Crime Doesn't Always Pay
After Hurricane Katrina reports of fraud and scheming were almost immediately in the news. Hundreds of people or maybe even more, driven by greed, opportunity and disaster came up with a multitude of ideas of how to get more money. Most of these reports were about how individuals attempted to get money from FEMA under false names or insurance for houses that never existed.
In contrast, a group of 49 Red Cross workers and their family members have been indicted in a scam to steal Red Cross hurricane relief funds. These people who were part of an organization based in helping people took an opportunity to help themselves. These people are charged with tapping into the system and creating fake accounts then had family members receive these.
In this case crime really has not paid off, at least for these individuals. They choose something without thinking about the marginal cost and marginal benefit. They most likely did not know how likely it was to be caught because of the individuality of this crime yet the Red Cross was offering $360 for individuals but more than $1,500 for families. This is a small fraction of the amount these individuals were most likely making in their every day lives, by working or retirement. In addition, these people are now facing not only fines but also jail time. This attempt to get rich was not rational and to this individuals not profitable.
1 comment:
When viewing this topic in an economic point of view we have to look not only at the explicit cost of these crimes, but the implicit costs also. We need to think to our selves, if we were in this situation would we do the same?
Imagine that you were a mother of three living in an apartment that just lost everything in the Katrina disaster. You now find yourself debating on if you should try to get money out of the insurance company for a house that you never had. You would think to yourself, what is the cost of my actions? What is the cost of the things that I lost? Not only the concrete items, but the implicit items also, like the money you lost that could have bought your children warm clothes and food. You would need to measure the cost and time of suffering from this disaster and of finding the necessary essentials of life. Then we must look at what the cost of jail time is? What is the cost of fines if I get caught committing this crime? What amount of money and happiness will I get out of this crime if I succeed? Then you would add all this together. If the cost of committing this crime is less then cost of not doing it an economist would say, do the crime?
So can we look at these people and call their actions irrational? Sometimes we might think so, but ask your self what you would do if the consequences of doing a crime like this one was brought you far more economic profit then not committing this crime!
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