Economics of Crime: Panel Data Analysis of Bank Robbery in the United States

By Samavati, Hedayeh | Atlantic Economic Journal, December 2006 | Go to article overview

Economics of Crime: Panel Data Analysis of Bank Robbery in the United States


Samavati, Hedayeh, Atlantic Economic Journal


Introduction

According to a recent FBI report, in 2001 the rate of bank robbery was one every 52 min. Over the five year period, from 1996 through 2000, nearly half a billion dollars were robbed from banks, only 20 percent of which was recovered. Between 2000 and 2002 alone, the banks' loss of funds to bank robbery increased by an alarming 22.8 percent [Federal Bureau of Investigation, 2002a].

Few crimes garner as much public attention as bank robberies. The bravado of early bank robbers in the US, such as Jesse James, John Dillinger, Bonnie Parker, and Clyde Barrow, created a mystique which has been capitalized upon in several Hollywood movies (e.g., Bandits and Butch Cassidy and the Sundance Kid).

The first bank robbery in the United States occurred on March 19, 1831 when Edward Smith robbed the City Bank on Wall Street in New York City for $245,000. Today, the average amount of money taken in a bank robbery is about $5,000. Yet, the considerable frequency with which bank robberies occur, 10,262 in 2001 and 9,689 in 2002, impose a substantial cost upon the banking industry [Federal Bureau of Investigation, 2002b]. These costs include loss of funds, disruption of the bank's business, potential injury to the employees and customers, and destruction of bank's physical property. In addition, the rise in the incidents of bank robbery creates increasing pressure to invest in state of the art security devices over and above that which is required by the 1968 Bank Protection Act. (1) Furthermore, the fear of possible violence (death, injury, and hostage taking) bank robbery engenders, renders this crime a significant social and economic problem. The paucity of literature based on systematic academic investigation of bank robbery suggests that other preventative measures and policies may yet to be discovered.

The purpose of this paper is to examine bank robbery in the United States between 1990 and 2000. Bank robbery is classified as one of the violent crimes (murder, rape, and assault are other ones), even though it is a crime against property. In addition to the costs imposed on the banks that fall victim to this crime, it imposes increasing costs on all of the taxpayers in a community by adding to the costs of law enforcement and police protection. Bank robbery is not an inevitable fact of life, yet its consequences on economic activity are inevitably pernicious. A better understanding of the determinants of this crime can help to shape national and local policies in order to deter bank robberies and thus, reduce the costs of this crime.

Literature Review

Criminologists, sociologists, and psychologists have sought to understand criminal activity in general, and bank robbery in particular, through examination of offender's characteristics, environment, psyche, and motivations. Some sociologists question the efficacy of the rational choice model to be applied to the crime of robbery. For example, Katz [1991] suggested that, "Nonrational violence makes sense as a way of committing oneself to persist in robbery in the face of the risks and chaos inherent in the criminal event" [Katz, 1991, p. 289]. To understand robbery, he advocates biographical research which is a method of analysis that uses life-history material to trace the offender as he enters into a life of crime. Another method used by scientists is situational analysis which focuses on the offender-victim interaction, and yet there are others that combine elements of these two methods [Katz, 1991].

Economists, however, try to understand criminal activity within the framework of economics of crime first espoused by Gary Becker [1968]. Richard Posner summarized the economists' view of criminal activity:

     The notion of the criminal as a rational calculator will strike
   many as highly unrealistic, especially when applied to criminals
   having little education or to crimes not committed for pecuniary
   gain. … 

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