Tuesday, July 15, 2014

The Economics of Crime that Pays

The Economics of Crime that Pays Simple Arithmetic is All it Takes to Do the Basic Calculations Lex Loeb Contributor Network . It is true that most criminals are not very smart. Most do not consider the consequences before they commit their crimes and one can genuinely feel sorry for them when they cry crocodile tears at their sentencing hearing in a court room. A lot of crime novel readers definitely do identify with the bad characters in the books they like to read. Part of the allure of being a crime novel junkie is to find out the degree to which the criminal does get away with his crime. The little old lady Agatha Christie probably enjoyed the idea of being able to murder people in her fiction as much as her readers enjoyed it or she would not have invented as many diabolical murders trying to get away with their crimes as she wrote about. Murder is usually not a crime that pays as much as other crimes do. The prime example is probably Counterfeiting and similar strictly for profit crimes. Several years ago a friend of mine told me about her brother in law who went to prison for counterfeiting. He had a partner in the crime who also got caught, convicted and sentenced. According to my friends story , at the time the penalty was just two years in prison. The pair of counterfeiters manufactured around $400,000 and spent it all so there was nothing for the court to garnish to pay victims. Each one of them essentially got $100,000 for a year in prison! What a deal! It is just basic math. Had these counterfeiters gotten away with the crime longer and passed more money , at the time they probably would have gotten the same two years in jail. Some counterfeiters get away with the crime and never have to pay the price of jail though probably most do. The would be counterfeiter can then calculate in advance what he or she needs to get away with in exchange for a number of months in jail. I just read about a case in 2005 where the counterfeiters got 3.8 years in prison for passing about $50,000 which at $6578.00 a year in prison does not seem to be as much of a bargain.The sentencing guidelines for counterfeiting may have changed and there may be more years in jail required for a conviction today but the math used to figure the cost of getting caught have not changed. And now for the mathematic punchline: Bernie Madoff says he ran a 50 billion dollar Ponzi scheme for 20 years , he appears to have about a 10-15 year life expectancy. He can expect to get life in prison. Assuming he lives 15 years in jail he netted some percentage of the 50 billion dollars , assuming it was about half or 25 billion dollars for the sake of sensationalism because it probably was less, then he pays 1.66666 billion dollars per year he gets to stay in jail. if he only lives 6 months in jail than the cost is the whole 25 billion dollars for just six months. This would clearly be a crime that really paid no mater how you do the calculations. Doctors are fond of saying they deserve to be compensated with a 400 thousand dollar annual income because of the sacrifice they had to make going to medical school. Many medical student drop outs will tell you that the regime of med school was as bad as being in prison so it is apparently a cost benefit trade off just like for profit crimes. Had The market not crashed and Madoff died before the collapse of his fraudulent empire then his crimes would have paid more than those of the worst ancient roman emperors, The biggest part of the American economy where crime really pays in in the legal profession especially where it interfaces with the United States Congress. No where else can dollar bills be printed with wild abandon and virtually no consequences for passing those bills with no value of any kind to back them up in trade. There is virtually nothing the US congress cannot purchase with money it does not yet have for virtually any purpose or without reason. It would seem that the publics disdain for Bernie Madoff is that he just happened to be un-elected. Had Madoff been an elected congressman or senator he would have be garnishing national favor as a hero of the American Economy. The fine line between government printing of money the government does not have and unauthorized counterfeiters is the difference between counterfeiting for the public good and for unauthorized private gain. Madoff fraudulent legacy is probably envied by many legislators. What makes national counterfeiting acceptable is that the group approves of it . If Madoff was one of the senators from new York in congress he could easily be responsible for spending 60-200 billion dollars printed by fiat a year in his senate subcommittee. Because the money does not go directly into his own pocket it is perfectly legal. Madoff's problem not being in congress is that when his fake money runs out he cannot just go out and print more at some point because he is limited by finding rich investors to tap out and he tapped out about as many as there were who would fall for his scam. The American taxpayer is too stupid to realize they are already tapped out when they are bankrupt so they clamor for the US government to go bankrupt to help save them from the inevitable. When the US government goes bankrupt the worst thing that happens is that Senators get to build hospitals while they are still alive and name the places after themselves in gratitude . If that does not make them local heroes they just don't get re-elected. It is no wonder that so many crooked people of ambition seek federal offices. The average person hold a corporate board of director position is likely to be far more honest than someone seeking a federal office just because there are higher costs of being on a board in a private corporation if the company should fail. The destruction of Ancient Athens as a world power was by criminals who held public office. A lot of really fine empires self destructed by allowing the ambition of self serving people who can do the basic cost per benefits of criminal activity calculations, The lawyers in congress would never allow a law to be passed that would make congressmen and senators financially responsible for their errors. That just would not be good government. California referendums sponsored by the Governator that would have prevented the financial crisis there now were voted down by the electorate more than a year before the bottom of the state economy fell out below them. . .

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