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Breaking and entering
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Sometime in the 1960s, economist Gary Becker was late arriving for an oral examination of a student at Columbia University. He had to make a quick choice: Drive the car to a parking lot or leave it illegally on the street. Becker later said that he calculated the chances of getting a parking ticket for leaving his car on the street, the amount of the fine he would have to pay and the cost of keeping the car in a parking lot. Eventually, he decided to take the risk and park on the street.
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Becker won the Nobel Prize for economics in 1992, for using economic reasoning to explain various social issues such as racial discrimination, drug use, education, family structure—and crime. The underlying analytical approach was broadly similar to what went through his mind that day on the street outside Columbia University: Individuals assess the costs and benefits of breaking the law.
Becker assumed that individuals try to maximize welfare as they conceive it—it could be driven by selfishness, altruism, loyalty, spite or masochism. “I have tried to pry economists away from narrow assumptions about self-interest. Behaviour is driven by a much richer set of values and preferences," he explained in his Nobel lecture in December 1992. “(Individuals’) behaviour is forward-looking, and it is also consistent over time… Forward-looking behaviour, however, may still be rooted in the past, for the past can exert a long shadow on attitudes and values."
Many of these themes are worth revisiting in a year when the world has seen street action from the Arab world to Israel to London. The motivations in each instance are very different and so are the underlying social and political situations. There are a host of sociological explanations for what has happened. In London, there is much debate about whether the kids went on a looting spree because they are the broken products of broken families or because fiscal austerity has shut their last chance to cling on to their dignity. Others ask—with a tinge of moral anger—why bankers who bankrupted entire countries walk away with fat bonuses, while kids who steal a pair of trainers should end up in jail.
Less ambitiously, it is also worth asking what happened in London that led to rioting spreading like a prairie fire. An economist would use the Becker tool kit and ask: “At what point did the individuals who eventually went on the looting spree figure out that the benefits from pilfering were far greater than the potential costs?"
A lot has to do with the size of the mob. One lone individual breaking into the neighbourhood store is sure to get thrashed by the owner or arrested by the police. But as the number of people indulging in burglary and arson climbs, the risk of getting punished begins to fall for each individual. There will eventually be a moment of anarchy when the costs of stealing are near zero, especially when the police force cannot even fire rubber bullets or use water cannons.
There is also a dynamic that encourages the crowd to grow. Say you dislike the Syrian police state, but are too scared to be the first on the street to protest. One man decides to step out to shout slogans against the ruling regime. He is alone and thus faces the maximum risk of being arrested or shot. Another 10 people in the town have a slightly lower appetite for risk: They will step out only when there is at least one person out there. These 10 people draw in another 100 with even lower risk appetite—and so on. You may be a timid person who has quietly promised yourself that you will step out only when there are at least 1,000 people on the street. The Arab spring or the famous Leipzig demonstrations against the Communist regime in the former German Democratic Republic show that a positive feedback encourages the size of the crowd to grow.
Be it in London or Damascus, there is always a random event that spins out of control. As the size of the crowd grows, the probability of being caught and punished rapidly falls.
I am not for a moment assuming moral equivalence between the protesters in Syria and the looters in the UK. But economic reasoning suggests that individuals come out on the street—be it with noble or criminal intent—when the probability of severe punishment begins to drop rapidly.
And, by the way, Becker decided to take a chance and illegally park on the street that day in the 1960s. He did not get caught.
Niranjan Rajadhyaksha is executive editor of Mint. Comments are welcome at cafeeconomics@livemint.com
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