Economic effects of anti-crime security measures

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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.

Costs of security

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[1].

The magnitude of the direct (primary) costs of security measures is significant, but very difficult to quantify in financial terms[2]. 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)[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 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)[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].

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[7].

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[8].
  • According to OECD[1] 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[9]"the weight of evidence on displacement (and there are various types) is that it is at worst only partial".
  • Hobijn (2001)[10], 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)[11].

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)[12], 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[13]", 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[1]. 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[14]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[15]
  • A reduction in costs of securing void areas
  • Less people who feel forced to move to another home[16]

Related subjects

Footnotes and references

  1. 1.0 1.1 1.2 Source: OECD (2004): The Security Economy. ISBN 92-64-10772-X.
  2. 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.
  3. SEO (2007). De kosten van criminaliteit [The cost 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. Source: Zimbalist, A. (2010): Is It Worth It? Finance & Development. Vol. 47, Number 1. International Monetary Fund. Online: http://www.imf.org/external/pubs/ft/fandd/2010/03/zimbalist.htm
  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. See e.g. Peter French (1998): The CCTV crime prevention bubble is set to burst unless extra money can be found to maintain public systems. Policy Review. Video Nation. Online: http://www.1in12.com/publications/cctv/bubble.html.
  8. Stevens (2004): The emerging Security Economy: An Introduction. Published in: OECD (2004): The Security Economy. ISBN 92-64-10772-X
  9. Pease, K. & M. Gill (2011): Home security and place design: some evidence and its policy implications.
  10. Hobijn, B. (2002): What Will Homeland Security Cost?, Economic Policy Review, 8(2), pp. 21-33. In: Brück (2004). Assessing the Economic Trade-offs of the Security Economy. p.111. Published in OECD (2004): The Security Economy. ISBN 92-64-10772-X
  11. The economist Brück (2004), warns to be a bit careful with this conclusion, since the future costs of security spendings are difficult to predict in general.
  12. Brück (2004): Assessing the Economic Trade-offs of the Security Economy. In: OECD (2004): The Security Economy. ISBN 92-64-10772-X
  13. Van Dijk, J. et al (2007): The Burden of Crime in the EU. Research Report: A Comparative Analysis of the European Survey of Crime and Safety (EU ICS) 2005. European Union, p.23.
  14. Opportunity cost can be defined as any activity measured in terms of the value of the next best alternative foregone (not chosen).
  15. Criminologist Ken Pease, has revealed the significance of crime on English and Welsh CO² output; an estimated total of 11.6 million tonnes - that's 2% of the UKs' total CO² emissions. See: Ken Pease (2009): The Carbon Cost of Crime and Its Implications. Online: http://www.securedbydesign.com/professionals/pdfs/The-Carbon-Cost-of-Crime.pdf
  16. "Crime levels and bad neighbours are the reason for almost ten million Britons moving home in the last five years" Source: Abbey National Survey (2007) In: Ken Pease (2009): The Carbon Cost of Crime and Its Implications. Online: http://www.securedbydesign.com/professionals/pdfs/The-Carbon-Cost-of-Crime.pdf.