The opportunity costs of rioting
After this week’s riots in England, it seems everyone has an explanation for why they happened. Often, these reasons contradict each other. But one reason really piqued my interest: a friend argued that this all boiled down to opportunity costs. It turns out he’s not alone; there’s a whole body of literature that has looked at the opportunity costs of rioting and its conclusions are fascinating, strangely intuitive and entirely applicable today.
First, a little Economics 101. What is an opportunity cost? “The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.” Applied to rioting this sounds something like this: the expected returns of rioting versus staying at home. I should specify that the “returns on rioting” include not just the value of LCD TVs looted from your local Curry’s but also, however distasteful this sounds, the satisfaction derived from rioting.
Short-term opportunity costs
In the short-term, there are two variables that are key to understanding why people choose “rioting” over staying at home. First, there’s the issue of expected punishment. Research suggests that if you expect rapid and severe punishment, you are less likely to riot. Second, and linked to this, there’s the issue of chaos: when people saw the lawlessness that reigned in the streets of England, many thought “why not?” David Cameron calls these people “opportunists”, economists call them “free riders”. Applied to the riots in England, what this basically tells us is that whereas in normal circumstances, the equilibrium in society is “not rioting”, earlier this week, the equilibrium in some neighborhoods shifted to “rioting”. As a result, the costs of rioting virtually disappeared: people saw chaos, didn’t think disorder on this scale would be punished and so jumped in. In terms of policy, this suggests that the court proceedings around the country really are important: it will have an impact on people’s perception of the expected costs of rioting.
Long-term opportunity costs
As for the long-term reasons for rioting, existing research is more ambiguous. Several commentators have suggested that it was the UK government’s cuts and poverty that had created the conditions for this unrest. They’re only partially right. Studies suggest that economic growth decreases the likelihood of rioting but poverty, and even income inequality, has no clear impact. Instead, and this may well be where Osborne’s cuts and policies fit in, the likelihood of crime and riots increases if people have low expectations about their future income. Under successive British governments, social mobility has collapsed. And under this government, there is certainly the perception that university education will become prohibitively expensive for many. So while we are moving to a more stratified economic model, where low income people no longer expect to rise to the next income bracket, we are also sewing the seeds for further crime and future social unrest.
What does this mean for policy?
It all boils down to the “why not riot?” question. In the short-term, potential rioters need to have the impression that the police can control the streets and that rioting will be punished. This should take care of the “opportunists”. But it will not solve the problem altogether. In the long-term, economic growth and social mobility (or at least he perception of it) really matters. If this isn’t taken care of, there will always be a core of people for whom the expected returns of rioting are greater than the returns of staying at home.
