Thursday, December 8, 2016

Crime rates and interest rates are they linked?

Crimes rates have plummeted in the U.S. since the mid-1990s.  Most of the credit for this remarkable trend has been given to an enlarged criminal justice system—largely more police, tougher sentencing and a massive prison complex.
But we have found a larger and much more powerful explanation:  A drop in interest rates and, in particular, long-term interest rates, writes James Austin a criminologist and Gregory D. Squires a professor of sociology at the George Washington University, in The Crime Report.
When interest rates go up, crime goes up.  When interest rates go down, crime goes down.
This has been the case in the U.S. at least since 1953.  And it is almost a perfect correlation. 
Today, both crime rates and interest rates are at historic lows. Conversely, in the late 1970s and early 1980s, both reached historic highs. Rarely does social science research yield such a high statistical association and strong relationship between two phenomena, particularly when they are not intuitively related.
What accounts for this startling finding?  What does it mean?  And how might it inform public policy?
One critical implication is that lower interest rates mean not just lower crime rates, but also greater economic prosperity.
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