The ‘Startling’ Link Between Low Interest Rates and Low Crime

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Illustration by Kishjar via Flickr

When interest rates go up, crime goes up. When interest rates go down, crime goes down. Two analysts say the powerful relationship between them has significant implications for justice and economic policymakers in the next administration.
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3 thoughts on “The ‘Startling’ Link Between Low Interest Rates and Low Crime

  1. This is statistical nonsense. These are non-stationary variables (which essentially means that they have broad trends). Any correlation is very likely to be spurious. The researchers should difference the variables (e.g., make them into yearly percent changes), and see if there is a significant correlation. The same is true for the correlation between crime and prison.
    Moreover, a simple correlation isn’t enough. There are many other factors that might account for this apparent relationship. Should use a multiple regression.
    Theory about the relationship between crime and the economy is iffy at best. A good test occurred in 2009-2011 when the economy entered the great recession, but there was no expected increase in crime. The economy was doing fine during the high-crime rates in the 80’s and 90’s.

  2. It’s saddening that the Crime Report would let this one slip by its editors. In the era of “fake news,” printing this piece – myriad of errors aside – with all its self-assuredness and cavalier pronouncements strikes me as incredibly tone-deaf from an outlet competing with larger CJ-only websites.

    In addition to the serious methodological and theoretical shortcomings pointed out above the authors omitted a host of variables that, under their suggested criminological model, would be far more proximate to offenders than would central bank rates. Why ignore the consumer price index? Why ignore inflation? Why ignore the strength of the social safety net? To focus on one theoretically distal variable, identify a moderate correlation, and unflinchingly proclaim that as a great leap forward in science is the rankest form of quackery. There is no more validity to this theory than there is to the correlation between violent crime and ice cream consumption, and at least that had a stronger correlation.

  3. As we stated in our essay “Nobody would suggest that high interest rates directly cause crime.” The statistical fact is that long-term nominal interest rates are strongly correlated (different than causality) with both the rise and fall of crime rates over a 60 year period. Of course there are other economic (and demographic) indicators that are also associated with crime rates. But one would have to assume that any multiple regression model on the relationship between crime and the economy would have to include this interest rate metric. The point was that variation in these interest rates over time may serve as a proxy for levels of social and economic stress which many other researchers have also found to be associated with crimes rates, murder rates, and suicide rates. BTW ice cream consumption rates have remained flat as far back as 1987 while crime rates have plummeted.

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