More money, more problems

Most rich countries had a drastic fall in crime rates in the early to mid 1990s. This decrease in crime seemed inexplicable.The theories run from an “aging population, higher incarceration and immigration rates, less exposure to lead paint, better police tactics…” the list goes on and on. Freakonomics even contains a chapter on the possible linkage between Roe v. Wade (1972), increases in abortions, and the reduction of crime; the reduction of children being born into poor circumstances being the reason for this abrupt (and welcomed) reduction in crime. The reasons all come with their fair share of anecdotes, but Mr. Volkan Topalli may have the most reasonable story for the decline. One thing that changed during that same period is the way that money is moved  and the prevalence of digitized transactions. Cash is anonymous, light weight, and easy to steal. Mr. Topalli, part of his work shown here, provides research from 1990-2011 in Missouri on the causal effects of introducing Electronic Benefit Transfers on crime rates. The introduction of a new electronic payment system along with credit and debit card transactions in this area created a natural experiment to see if more money truly leads to more problems. His research would argue that the old saying is true. Having more money on the streets increases the likelihood of crime. Increases in electronic transactions and digitized payments caused decreases in crime ranging from 8%-12.5%. Getting physical cash off the streets is an efficient way to deter individuals from committing violent crimes and theft. With less cash in everyone’s pocket, there is more risk involved with trying to rob someone. It can be  theorized then that a cash-less society may be a safer society. This is at least true for deterring the common street thug. While the internet has its dangers when it comes to privacy, at least digital transactions make city streets safer.

About Jared Soares

Hello, my name is Jared Soares. I am pursuing a degree in economics with minors in mathematics and computer science. Outside of school I enjoy hiking, rock climbing, cooking and performing with the improv comedy troupe Ubiquitous They.

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