Tag: Crime

On Baltimore’s Economic Plunge

After Monday’s acquittal of Lt. Brian Rice in the ongoing Freddie Gray saga, lead prosecutor Marilyn Mosby is batting a perfect 0-4. The three previous defendants were similarly acquitted, with two (and perhaps three) more officers to take the stand in the future. 

It appears that Marilyn Mosby’s prosecutions have been politically motivated and without foundation. The big problem, however, is that Freddie Gray has taken the focus off of Baltimore’s long and painful economic plunge – a plunge that can be laid squarely at the feet of Charm City’s long embrace of anti-market economic policies.

My colleague, Prof. Stephen J.K. Walters, and I wrote about this in the Investor’s Business Daily on April 22, 2016: “One Year After: Freddie Gray and ‘Structural Statism’.”

Here is some of what we wrote about how the path of structural statism has contributed to Baltimore’s poverty and associated problems.

“When Freddie Gray was born in 1989, Baltimore hosted 787,000 residents and 445,000 jobs. By the time his fatal injuries in police custody provoked riots last April, the city’s population had fallen by one fifth, to 623,000, and its job base had shrunk by one quarter, to 334,000.

Little wonder that throughout his life, Mr. Gray had never been legally employed. Nevertheless, friends and family considered him “a good provider,” according to The Baltimore Sun.

This was because he worked in the drug trade, which filled his city’s economic vacuum. An average day on the corner can yield take-home pay ten times that available in the low-skill warehousing or service jobs sometimes available to high-school dropouts like Gray.

The catch, of course, is that such rewards carry two great risks. The lesser of these is regular involvement with the justice system. Gray was arrested 18 times and served three years behind bars in his tragically brief life.

Far more dangerous is how competition works in illegal markets. When selling contraband, one does not pursue market share by advertising high quality or low prices. Sales are increased by acquiring territory from rivals, often violently.

For Baltimore’s drug cartels, the post-riot disequilibrium provided an opportunity for market expansion. Inevitably, each strategic assassination produced reprisals and collateral damage.

As a result, 2015 saw the highest homicide rate in Baltimore’s history, at 55 per 100,000 residents — over 13 times New York’s rate. This horrific suffering was concentrated in the African-American community: 93% of victims were black, of which 95% were male and 65% aged 18 to 34.

In Freddie Gray’s demographic, then, the homicide rate was 450 per 100,000 — higher than the peak U.S. combat death rates recorded in the wars in Iraq and Afghanistan.

The prevailing narrative is that all this is a by-product of structural racism and exemplifies a society “built on plunder” (according to the celebrated black radical Ta-Nehisi Coates). This is a myth.

It is not that racism doesn’t exist but rather that it is relatively constant. When explaining variations in economic and social outcomes, constants have little power.

It’s the application of destructive public policies that explain why neighborhoods like Gray’s Sandtown-Winchester are deprived. If one had to put a label on this malignant force, it might be structural statism: an addiction to market-unfriendly governmental approaches to every problem.”

Stay tuned: with several trials still to come, we’re bound to hear more about the Freddie Gray Sideshow, even as Baltimore’s plunge into poverty – and its causes – goes unnoticed.

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The Luckiest Crop in History

Recently, the New York Times ran an opinion piece by Gregg Easterbrook, which draws attention to the disconnect between the gloomy public on the one hand and the real state of America on the other hand. The prevailing mood in the United States is one of pessimism. For prominent politicians on both sides of the aisle, to use Easterbrook’s words, “the impending apocalypse has been issue number one.” Yet in almost every measurable way, this is the best time in history to be alive. The evidence goes on and on [links added]:   

Pollutiondiscriminationcrime and most diseases are in an extended decline; living standardslongevity and education levels continue to rise … A century ago, most Americans worked in agriculture: Today hardly any do, and we’re all better off, including farmers. That manual labor, farm or factory, has given way to 60 percent of Americans employed in white-collar circumstances … In 1990, 37 percent of humanity lived in what the World Bank defines as extreme poverty; today it’s 10 percent.  

Where did all this progress come from? Easterbrook rightly credits, “interconnected global economics.” Through an intricate symphony of competition and exchange, humanity has driven technology forward and achieved heights of prosperity that would be unimaginable to our ancestors.   

