Given the central role of private individuals and firms in determining the quality and availability of criminal opportunities, and the effectiveness of the criminal justice system, private actions arguably deserve a central role in the analysis of crime and crime prevention policy. But the leading scholarly commentaries on the crime drop during the 1990s have largely ignored the role of the private sector, as have policymakers. Among the potentially relevant trends we document in this paper are: growing reporting rates; the growing sophistication and use of alarms; monitoring equipment and locks; the considerable increase in the employment of private security guards; and the decline in the use of cash. Private actions of this sort have the potential to both reduce crime rates and reduce arrests and imprisonment. Well-designed regulations and programs can encourage effective private action to prevent crime.
One creative method to harness private action to cost-effective crime control is the creation of business improvement districts (BIDs). A BID is a nonprofit organization created by neighborhood property owners to provide local public goods, including public safety. The organization has the power to tax all the owners or merchants in the district, including those that did not sign the original petition. A quasi-experimental analysis of Los Angeles BIDs demonstrates that the social benefits of BID expenditures on security are a large multiple (about 20) of their private expenditures. Creation and operation of effective BIDs requires a legal infrastructure that helps neighborhoods solve the collective action problem.
We also provide an extended discussion of motor-vehicle theft, where new technology, including the installation of immobilizers and vehicle-tracking systems like Lojack and OnStar, appear to get much of the credit for the dramatic reductions in theft rates.
Private inputs are vital to the effective functioning of the criminal justice system. Citizens are expected to voluntarily report crimes to the police and cooperate with the investigation, often with no private benefit and some cost. There are various public programs to provide financial compensation (and sometimes protection) for victims contingent on their cooperation. However, in most cases where cooperation is not required by private insurance, the tangible private benefit of cooperation (net of private costs) is less than the benefit to the public.