A link between low interest rates and low crime (2016)
thecrimereport.org
thecrimereport.org
It's likely the link here is between Government Budgets (including budgets for police resources), and Interest Rate. Low IR generally happens in response to recessions. Budget cuts (including police budget cuts) also happen in response to recessions. Police activity reduces with reduced police budgets. Crimes reported to UCR reduces with reduced police activity.
Search "Reproducibility Crisis", "Dan Ariely" or "scientific fraud" and you should get the jist of why you shouldn't trust many headlines for new discoveries right now. Especially "surprising" results that go against expectations
https://www.nature.com/articles/d41586-023-03486-5
https://www.newyorker.com/magazine/2023/10/09/they-studied-d...
My take on the replication problem (I’m not a social scientist) is that we now think the original experiments missed a confounding factor out of ignorance or lack of statistical sophistication.
This is not how Ariely and Gino were caught, though. I wouldn’t call their research surprising at all (again, not my field), but their randomization failed. Replication should have found a different level of support and introduced skepticism of the rigor of their methodology.
It's what I originally wrote. Good job cherry picking. You sure this isn't your field?
You should always take media 'headlines' about science with a grain of salt.
Not just for social sciences, but for dark matter, string theory, everything.
The replication crisis is bit overblown because the 'right' want to use that to drive their own more 'biblical' view of the world. By sowing doubt about all science, like done with cigarettes.
Social sciences do replicate at rate over 50%. That is long way from nothing replicating. Sorry 50% isn't good enough, it isn't like string theory is replicating, and nobody is getting out pitch forks.
another take https://www.vox.com/future-perfect/21504366/science-replicat...
The Right believe they are being directed by GOD. Their soul will be tortured for all eternity if they don't fight a war on earth following the will of God.
How do you argue a factual point with someone that is basing their decision on being directed by the god of the entire universe.
Basically the modern Christian Right, is fighting their own Jihad. We just don't have a good word like that to describe it.
So, I would disagree they are two sides of the same coin.
The left is maybe skewing some statistics, while the Right is ready to kill people for their god (checkout how many mass shootings are based on Right Talking points).
‘ The work of the historian David Hackett Fischer identified four major instances of inflation in Western history, in the 14th, 16th, 18th, and 20th centuries. In each of these periods, violent and property crime rates increased, and then fell once prices stabilized. When inflation decreased in the early 1990s, both Europe and the United States saw a corresponding decline in crime.’
Other sources use something called the Modified Wald Causality test, which should only be convincing to someone already acquainted with the field. The modern European data comes from Interpol, which might suffer the same collection bias as USA. We’re looking at first-order changes, anyway, so I wager this causality test can be sensible, even if the incoming data suffers from a linear bias.
What data would be better?
That's helpful.
Below are FBI discussions about differences and uses for National Crime Victimization Survey & Uniform Crime Reporting
https://ucr.fbi.gov/crime-in-the-u.s/2019/crime-in-the-u.s.-...
https://bjs.ojp.gov/sites/g/files/xyckuh236/files/media/docu...
Here's a bit of what we do have.
https://www.nytimes.com/2021/11/08/us/police-crime.html
https://abcnews.go.com/US/crimes-rise-battles-rage-police-fu...
No, but it's the best available proxy.
Not only that, but in this case peak interest rates were around the infamous 1970s era when a lot of policies change. So even if these are related, there is probably a hidden variable that a lot of policies changed at the same time and the two series still aren't causally related. There was likely a policy refresh on how crime gets handled at the same time as there was a policy reset on how interest rates were managed.
Like, there is more crime in cities, but, because there are also more people. What is per-capita crime. Small town with 10 people, 1 felon, man, they are 10% felons.
A better take might be that they reliably happen together.
[1] https://namerology.com/2022/03/08/the-ultimate-baby-name-gra...
https://en.wikipedia.org/wiki/Lead%E2%80%93crime_hypothesis
https://www.forbes.com/sites/alexknapp/2013/01/03/how-lead-c...
https://www.luc.edu/media/lucedu/hhhci/pdf/FactSheetDelinque...
They talk about rates affecting unemployment which affects crime, but if you look at the unemployment chart, it is completely out of sync with the rates vs crime chart that they base their argument on.
Or maybe it is because it is summer when most kids eat ice cream and go swimming?
Of course it is easy to put these two things together, but it is much harder with economics to know if there is a simple answer or a complicated one.
The study uses UCR data which only records the number of crimes reported to police. How can we know that the correlation here isn't actually that the likelihood of a crime being reported is linked to inflation? I.e. with lower inflation I'm less willing to deal with reporting some types of crimes to police, but with higher inflation I'm stressed personally and financially and am more likely to report a crime.