Unfortunately, Easterbrook also gives credit to top-down government planning where none is due. He cites the Affordable Care Act as an example of a successful reform, but rising life expectancy and improved health outcomes are long-term trends that both predate Obamacare and extend far beyond U.S. borders. It is far too soon to attribute any part of those trends to that highly problematic policy.   

Easterbrook even claims that, “In almost every case, reform has made America a better place, with fewer unintended consequences and lower transaction costs than expected. This is the strongest argument for the next round of reforms.” That is a sweeping overgeneralization, as it obviously hinges on the specific nature of reforms. Plenty of reforms throughout American history are now universally recognized as horrible mistakes – just look at alcohol prohibition.   

Despite some confusion about the drivers of progress, Easterbrook’s opinion piece is a refreshing reminder of the incredible progress humanity has made and well worth a read. It ends with this heartening quote that the data backs up:   

Recently Warren Buffett said that because of the “negative drumbeat” of politics, “many Americans now believe their children will not live as well as they themselves do. That view is dead wrong: The babies being born in America today are the luckiest crop in history.” 

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Arizona’s SB1070 and Crime

Arizona state representative Sonny Borrelli (R) remarked that crime rates in his state dropped 78 percent since the passage of that state’s infamous SB1070 in 2010. His remark was thoroughly debunked. Below are a few charts to put Arizona’s crime rates in context. 

It is very difficult to show causality between a law and its effect on crime in later years. Crime rates have trended downward in the United States for over 20 years now. It is difficult to credit any decline after 2010 to a specific Arizona immigration law.  Also, Arizona’s crime rate cannot be considered in isolation. Comparing it to neighboring states and the country as a whole which did not pass an SB1070-type bill is necessary to even get a slight hint of how that law on crime.  Furthermore, there is a vast empirical literature on the effect of immigration on crime. At worst, immigration has almost no effect on crime. At best, immigration decreases crime rates.   

All of the figures are presented as a rate of crime per 100,000. The violent crime rate in Arizona was declining before SB 1070 and continued to decline afterward (Figure 1). From 2009 to 2014, the Arizona violent crime rate declined by 6.3 percent while it dropped 13 percent nationally. There was a decline of 16.3 percent in California, 9.9 percent  in Nevada, and 5.5 percent in New Mexico. 

Figure 1

Violent Crime Rate

 

Source: FBI.

Like the violent crime rate, the property crime rate in Arizona was also declining before SB 1070 and continued to decline afterward (Figure 2). From 2009 to 2014, the Arizona property crime rate decline by 10.9 percent while it dropped 14.6 percent nationally. It declined in every other state: 10.6 percent in California, 14.3 percent in Nevada, and 4.6 percent in New Mexico.

The War against Cash, Part I

Politicians hate cash.

That may seem an odd assertion given that they love spending money (other people’s money, of course, as illustrated by this cartoon).

But what I’m talking about is the fact that politicians get upset when there’s not 100 percent compliance with tax laws.

They hate tax havens since the option of a fiscal refuge makes confiscatory taxation impractical.

They hate the underground economy because that means hard-to-tax economic activity.

And they hate cash because it gives consumers an anonymous payment mechanism.

Let’s explore the animosity to cash.

Immigration and Crime – What the Research Says

The alleged murder of Kate Steinle in San Francisco by illegal immigrant Juan Francisco Lopez-Sanchez has reignited the debate over the link between immigration and crime. Such debates often call for change in policy regarding the deportation or apprehension of illegal immigrants. However, if policies should change, it should not be in reaction to a single tragic murder.  It should be in response to careful research on whether immigrants actually boost the U.S. crime rates. 

With few exceptions, immigrants are less crime prone than natives or have no effect on crime rates.  As described below, the research is fairly one-sided.       

There are two broad types of studies that investigate immigrant criminality.  The first type uses Census and American Community Survey (ACS) data from the institutionalized population and broadly concludes that immigrants are less crime prone than the native-born population.  It is important to note that immigrants convicted of crimes serve their sentences before being deported with few exceptions.  However, there are some potential problems with Census-based studies that could lead to inaccurate results.  That’s where the second type of study comes in.  The second type is a macro level analysis to judge the impact of immigration on crime rates, generally finding that increased immigration does not increase crime and sometimes even causes crime rates to fall. 

