Economics of Rioting

The mass riots across our green and pleasant land have left many with a sense of disbelief and shock. The reasons behind what occurred are long and complex and most are beyond the scope of this blog, but there are some aspects that can be explained by simple economics. 

How it Started

Like many previous mass riots, the spark is usually related to race. Many young black men feel that they are discriminated against. They feel that the government and the institutions it supports are prejudiced against them. And to be fair, they have a point.

If you’re black you are 8 times more likely to be stopped and searched by police than a white person. Jermain Defoe had to get a restraining order so that Essex police stopped pulling him over ever time he drove around Essex. David Starkey, a respected Historian with a TV series on the BBC, has recently spoken on an interview regarding the riots saying “the whites have become black” as if they have caught some sort of criminal disease. So when a man was killed by police in suspicious circumstances, for the young black people of Tottenham this was a tipping point of outrage.  

The riots were intensified with false rumours sent around via Blackberry messenger saying that other black man had been killed by police, and soon similar protests erupted around London. The police gave the rioters some space, understanding that a full blown confrontation could exacerbate the situation. However neither they, nor anyone else expected the onslaught of the opportunist looter. 

The Rational Looter

When the riots in Tottenham had reached a critical mass the opportunists suddenly gained an incentive to riot.

Consider this,

Cost = Probability of being caught x Cost of being caught (including social costs)

Benefit = value of probable haul + value of emotional thrill

For most of us the cost of being caught would be horrific. We would lose our jobs, our friends and any value we appoint to our social standing. For the young, unemployed and low paid, this cost is significantly lower. They also value the haul more than we would. Many of the young crowd involved use their branded clothes, watches etc as a way of showing social status. Thirdly, many of the rioters were teenagers, who are generally emotionally volatile anyway, would find looting a greater thrill than the more mature civilian.

Generally however, a looter is no different from you or I. They will consider the benefits and costs and make a rational decision. When the police held back on engaging the rioters at first, it created an interesting affect on their cost calculations.

If we expand on the ‘Probability of being caught’, we can gain an insight into the mind of a looter.

Probability of being caught  =  (Number of police x  arrest % per officer) / Number of rioters

Before the riot we could assume to see something like this (300 * 80%)/400 = 60%

We assume a 60 % chance of being caught would not make looting a worthwhile (60% x Cost of being caught is grater than the benefit). But when the police initially held back from the rioters, the arrest % fell to a low figure say 20%.

(300 * 20%)/400 = 15%

Now looting becomes a little more attractive.

Potential looters will assign different levels of value to the haul and to the thrill of rioting, but as the number of looters increase, the probability of being caught falls. This means more and more will find looting attractive.  Imagine a 200 increase in the number of looters.

(300* 20%)/600 = 10%

This is a chain reaction, the more people start rioting the more that will find it attractive. A spiral will start with an ever falling probability of being caught. Looking at the overall cost Benefit analysis then looting becomes completely rational.

The reader might think, “I would never steal, even if the benefits outweigh the costs”. Ask yourself; have you downloaded any songs that you have not paid for? Any DVDs that are not entirely legitimate? When you stole the music or the brought the illegal DVD you did the exact same Cost-Benefit analysis as the looters.

If the government wanted to stop wide spread looting in the future it should do the following.

1. Make sure that either police numbers are high or arrest rates are high (preferably both)
2. Increase the cost of being caught, with stiffer sentences and larger fines.
3. Increase the value that young people assign to their community. Currently in large cities the value young people assign is small.

Obviously there are lots of things to discuss here; I would love to hear your thoughts on the riots so please comment below.