In the early 20th century, an economist named Arthur Pigou formalised the concept know in economics as an externality. Criminality is the perfect example of a ‘negative externality’, when an action or situation creates a cost to society over and above any cost to the individual. Yes, in this example there is a personal cost to the criminal (they end up in prison) but only viewing crime through this lens totally ignores the greater impact that it and its effects has on society. Considering these extra effects can allow a more sensible analysis of crime and policing as problems and the synthesis of much more socially effective solutions.

Policing issues have some interesting and counterintuitive externality applications. Imagine a situation with two cars, one has a steering wheel lock to prevent theft whilst the other does not. Person one purchases the lock to be safer, they will likely experience a reduction in crime. Person two however will experience a higher risk of theft if the cars are next to each other, criminals will target the less protected vehicle. This externality has been empirically researched, in local studies steering wheel locks haven’t decreased car theft overall, they have just changed which vehicles get stolen. Yet this seems counterintuitive, an idea to increase security actually has little effect once you consider both cars together. This argument strongly contradicts many current policing policies - they simply shift criminal behaviour. What is needed is policy that tackles the reasons for committing crime in the first place. Tackling addiction or mental health might not seem like an immediate solution to many criminal issues but is an example of this approach.

Similar to the earlier car theft example, Germany has previously experienced large levels of motorcycle theft. That is, until helmets became compulsory for all motorcycle riders. Theft levels plummeted because the new law tackled the reason that people stole the motorbikes: joyriding. Thieves didn’t carry helmets and the new possibility of being stopped for not wearing a helmet made the risks of arrest too high. Wearing helmets to joyride meant it lost its appeal and so youths turned to legal alternatives. Simple, cheap and easy policies like this can’t solve all criminal issues, however this is a prime example of where considering externalities can help policy creation that actually solves the problem it aims to.  

Applying the concept of the externality to crime itself instead of policing highlights crime’s almost endless list of social costs. The best way to conceptualise this is as all of the negative ‘knock on’ effects that the initial incident has on others. For example a recent study examined the relationship between parental criminal involvement and educational attainment of children. The findings suggest that having criminally involved parents increases the probability that primary school education is the highest level obtained by 7–9 percentage points, and decreases the probability of attaining higher education by 2–6 percentage points. It is also well researched that lower education levels in turn lead to lower income levels later in life. Therefore there is a worrying likelihood that criminal parents create a poverty trap for their children. There is some research that suggests those from more difficult, lower income backgrounds are more likely to commit crime too. This is not definitive but if true would support the theory of a crime-poverty cycle that propagates across generations as well as a poverty trap.

The externality bracket also covers the effects experienced by the victims of crime. Often crimes leave a legacy of psychological damage and have a vast emotional cost. This can go on to cause anxiety, depression or changes to behaviour that are negative and long-lasting. Social lives and careers can suffer. But this isn’t particularly insightful, it is obvious that victims have negative experiences following crimes and it’s also intuitive that this negatively impacts society through healthcare costs, lost wages and more. What is more interesting is that retribution has little impact in reducing these effects. Almost two-thirds of victims polled by ICM believe that prison does not stop reoffending for non-violent crimes and 53% did not feel the criminal justice system takes account of prisoners needs. There was a strong belief that better pastoral care would be more beneficial in the long term. Even within a group that has been as detrimentally impacted by crime as victims, many are keen to prioritise preventing others becoming victims in the future despite their anger.

This links closely with reoffending. The current system fails to fully acknowledge the externality of prison time. Reoffending rates are extremely high in the UK and this amplifies all of the negativity of crime. Quite simply, prison isn’t working effectively in reforming inmates. Looking abroad to those who have been more successful, such as Norway, demonstrates that more humane approaches yield better results. Viewing prison as a punishment truly cements these social costs. Dehumanisation of criminals and subsequent societal ostracisation encourages reoffending. Once you consider the role that the current retribution based system plays in maintaining cycles of vast negative costs, and then add that most victims don’t even see a benefit in these systems, reforming the system seems sensible.

The real benefit of the externality approach is that it tries to encapsulate broader effects of crime. Incorporating these effects raises the seriousness of tackling criminal issues and provides a greater justification of actions that might be financially costly in the short term but, once social costs are considered, extremely efficient in the long run. Thankfully, there is some progress in these areas but it is important for all of our sake that we continue to rethink our approach to crime and consider all of its complex causes and effects.