Brian Easton: Law and Order - An Economics Perspective

What might the public’s increasing demands for safety and security tell the economist?

Criminology and economics are quite different disciplines. Someone from one discipline trespasses on the other with the greatest of caution, something which, I’m afraid, not all economists have. There is a foolish economics literature about the ‘optimal level of crime’. Before it raises your hackles, it is better framed as the optimal level of criminal enforcement, something which must trouble greatly the Treasury desk officer struggling with the law and order vote. This year it amounts to $6.7b (police $2.6b; corrections $2.1b). It is up $2b (or almost half) in the last six years. It amounts to the average adult paying almost $5 a day in tax.

The size and growth of the sector are puzzling, since overall the level of crime has not been increasing. The Ministry of Justice has run a New Zealand Victim and Crime Survey since 2018. It is far more reliable than offences reported to the police because not all crimes are reported and not all of those reported are to the police – common reasons are because the incident was too trivial or it was reported elsewhere (fraud is more likely to be reported to a bank).

The survey results are all over the place but with the exception of fraud offences, which are rising, generally the crime trends have been stable or very gently falling since 2018.

(I made a small research contribution to explaining these trends when I pointed out that Māori were poorly prepared for their postwar migration into the big cities, which resulted in social disruption including higher incarceration rates. As Māori have adjusted to urban life the imprisonment rates among the young have fallen dramatically; the proportion of Māori who are victims of crime has been falling and is now close to the national average.)

However, the public perceptions show increased concern about crime. While 30 percent of the public said they felt ‘completely safe’ in 2018, only 24 percent had similar feelings in 2023. Meanwhile, the proportion who felt ‘unsafe’ rose from 10 percent in 2018 to 15 percent in 2023. Hence the public demand for increased law and order spending. It is high across most parts of the political spectrum, including among those otherwise antagonistic to government spending.

The research literature describes a phenomenon called a ‘policy entrepreneur’, who promotes an agenda by exaggerating the problem the community faces. But the community has to be receptive to the exaggeration. To understand its willingness, we might turn to another discipline – psychology.

Abraham Maslow proposed a hierarchy of (human) needs. It is frequently presented as layers in a triangle, with a point which draws attention to the upward direction. However, the casual observer may think that the needs at the top are smaller than those at the bottom. So here the hierarchy is presented as a stack.

Maslow's Hierarchy of Needs

* Self-actualisation needs

* Esteem needs

* Love and belonging needs

* Safety needs

* Physiological needs

Stack or triangle, the physiological needs – essential for human survival and include things such as food, shelter, and clothing – at the bottom are the foundation of wellbeing. They are the needs with which economics is most concerned (and which are measured by GDP). But observe that the economy has much less to contribute to the remaining higher levels (although the importance of conspicuous consumption – the display of ‘positional’ goods – to esteem needs should not be underestimated).

Immediately above the physiological needs are the ‘safety’ needs with the implication that as physiological needs are met, people turn to their safety needs. That seems to be what is happening.

There is no question that the physiological needs of the vast majority are being better met than at any time in human history. That is true almost everywhere, although for many people in the world there remain serious physiological deficits. But in some parts of the world – including New Zealand – there is widespread affluence.

Certainly, people demand more income – hence the demand for tax cuts – but the same people may be retiring earlier and working shorter hours or taking lower paid jobs because that better reflects their life demands. (Two hundred years ago, a 70 hour working week was not unusual and people did not retire but worked until they died.)

But we should not be complacent. Perhaps a fifth of the population are struggling rather than affluent. Typically, they are families with children.

So the economic logic is that the economy may becoming less important in public life. It is still there of course, but not as prominent as I recall it being in the 1970s. Economics remains foundational in political and social development. Moreover, economic goods and services remain important in dealing with safety needs to the extent of at least $6.6b a year of public money and all the private money spent on safety. (Additionally, as already mentioned, positional goods are important for esteem needs.)

Whether we are deploying the law and order resources most effectively is an economic concern. Often policy entrepreneurs have solutions to complex problems which are clear, simple ... and wrong or wastefully ineffective. It is also a feature of New Zealand’s approach to public issues to ignore prevention, instead focussing on ambulances at the bottom of the cliff and neglecting fences at the top. (We are so unprepared, the ambulances usually arrive late.)

I began by saying that economists do not have a lot to say about law and order so perhaps I should stop at this point. I finish with the slogan of a former British Prime Minister, Tony Blair, who said that his government was ‘tough on crime; tough on the causes of crime’. I cannot think of a New Zealand politician who has expressed a similar sentiment.

Brian Easton is an economist and historian from New Zealand. He was the economics columnist for the New Zealand Listener magazine for 37 years. This article was first published HERE