Crime and Punishment: Some Costs of Inequality

Once upon a time, economists told us that efforts to reduce income inequality would be punished by lower economic growth. The title of a famous book published by Arthur Okun in 1975 tells the story — “Equality and Efficiency: The Big Tradeoff.”

Hence the conservative plea for laissez-faire — leave us alone and let us do our thing.

But inequality can lead to inefficiency when it intensifies social conflict. In other words, there may be an economic case, and not just a moral case, for reducing inequality.

Economists across the political spectrum have turned the logic of laissez-faire around, emphasizing that rational economic agents are easily tempted to misbehave. Jack Hirshleifer, a highly respected mainstream economist, has called attention to “the dark side of the force” — crime, war and politics. Why participate in the market if you can do better by engaging in theft or fraud?

To paraphrase Bob Dylan, if you ain’t got much, you ain’t got much to lose. On the other hand, the more you got, the more you got to protect. Richard Wilkinson’s new book, “The Impact of Inequality,” summarizes evidence from comparative studies that violence is greater — and trust and cooperation lower — in more unequal societies. (He also argues that inequality is bad for health, a topic I’ll return to in a future post.)

Both crime and incarceration go up along with inequality. In the United States, we incarcerate a higher percentage of our population than any other country in the world. The sociologist Bruce Westernand others argue that reduced economic opportunities for young black men help explain increases in our incarceration rates over the past 20 years.

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Article Credit
“Crime and Punishment: Some Costs of Inequality”
By Nancy Folbre
The New York Times, 12 March 2009