Majority of Americans Misperceive Crime Trends

According to a recent Gallup survey, the majority of Americans think that crime is on the rise. This misperception persists year after year. Only 21 percent of Americans realize that crime is actually falling. Consider murder and rape alone:

Murder and rape are not the only crimes that are falling. The downward trend in U.S. crime rates also holds for simple and aggravated assaults as well as robberies. Crime, in other words, is falling across the board.

 

 Furthermore, the fall in crime is not limited to the United States. Globally, crime is down. For example, consider the homicide rate in Europe over the last century:

 

Why do most people perceive the world as increasingly crime-ridden despite statistical evidence to the contrary?

Harvard professor and HumanProgress.org advisory board member Steven Pinker provided a number of reasons for our deeply ingrained pessimism during a recent Cato event, “If Everything is Getting Better, Why Do We Remain So Pessimistic?” which can be viewed here. His book, The Better Angels of Our Nature, offers a more in-depth look at the decline of violence.

Newsweek: Back in Print, Confused as Ever

Dumb arguments against libertarianism are increasing, as guardians of the expansive state begin to worry that the country might actually be trending in a libertarian direction. This may not be the dumbest, but as Nick Gillespie said of a different argument two weeks ago, it’s the most recent:

‘You Ready to Step Up?’

The deadly drug war in Long Island’s Hempstead ghetto is a harrowing example of free-market, laissez-faire capitalism, with a heavy dose of TEC-9s
To be fair, author Kevin Deutsch never uses the terms “laissez-faire” or “free-market” in his detailed article, so we should probably direct our disdain at Newsweek’s headline writers. Deutsch does portray the second-ranking guy in the Hempstead Crips as a businessman seeking to “recruit talent, maximize profits and expand their customer base.” But even the drug dealer gets the difference between selling prohibited substances and doing business in a free market:
“We’re looking to market, sell and profit off drugs the way any business would handle their product,” Tony says. “Only our product is illegal, so more precautions need to be taken. It’s all systematic and planned, all the positions and responsibilities and assignments. All of that’s part of our business strategy. It’s usually real smooth and quiet, because that’s the best environment for us to make bank. But now, we at war, man. Ain’t nothing quiet these days.”
Deutsch describes the competition between the local Crips and Bloods in terms not usually seen in articles about, say, Apple and Microsoft or Ford and Toyota:
As for strategies, they seem to have settled on a war of attrition, aiming to kill or maim as many of their enemies as possible….
 
They’re far better armed and willing to use violence than the smaller neighborhood cliques scattered throughout Nassau County….
 
They’re also able to keep out other competitors through use of brute force….
 
It’s one of hundreds of similar conflicts being fought by Bloods and Crips sets throughout the country. These battles breed shootings, stabbings and robberies in gang-plagued, low-income neighborhoods each day. 
These are, of course, just the sorts of consequences that libertarians and economists expect from prohibition. As Tim Lynch and I wrote in the Cato Handbook on Policy a decade ago,

drug prohibition creates high levels of crime. Addicts commit crimes to pay for a habit that would be easily affordable if it were legal. Police sources have estimated that as much as half the property crime in some major cities is committed by drug users. More dramatic, because drugs are illegal, participants in the drug trade cannot go to court to settle disputes, whether between buyer and seller or between rival sellers. When black-market contracts are breached, the result is often some form of violent sanction, which usually leads to retaliation and then open warfare in the streets.

Jeffrey Miron of Harvard’s economics department and Cato made similar points in his book Drug War Crimes, as have such economists as Milton Friedman and Gary Becker. Miron also noted that prohibition drives up the prices of illegal drugs, making the trade attractive to people with a high tolerance for risk. And so in that sense, it’s true that some people will usually enter the prohibited trade – in alcohol, gambling, prostitution, crack, or whatever – and will employ some techniques that are also used in normal business enterprises. As Tyler Cowen says, there are markets in everything. Given our natural propensity to truck, barter, and exchange in order to improve our own situation, we can expect people to step into any trade, prohibited or not. Better that such trade should take place legally, within the rule of law, than underground, where violence may be the only recourse in disputes.

When the government bans the use and sale of a substance, and imprisons hundreds of thousands of people in an attempt to enforce that prohibition, that’s not “laissez-faire, free-market capitalism.” Duh. 

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