How can we deter crime?

Business Standard, 13 November 2017

Crime is deterred by the probability of getting caught. For one case -- theft in New Delhi -- we estimate the probability of getting caught is under 3%. The criminal justice system is not deterring crime. We can make punishments more draconian, but this generally leads to greater corruption. We can increase headcounts by 10 times, but this is expensive. The way forward lies in organisation and process reform that yields a 10-fold reduction in the man-days expended per conviction.

The probability of getting caught

The Crime Victimisation Survey (CVS) measures outcomes as seen by citizens. Using a recent IDFC Institute survey, we estimate that 1.34 million people in Delhi experienced a theft in the latest year. Of these, 0.6 million approached the police. IDFC Institute and NCRB data agree that 90,000 were able to file an FIR. The conviction rate for theft in Delhi is not known. The overall average conviction rate in Delhi (NCRB data) is 49.2%, which may imply that the 90,000 FIRs eventually yield 44,000 convictions.

For 100 thefts in Delhi, the police are approached in 44, FIRs are filed in 7, and convictions obtained for 3. Of the 3 that are convicted, some are innocent, so the actual chance of the criminal getting away is greater than 97%.

For a would-be thief, there is an over 97% chance of getting away. Our criminal justice system is failing to generate deterrence. With such a low chance of getting caught, it is a wonder there is not much more theft. This is a comment on the great reservoir of social capital in the idea of India. Decency is the norm even when the State does not punish misbehaviour.

Solution 1: Increase the punishment

One way to respond to the low probability of getting caught is to increase the punishment. As an example, suppose there is a self-service system where you have to pay Rs.100 for parking. Some people cheat, and do not make this payment. If there is only a 10% chance of getting caught, we should set the fine at Rs.1000. Even though there is a 90% chance of getting away with non-compliance, the 10% event of getting caught has a 10-fold penalty, and this delivers compliance.

In the field of finance, there are many crimes -- such as market manipulation -- where all violators will surely not be caught. In the FSLRC approach, the financial agency (SEBI or RBI) works in two steps. First, the prosecutor must determine the wrongful profit of the violator. Second, it is assumed that only one-third of the cases will get caught, so the penalty is set at three times the ill-gotten gains. This two-step method constitutes a rational approach to think about punishment. It is better than the present ways, where punishments are awarded in a fairly arbitrary way, where equal treatment is often violated.

As an example, SEBI often skips the step of computing the ill-gotten gain, and imposes a punishment upon a financial firm of being debarred from business for N days. When two different firms are punished by being debarred for 30 days, this sounds like an equal punishment. However, the monetary value of this punishment can be very different, based on the profit per month and the long-term impact upon profit that is experienced by the two firms. We need to pursue equal treatment in the overall monetary value of the penalty that is imposed. The investigation and prosecution needs to do the additional work of estimating the ill-gotten gains, and being able to defend this calculation in court.

In the Indian discourse, we often become angry and ask for big punishments. This may not just be bloodthirst; it may be an intuitive response that seeks to reclaim deterrence when there is only a low probability of getting caught.

But there are two problems with large punishments. Big punishments increase discretion in the hands of the officials doing investigation and prosecution. Imagine what would happen if the traffic policeman could impose a fine of Rs.10,000 upon a person who drives through a red streetlight. In an environment with weak processes and weak accountability, big punishments generate organisational rout with pervasive corruption.

And, there is an ethical problem in the harm imposed, when a large punishment is imposed upon an innocent person. This is one of the reasons why the death penalty is ill advised: Every now and then, the justice system makes a mistake, and hanging an innocent person is a grave tragedy.

We can be like Saudi Arabia, and eliminate theft by promising to amputate a hand. But the purpose of punishment in a civilised society is deterrence and not retribution.

Solution 2: More policemen

As is the case with judges, India has too few policemen, But as is the case with judges, merely increasing headcounts is a poor answer. To get up from 3% deterrence to 30% deterrence under the present arrangement will require 10 times the headcount. This uses taxpayer money and also incurs the opportunity cost of what those workers could have done in the economy.

The way forward

Liberal democracies have walked the slow path of building State capacity that yields deterrence at low levels of punishment. For thefts in Delhi, how can we do better than 3% deterrence? How can we get up to 6% and then 30% deterrence?

The only way forward is to think about productivity. How many man-days of staff time is required per conviction? How can organisation and processes be modified so as to achieve a 10 fold increase in productivity? This requires a careful analysis of the working of police, investigators, forensic labs, prosecutors and courts.

The ultimate outcome is measured by crime victimisation surveys (CVS). This tells us how we are faring. At present, CVS tells us that 1.34 million people in Delhi experienced a theft in a year. When the reforms are introduced and succeed, this count should go down.

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