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A link between low interest rates and low crime (2016)
- d--b 3y agohttp://www.tylervigen.com/spurious-correlations http://www.tylervigen.com/spurious-correlations
- globular-toast 3y agoAnyone have any updated figures, 7 years later?
- fooker 3y agoRemember correlation does not imply causation. Apple prices and divorce rates are correlated too!
- sebtron 3y agoMy favorite one is chocolate consumption vs nobel prize winners by country.
- CoastalCoder 3y agoHonest question: what standards of evidence do people have for concluding causation (in physical systems)?
- fooker 3y agoExperiemnts that try to fix or eliminate other variables. This is usually not possible for economics and other social sciences.
- vladms 3y agoI think the gold standard is experimenting for physical systems. Then you can control for whatever you want. For medicine it would be double blind study (select participants, split them in 2 groups, then you know the groups are the same, give one group the medicine, give the other group placebo). And then we get to social sciences - like economics - very hard to make an experiment. You can't just play with the interest rate to write a paper...
- vkou 3y agoYes, it's difficult to run macroeconomic experiments. The question still stands. What degree of evidence is sufficient to not be off-hand-dismissed with 'Correlation does not imply causation'?
- ttyprintk 3y agoSince inferring causality is hard, we look for counterexamples that disprove it. Hence the reliance on randomization and the null hypothesis. A counterexample in social sciences might be that the corresponding relationship is found across methodologies and cultures. This turns a question of causal inference into questioning the power of overturning longitudinal data. Statisticians differ about the philosophy on that.
- ttyprintk 3y agoI agree it depends on the domain. “Successful randomization” might be a more helpful term than “gold standard” here because in this domain the amount of covariance with gold prices is embedded into some people’s arguments.
- deleted 3y ago[deleted]
- hackerlight 3y agoIn social sciences: natural experiments. In medical sciences: interventions.
- hgomersall 3y agoGiven the stated aim of higher interest rates is to increase unemployment, it's not a stretch to expect a causative effect. That said, I'm sceptical the higher interest rates achieve the stated aim in any sense, though even screwing over the poor with higher mortgage and loan payments could easily increase crime.
- konschubert 3y agoExcept when the higher interest rates result in a "soft landing". https://www.noahpinion.blog/p/how-did-the-us-achieve-a-soft-landing https://www.noahpinion.blog/p/how-did-the-us-achieve-a-soft-... And yes, higher interest rates do reduce inflation.
- hgomersall 3y agoI know people keep saying "higher interest rates do reduce inflation", but I'm yet to see any supporting evidence for this. Japan is a nice example where the exact opposite appears to be true. The soft landing in the US could easily just be down to the stimulus effect of handing out free money in the form of interest when inflation was going to come down anyway as the supply shocks work through the system. Interest rates predictably influencing inflation is now on the level of a test of faith.
- vidarh 3y agoGood thing the article writer is actually aware of this.
- aitchnyu 3y agoThere was a blog which posted funny high correlation quantities. Wonder if newer algorithms can find clusters of quantities and try to infer causation. Like it could determine fuel prices, food prices and people going hungry as a cluster.
- actionfromafar 3y agoAny causation where someone lives to tell the tale, is tricky to fully tease out. Everything is feedback loops.
- pocketarc 3y agoThis is the one, and it's great fun to look at: https://tylervigen.com/spurious-correlations https://tylervigen.com/spurious-correlations
- neilwilson 3y agoBlair Fix would agree with you "Do High Interest Rates Reduce Inflation? A Test of Monetary Faith"[0] [0]: https://economicsfromthetopdown.com/2023/02/04/do-high-interest-rates-reduce-inflation-a-test-of-monetary-faith/ https://economicsfromthetopdown.com/2023/02/04/do-high-inter...
- throwawayqqq11 3y agoI am not an economist but that claim looks bogus to me. I suspect a lot of indirection between crime - GDP - interest rates, which makes me suspect a spurious correlation.
- 3abiton 3y agoAlso cherry-picking metrics and ignoring others (imprisonement rate), is trying really hard to push an "implication".
- vidarh 3y agoThe article dealt specifically with imprisonment rate, and cited numbers for how it correlates poorly, and constantly lags, as well as a source which suggests increased imprisonment might actually contribute to more crime.
- vidarh 3y agoDid you read the article? The bulk of it is dealing with the indirection and other factors.
- Eisenstein 3y agoIf you correlate ice cream consumption with accidental drownings amongst children you will find a striking match up. I propose to ban ice cream to limit drownings. Or maybe it is because it is summer when most kids eat ice cream and go swimming? Of course it is easy to put these two things together, but it is much harder with economics to know if there is a simple answer or a complicated one.