High interest rates happen when there is high inflation
High Inflation is present in periods of poor impulse control from consumers who bid up prices
Poor impulse control periods are not something that happen in a single societal fundamental such as purchases of goods and services, but across the board including crime, killings and drugs
People are looking for a cause and a link between government actions, Fed actions and crime (and other phenomenons), but it's really the contagious seasonality of human behavior that changes . Government and Central Banks are totally part of it, not causing it, they are just people subject to the contagious seasonality like the rest of us.
For the elites this particular contagious season of human behavior means cooking the books of their publicly traded company or starting a war, whereas for those who are not so high in the food chain means stealing a car or punch their nextdoor neighbor after a fight.
> the seasonality of human behavior
Is it really a thing? Does impulse control come in waves?
Internalized concerns about time opportunity cost and sense of urgency and the aforementioned poor impulse control and irrational exuberance, a mix of all of them too.
Test it on yourself, when you are in a good mood or in a 'let's go after it' mood you are more likely to be speeding, the higher the mood, the lower the impulse control, it can drive you up to 120-130 mph maybe while your favorite song is playing and there is a stretch of open road ahead. Even 140 if your car is powerful, and you don't notice it. You are breaking a bunch of laws in that moment without realizing.
It comes from within, it has nothing to do with finances, job market, savings or any reasoned thought. Thank God! Being irrational and getting away with it, and then looking back in a moment of rationality is an emotion that makes us human.
Have you ever lived in bad neighborhoods? There is no interview process to join a gang, a person starts with something mundane like moving drugs for some very low ranking affiliate from some area of the city to another. Literally just driving, nothing life changing.
You could rebut, why not become an Uber driver, to which I reply: same amount of money that Uber driver makes in a whole day in about 1-2 hours tops.
When you hear news reports saying "X or Y joined Z gang in 2016 and climbed within the criminal organization" , you can be sure that the first mundane task he made for some low ranking affiliate back in 2010 perhaps even earlier.
We know inflation, debt and violence do. What human behavior can possibly be the base cause for such effects?
High inflation, in the modern world, happens at times of shocks on the supply chain - energy, raw materials, catastrophic events and so on.
I don't know why you'd peddle some pseudo-psychology with a side-serving of bad moralism, but it's not the truth.
Businesses don't exist in vacuum, they are always maniacally monitoring how fast or slowly consumers buy up all their inventory of that particular item or grocery.
You should stop acting like everybody isn't watching everybody else in the pursuit of maxiumum result with minimum effort. Even you are doing so right now by looking up at what 'the other side' (businesses) are doing and trying to politically ostracise 'the other side'.
I said consumers in my OP just because they are a largest group of people, because it also includes business owners, they too are consumers! I further believe the largest group of people always has the lion share of input in a phenomenon.
But of course when a business owner arrives on their premises in the morning and stops wearing the hat of the consumer, they will too be subject to impulsivity by making a impulse purchase of some item from their supplier (based on data, or even more probably gut instinct that it would sell), and the supplier does the same with the farmer, or the raw material procurer etc. etc.
Everybody is watching everybody else, they see that impulsivity pays rewards so they start acting impulsively too, this affects and spreads among the population very evenly regardless of social class, the higher classes impulsivity and impulsive purchases just makes the news while the lower classes doesn't.
Of course, but consumer behaviour on most items is relatively fixed, and largely reactive to shocks. That is very visible in the current situation: we had little or no inflation for 20 years and then BANG the cost of natural gas and wheat skyrockets because of herr Putin, and suddenly we're in an inflation-heavy world. That's not consumer-driven, that's supply-driven.
> trying to politically ostracise 'the other side'.
I'm not ostracising anyone. The fact is that prices are set by business owners to maximize their profits - that's just how it is. Consumers can only react to that. Your quixotic comments try to blame consumers for "impulsively" paying higher prices for food or basic supplies, and that's just preposterous.
> consumers in my OP just because they are a largest group of people, because it also includes business owners
No, it does not. Gas-industry CEOs don't bid on gas supplies for their own garage or "impulsively" because they like it; they speculate on a scarce resource, rationally taking opportunities to maximize their gain - and that is what drives inflation, the selling side engaged in rational maximization of profits. Same for petrol, wheat, etc. Everything else, including final consumers, can only react in cascade effects, and trying to blame them is just cruel.
Interest rates are up in times of present scarcity and future abundance.
So given a supply shock that increases scarcity, there might not be enough resources for everyone.
Then you will see both crime and interest rates coincide.
Meanwhile if there are enough resources for everyone, it is obvious that simply working will get you the resources you need.
But the thought process that compels people (both consumers and businesses) to desire more than real time order and consumption , or even just upgrade to products that are more intensive as far as raw materials are concerned, is psychological and contagious.
