increase in spending on prisons[13].

Crime rates in Europe and the US decreased since the early nineties while spending on security measures have risen steadily[14]. 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.

Designing Out Crime

Designing-out crime at the earliest stages in the planning process can be extremely effective in developing safer and more secure environments in which people can live and work[15]. It also aims to reduce fear of crime and, in doing so, helps to improve people’s quality of life. Some examples of successes of Designing out Crime:

  • Vollaard & Van Ours (2011)[16] studied the effect of Dutch government regulations in 1991 regarding burglary-proof windows in all new-built homes in the Netherlands. They conclude that this regulation have reduced burglary in these new-built houses with 1.1 to 0.8 percent annually, a reduction of 26 percent. Hence, the social benefits of the regulation are likely to exceed the social costs.
  • ...

Footnotes and references

  1. ↑ 1.0 1.1 Source: OECD (2004). The Security Economy. ISBN 92-64-10772-X
  2. ↑ Stevens (2004) in: OECD (2004). The Security Economy. ISBN 92-64-10772-X
  3. ↑ SEO (2007). The costs of crime. Commissioned by the Dutch Ministry of Security and Justice.
  4. ↑ Security costs for the Summer Olympics in Athens (2004) added up to USD 1.4 billion.
  5. ↑ The Guardian, December 5th 2011. London 2012 Olympics security costs almost double to £553m.
  6. ↑ Kinum, C. (2004). The Economic Impact of Heightened Security Measures on the Commercial Real Estate Market, Post 9/11. AllBusiness.com.
  7. ↑ Stevens (2004). The emerging Security Economy: An Introduction. Published in: OECD (2004). The Security Economy. ISBN 92-64-10772-X
  8. ↑ Hummels, D. (2001). Time as a Trade Barrier. Mimeo, Department of Economic, Purdue University, West Lafayette/Indiana. In: Brück (2004). Assessing the Economic Trade-offs of the Security Economy. Published in OECD (2004). The Security Economy. ISBN 92-64-10772-X
  9. ↑ Brück (2004), warns to be a bit careful with this conclusion, since the future costs of security spendings are difficult to predict in general.
  10. ↑ Brück (2004). Assessing the Economic Trade-offs of the Security Economy. In: OECD (2004). The Security Economy. ISBN 92-64-10772-X
  11. ↑ Levitt, S.D. (2004). Understanding why Crime fell in the 1990s: Four Factors that Exaplin the Decline and Six that do not. Journal of Economic Perspectives – Volume 18, Number 1 –Winter 2004- Pages 163- 190.
  12. ↑ The other two main explaining factors are the receding crack epidemic and the legalization of abortion.
  13. ↑ Levitt (2004, p.179) states that there is prove that a further increase in imprisonment in the US may be less attractive than an simple cost-benefit analysis might suggest.
  14. ↑ Source: OECD (2004). The Security Economy. ISBN 92-64-10772-X
  15. ↑ Source: HM Government (2012). Protecting Crowded Places: Design and Technical Issues. Produced by the Home Office in partnership with the Centre for the Protection of National Infrastructure and the National Counter-Terrorism Security Office.
  16. ↑ Vollaard, B., J.C. van Ours (2011). Does regulation of built-in security reduce crime? Evidence from a natural experiment. The Economic Journal (May 2011). Oxford: Blackwell Publishing.
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