- Joker_vD 3y agoWell, we can test this counter-factual by banning ice cream during the summer and see if it affects the number of accidental drownings. do(X)
- nvdk 3y agoto all the quick replies below, the article actually goes a bit in the possible causation and how higher interest rates might relate to higher financial stress in society and how that relates to crime rates.
- konschubert 3y agoDo they control for unemployment?
- jameshart 3y agoWhy would they want to? Part of the hypothesis is that interest rates drive increased unemployment which drives crime. Overall their thesis is that interest rates are a leading indicator of economic stresses that highly impact crime rates.
- deleted 3y ago[deleted]
- Shrezzing 3y agoThe report uses data from the Uniform Crime Report. UCR records crimes reported by the police, which isn't the same as crimes occured. It's likely the link here is between Government Budgets (including budgets for police resources), and Interest Rate. Low IR generally happens in response to recessions. Budget cuts (including police budget cuts) also happen in response to recessions. Police activity reduces with reduced police budgets. Crimes reported to UCR reduces with reduced police activity.
- ttyprintk 3y agoHowever, inflation versus crime is studied across nations with academic rigor. Bias from a single source does not undermine the conclusion that inflation is a higher factor in certain crimes than, say, unemployment. https://pinkerton.com/our-insights/blog/inflation-and-crime https://pinkerton.com/our-insights/blog/inflation-and-crime
- passwordoops 3y ago"Academic rigor," especially in these social science studies, has usually come to mean "fraud" or at best "bad methodology". Search "Reproducibility Crisis", "Dan Ariely" or "scientific fraud" and you should get the jist of why you shouldn't trust many headlines for new discoveries right now. Especially "surprising" results that go against expectations https://www.nature.com/articles/d41586-023-03486-5 https://www.nature.com/articles/d41586-023-03486-5 https://www.newyorker.com/magazine/2023/10/09/they-studied-dishonesty-was-their-work-a-lie https://www.newyorker.com/magazine/2023/10/09/they-studied-d...
- ttyprintk 3y agoThis is not my field, but I remember that article as completely undermining your claim that “academic rigor” “usually” implies “fraud”. My take on the replication problem (I’m not a social scientist) is that we now think the original experiments missed a confounding factor out of ignorance or lack of statistical sophistication. This is not how Ariely and Gino were caught, though. I wouldn’t call their research surprising at all (again, not my field), but their randomization failed. Replication should have found a different level of support and introduced skepticism of the rigor of their methodology.
- izacus 3y agoDoes that imply that US society becomes disfunctional if there's no access to debt? What's making it impossible to function within the existing budgets and causes this huge dependency on borrowing with cheap rates?
- vidarh 3y agoBorrowing impacts jobs, and housing costs, both of which have outsized effects on people's budgets.
- izacus 3y agoOk, but why is the impact of borrowing costs so big on the US?
- bawolff 3y agoWhy are we assuming this is US specific? Does it not happen in other countries? (Not rhetorical, i have no idea what the answer is)
- offices 3y agoIt's intentional. When the institutions responsible talk about 'raising interest rates', they implicitly add 'to increase unemployment which will reduce spending and reduce inflation'.
- vidarh 3y agoWhy would it not be? As long as there is credit available, supply of it will drive demand for products and services, and property, and either creates jobs and/or affect prices also for people who never borrow. The reality is that there are very few places in the world where people in general can afford to buy property without borrowing for example, and rental prices tend to reflect purchase prices.
- deleted 3y ago[deleted]
- sharperguy 3y ago
- oldpersonintx 3y ago[dead]
- JumpinJack_Cash 3y agoIt's the other way around: High interest rates happen when there is high inflation High Inflation is present in periods of poor impulse control from consumers who bid up prices Poor impulse control periods are not something that happen in a single societal fundamental such as purchases of goods and services, but across the board including crime, killings and drugs People are looking for a cause and a link between government actions, Fed actions and crime (and other phenomenons), but it's really the contagious seasonality of human behavior that changes . Government and Central Banks are totally part of it, not causing it, they are just people subject to the contagious seasonality like the rest of us. For the elites this particular contagious season of human behavior means cooking the books of their publicly traded company or starting a war, whereas for those who are not so high in the food chain means stealing a car or punch their nextdoor neighbor after a fight.
- perfunctory 3y ago> Poor impulse control periods > the seasonality of human behavior Is it really a thing? Does impulse control come in waves?