It's not like everybody suddenly arrived independently at the same conclusion
Those who invested in affected businesses or capital goods with inflated prices due to easy credit will find those investments collapsing in value.
Eventually, the economy could restructure into a more sustainable form, where investments, business sizes and training were aligned with the new state of the economy. But a pain period is not really avoidable, other than by relowering interest rates. The longer interest rates are kept low, the longer and more painful the transition.
How does that work? Are they regularly covering their payroll with loans?
Most significantly-sized businesses rely on credit week-in week-out, and tend to implode very quickly if the market turns off the tap.
Is there a lender that decides to stop making payday loans and buy T-bills instead?
At the level of individual lenders, this looks more like all institutions shifting slightly toward lower-risk lending across the board than any individual lender choosing to buy t-bills instead of making payday loans. But then again, that's exactly what "maintaining higher capitalized operating reserves" means.
Ever heard of Keynes and his liquidity preference theory?
Ever heard of Wolfgang Stützel and his book about balance mechanics?
It's pretty obvious. The person with the money gets to decide and they are allowed to decide to not decide at all.
Since one person's credit is another person's debit, the credit side determines indebtedness. Positive money balances determine how much debt there is in the economy and since people have a preference for holding money balances, those money balances keep ballooning and correspondingly, indebtedness must go up.
(This is how Islamic banking operates, as riba is forbidden. Indeed, usury is also condemned by the Church, and Catholic banks would sustain themselves on, e.g., service fees for the labor involved in, say, issuing a loan or investing on someone's behalf or whatever. And the Jewish Talmud forbids taking interest between Jews, though it does permit charging goyim interest. Regardless, you do not need to appeal to religious law or teaching as these merely reflect the demands of justice and just economic exchange.)
Apple prices and divorce rates are correlated too!
This is usually not possible for economics and other social sciences.
And then we get to social sciences - like economics - very hard to make an experiment. You can't just play with the interest rate to write a paper...
The question still stands. What degree of evidence is sufficient to not be off-hand-dismissed with 'Correlation does not imply causation'?
A counterexample in social sciences might be that the corresponding relationship is found across methodologies and cultures. This turns a question of causal inference into questioning the power of overturning longitudinal data. Statisticians differ about the philosophy on that.
“Successful randomization” might be a more helpful term than “gold standard” here because in this domain the amount of covariance with gold prices is embedded into some people’s arguments.
In medical sciences: interventions.
https://www.noahpinion.blog/p/how-did-the-us-achieve-a-soft-...
And yes, higher interest rates do reduce inflation.
The soft landing in the US could easily just be down to the stimulus effect of handing out free money in the form of interest when inflation was going to come down anyway as the supply shocks work through the system.
Interest rates predictably influencing inflation is now on the level of a test of faith.
"Do High Interest Rates Reduce Inflation? A Test of Monetary Faith"[0]
[0]: https://economicsfromthetopdown.com/2023/02/04/do-high-inter...
Hopefully the return to normal rates will deflate those asset bubbles.
Which is unsurprising as that is specifically why the rates were lowered in the first place – to spur on consumer activity when it started grinding to a halt in 2008. And why rates have risen again recently – to try and tame consumer activity amid a supply chain no longer able to keep up with it.
So, yes, as consumer activity declines, asset values will go with it. But that also means less for the average Joe. As people have to do with less, it isn't too hard to think that crime will increase as a result. When there are no longer toys to placate them, people will find something to do.
I also think crime would not exist if everyone could afford basic necessities
Government: look, without us who would protect you from criminals.
It probably needs more than just criminality. But "foreign" threats would probably not be enough to justify how large government entities are throughout the globe.
Governments consciously or unconsciously need crime so would always make sure it doesn't get entirely eliminated.
Me think governments also like unemployment, since they provide unemployment and other social benefits.
I think they also like narcotics, ensuring not only constant supply of crime but also feed into the pharmaceutical business. Once you are hooked it's rather simple to pick you up and hook you to the official, legit drugs. At least for a while.
Wouldn't go as far as saying they may also benefit from epidemics and pandemics, they do provide the convenience to mandate everyone to stay home right before social protests get too well organised, that would be a stretch. Not an impossibility though.
If you decrease interest rates while you have high inflation, people spend like there is no tomorrow. If you could buy 2 loaves of bread and 2 tvs today, you can only buy 1 loaf of bread and 1 tv in a month's time. So you buy and stock. This creates increased demand which creates increased prices.
At some point you don't even know what the prices of things are, manufacturers don't know it as well, so they increase the prices higher to cover anticipated future costs. Your wages rise but your purchase power declines each month.
Portions get smaller, prices get higher, you live a shitter life.
Inflation is the mother of all evil. If high interest rates are needed to keep it under control it is worth every effort.