About Nick: i am an economist based in malaysia. I write about development economics, while sneaking in a pop culture reference or two.

Entrepreneurship as a Solution to Crime

Published in The Edge Malaysia, 8 - 14 September 2014.

In a previous article in this newspaper entitled, “Fighting Crime with Economics,” I argued that an important way to battle crime is to improve the economic opportunities for lower-income groups which would, firstly, reduce the considerable financial incentives and, secondly, increase the opportunity cost of turning to crime. The assumption behind this argument is not a particularly controversial one – people facing economic hardships may turn to petty thefts, robberies and other such crimes as a means of survival. In this short essay, I would like to expand further on this point by commenting on a particular method of improving economic opportunities for lower-income groups, drawn from my recent experiences of visiting two cities in the Pacific Northwest of the United States, namely Portland and Seattle.

Before I begin, I think a couple of caveats are in order. First off, my experiences in Portland and Seattle are purely my own; I certainly would not suggest that these experiences are generalizable to the population. Secondly, both cities are vibrant, dynamic and thoroughly steeped in local culture where residents take pride in displaying the ‘weirdness’ of their respective cities (in fact, in a recent cultural display of Portland by Portlanders in Paris, France, the slogan for Portland’s display was “Keep Portland Weird”).

In Portland, my friends and I attended a free walking tour (or rather, a pay-what-you-like walking tour) where the guide, Eric, a Portland resident for about 20 years, discussed in some detail the facts about unemployment in Portland. To sum, Portland has the second highest unemployment rate among cities in the United States, trailing only Detroit. Furthermore, in the coming 10 years, 1.1 million people are expected to move into Portland but only 500,000 jobs are expected to be created. Thus, unemployment is currently a major problem in Portland and is only set to get worse as the years go by.

Eric mentioned that, as a direct consequence of the difficulty in finding jobs in Portland, he and his friends were forced to create their own work as a means of getting by and surviving in the city they love. They became entrepreneurs. Not out of some form of entrepreneurial spirit, not out of some existential crisis, not out of some desire to be different, but simply out of the mother of invention, necessity. Eric decided to start his own tour company, a pay-what-you-like walking tour where customers tip the guide a fee of their choice based on how much they enjoyed the tour (something like what Radiohead did when they released their 2007 album, “In Rainbows). Others decided to start food trucks – trucks which were converted to, essentially, mobile kitchens where operators cooked and sold food to customers in designated streets and/or parking lots. In fact, according to Eric, it is very likely that the rise in the number of food trucks in Portland – 10 times in just 3 years – is due to the high unemployment rate in Portland, forcing residents to turn to entrepreneurship and the creation of their own jobs simply to get by in Portland.

On the other hand, in Seattle, I witnessed firsthand the hypothesis that I had put forward in my earlier article. The driver side back seat window of the rental car I was driving was smashed, in broad daylight, in an open air parking lot, while my friends and I were on a pay-what-you-like walking tour in Seattle. This took place near Pike Place Market, one of the most popular tourist spots in downtown Seattle. The “car prowler,” in American police lingo, stole my backpack (and fortunately, only my backpack) and the belongings in the car parked next to ours. Fortunately, I had no real items of significant monetary value in my backpack; just a 4 year old iPad. Unfortunately, I had many items of significant utility value in my backpack including, ghastly for any economist in training, my Microeconomic theory notebook.

And so, I got to witness firsthand, different anecdotes on how economic hardships can influence behavior among people and how these behaviors can manifest in significantly different ways. One person (perhaps more) chose to turn to crime while another (and others) chose to turn to entrepreneurship. In Malaysia, we and many others whom we know have experienced firsthand the consequences of the former choice, be they snatch thefts, home break-ins, or muggings on the street. It is perhaps less well publicized that there are individuals who face economic hardships who make the latter choice, which is to turn to entrepreneurship.

If entrepreneurship is one potential solution to economic hardships, and if we believe that entrepreneurship is a good thing for the Malaysian economy and, indeed, Malaysian society, then one way of tackling crime would be to continue pushing more and more for entrepreneurship promotion, particularly among those who are less economically privileged. Policies on entrepreneurship encouragement should go beyond mere financial incentives. Important policies to supplement an entrepreneurship culture such as a strong social safety net – necessary for mitigating some of the high risk associated with entrepreneurship – or even primary and secondary school level business competitions can help. Policies that weaken cronyism and uncompetitive links between business and government must also be further enforced; personally, I would really enjoy seeing the Malaysian Anti Commission Corruption (MACC) capture a really big fish, for once.

This is all certainly easier said than done. A spirit of entrepreneurship – particularly in a country whose education system is better suited to produce employees than it does employers – is not cultivated in merely a year or two; it takes a sustained sense of purpose and perseverance to switch Malaysians from being a generation biased towards being job seekers to one biased towards being job creators. But, if we do, we may yet solve another significant problem in our society; the encouragement of entrepreneurship, particularly among those who are less well off, may help to mitigate crime, simply by increasing the economic opportunities available to all and thus increasing the opportunity cost of crime.

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