- downWidOutaFite 3y agoNo
- helboi4 3y agoYeah that sounds ridiculous to me. Yes I can understand that high interest rates come from periods of iresponsible borrowing by capitalists who have become complacent due to low interest rates continuing for a long time. However, to act like this complacency, which is caused by a deep understanding of the economy and business-minded spirit, would also affect the lower classes in some way even though they are largely unaware of the details of the economy or lack the ability to exploit it, is a strange stretch. Even more of a stretch is saying that the lower class equivalent of risky borrowing because of a feeling of security is... doing crime because you feel so secure in your employment?? Why would anyone in their right mind be compelled to do crime because your life is just going too well and you have too many opportunities to better yourself legally? The claims of the article make much more sense.
- somewhereoutth 3y agoThe real startling link is between wealth inequality and high crime.
- suoduandao3 3y agoGiven that high interest rates mean it's very advantageous to have money, might interest rates just be a leading indicator of wealth inequality?
- somewhereoutth 3y agoAs it turns out, low/zero interest rates since 2008 have led to asset bubbles just about everywhere - which of course benefits wealth holders. Housing being the most egregious example. Hopefully the return to normal rates will deflate those asset bubbles.
- randomdata 3y agoThing is, for as insane as they may seem on the surface, assets prices have managed to keep in line with the return on investment. The returns are where the gains have really been made. In other words, it is not so much an asset bubble as it is a consumer activity bubble. Which is unsurprising as that is specifically why the rates were lowered in the first place – to spur on consumer activity when it started grinding to a halt in 2008. And why rates have risen again recently – to try and tame consumer activity amid a supply chain no longer able to keep up with it. So, yes, as consumer activity declines, asset values will go with it. But that also means less for the average Joe. As people have to do with less, it isn't too hard to think that crime will increase as a result. When there are no longer toys to placate them, people will find something to do.
- d--b 3y agoThis sounds really dubious. They talk about rates affecting unemployment which affects crime, but if you look at the unemployment chart, it is completely out of sync with the rates vs crime chart that they base their argument on.
- ImHereToVote 3y agoTo a lay person this just sounds like thieves are denied the easy thieving button during high interest rates, and substitute their income with IRL thievery.
- nickdothutton 3y agoDoes this replicate outside of the US? How is it for Singapore, or Sweden, or Saudi?
- throwubs 3y agoLow interest rates create a lot of well paying jobs. I think there should be no interest at all for the greater good... I also think crime would not exist if everyone could afford basic necessities
- hirako2000 3y agoWas reading somewhere crime is an intended produce, necessary to maintain a government in place to run the system. Government: look, without us who would protect you from criminals. It probably needs more than just criminality. But "foreign" threats would probably not be enough to justify how large government entities are throughout the globe. Governments consciously or unconsciously need crime so would always make sure it doesn't get entirely eliminated. Me think governments also like unemployment, since they provide unemployment and other social benefits. I think they also like narcotics, ensuring not only constant supply of crime but also feed into the pharmaceutical business. Once you are hooked it's rather simple to pick you up and hook you to the official, legit drugs. At least for a while. Wouldn't go as far as saying they may also benefit from epidemics and pandemics, they do provide the convenience to mandate everyone to stay home right before social protests get too well organised, that would be a stretch. Not an impossibility though.
- terminalcommand 3y agoTurkey tried this, results were catastrophic. Google erdoganomics. We had 8% annual interest and an annual inflation of over 100%, fun times.
- imtringued 3y agoAssuming he uses the zero interest money to do austerity, it could work, at least in theory. Except Erdogan never intended to do austerity. He just wanted to borrow money at low interest. I admit that I misunderstood his intentions.
- terminalcommand 3y agoThe problem was that Erdogan borrowed at a higher interest rate. The issue with countries outside of US is that the local currencies are not accepted anywhere so you cannot cover your deficit by printing money. You need us dollar, gold reserves to back the value of your currency. If you decrease interest rates while you have high inflation, people spend like there is no tomorrow. If you could buy 2 loaves of bread and 2 tvs today, you can only buy 1 loaf of bread and 1 tv in a month's time. So you buy and stock. This creates increased demand which creates increased prices. At some point you don't even know what the prices of things are, manufacturers don't know it as well, so they increase the prices higher to cover anticipated future costs. Your wages rise but your purchase power declines each month. Portions get smaller, prices get higher, you live a shitter life. Inflation is the mother of all evil. If high interest rates are needed to keep it under control it is worth every effort.
- _heimdall 3y agoOne assumption I don't see covered at all, they seem to be assuming that the percentages of total crime being reported to police is constant. The study uses UCR data which only records the number of crimes reported to police. How can we know that the correlation here isn't actually that the likelihood of a crime being reported is linked to inflation? I.e. with lower inflation I'm less willing to deal with reporting some types of crimes to police, but with higher inflation I'm stressed personally and financially and am more likely to report a crime.
- roenxi 3y agoThis is junk analysis because there will always be signals that randomly correlate. There are a lot of signals out there that we can plot pairwise and the axises here aren't identical. All this says is that long term interest rates formed a hump shape, and crime formed a hump shape. There are so many hump shapes it is just a matter of finding 2 humps that peaked around the same time. Not only that, but in this case peak interest rates were around the infamous 1970s era when a lot of policies change. So even if these are related, there is probably a hidden variable that a lot of policies changed at the same time and the two series still aren't causally related. There was likely a policy refresh on how crime gets handled at the same time as there was a policy reset on how interest rates were managed.
- FrustratedMonky 3y agoYeah, this is exactly what I thought. Interest Rates correlate to a lot of things. Seems like stretch to say there is a cause, not just correlation. Like, there is more crime in cities, but, because there are also more people. What is per-capita crime. Small town with 10 people, 1 felon, man, they are 10% felons.
- WarOnPrivacy 3y ago> Seems like stretch to say there is a cause, not just correlation. A better take might be that they reliably happen together.
- rimeice 3y agoYeh, this. The frequency of babies named Jeffrey[1] follows this pattern. Maybe all this crime was committed by Jefferys? [1] https://namerology.com/2022/03/08/the-ultimate-baby-name-grapher-is-here/amp/ https://namerology.com/2022/03/08/the-ultimate-baby-name-gra...
- t_mann 3y agoThe statistical analysis doesn't seem to go beyond correlations, so this could well be just an instance of https://en.wikipedia.org/wiki/Spurious_relationship https://en.wikipedia.org/wiki/Spurious_relationship, ie a statistical fluke like marriage rates correlating negatively with longevity or pirate activity with climate change.
- tootie 3y agoIt may be but that doesn't mean it's not interesting. I doubt the relationship for is truly spurious but it's certainly indirect. Even if we determine that crime and interest rates are driven by the same external forces it will force us to evaluate policy on another axis.
- t_mann 3y agoThe link between the decline of piracy and rising global temperatures was the industrialization of the British empire - studying piracy (unsurprisingly) wouldn't have yielded any insights on climate change. Similarly, interest rates may have not much to tell us about crime.
- randomdata 3y agoWhen observed over short timeframes, there is clear seasonal variability along with decline in oceanographic piracy when the weather conditions are unfavourable to the activity. A study on the decline of piracy over the long timeframe would notice that the trend is down due to increasingly rougher seas – caused by climate change.
- beej71 3y agoMaybe the age of Miss America correlating with number of murders by steam, hot vapors, or hot objects would be a more and less interesting example. https://www.tylervigen.com/spurious-correlations https://www.tylervigen.com/spurious-correlations
- _vere 3y agoeconomic stability correlates with low crime rate, color me shocked
- spywaregorilla 3y ago"almost perfect correlation" is an interesting way to describe 0.77
- eganist 3y agoA much more interesting link is between crime and atmospheric lead emissions, which looks similar to this but conforms much more tightly. I'm more inclined to buy that than interest rates considering we have more direct evidence between lead exposure and violent tendencies. https://en.wikipedia.org/wiki/Lead%E2%80%93crime_hypothesis https://en.wikipedia.org/wiki/Lead%E2%80%93crime_hypothesis https://www.forbes.com/sites/alexknapp/2013/01/03/how-lead-caused-americas-violent-crime-epidemic/ https://www.forbes.com/sites/alexknapp/2013/01/03/how-lead-c... https://www.luc.edu/media/lucedu/hhhci/pdf/FactSheetDelinquencyandCriminalBehavor.pdf https://www.luc.edu/media/lucedu/hhhci/pdf/FactSheetDelinque...
- apapapa 3y agoHigh interests rates are linked to poverty and it would not surprise me if more violent crimes were commited in poor neighborhoods
- lo_zamoyski 3y agoWhat if we eliminated interest rates (as technically, they constitute the exploitative practice of usury, and therefore theft), and opt for equity participation instead? (This is how Islamic banking operates, as riba is forbidden. Indeed, usury is also condemned by the Church, and Catholic banks would sustain themselves on, e.g., service fees for the labor involved in, say, issuing a loan or investing on someone's behalf or whatever. And the Jewish Talmud forbids taking interest between Jews, though it does permit charging goyim interest. Regardless, you do not need to appeal to religious law or teaching as these merely reflect the demands of justice and just economic exchange.)
- anovikov 3y ago"if you give everyone lots of free stuff, they won't be killing each other as much as usual because they will be too busy chewing". Who could guess.