Does less cash equal fewer crimes?

Since the early 1990s, crime rates have generally been falling in the U.S. In particular, there has been a big drop in the incidence of robbery, burglary and larceny. How come? New research suggests an unexpected factor. In the 1990s, the national government started requiring states to deliver welfare benefits through the new Electronic Benefit Transfer system instead of paper checks. EBT allowed beneficiaries to get their money via debit cards -- meaning a big reduction of cash on the street and, as a result, significantly lower crime rates. The research, conducted by University of Missouri criminologist Richard Wright and his colleagues, focuses on crime rates in Missouri from 1990 to 2011. The researchers exploited the fact that the EBT program was implemented in eight phases in different localities from June 1997 to May 1998. The variations in the implementation dates enabled Wright and his co-authors to isolate the program's effects. Wright and his colleagues asked two major questions: 1. Did crime fall after the introduction of the EBT system? 2. Did income-generating offenses fall more than other offenses, such as rape? The answer to both questions turns out to be yes. The big news is that EBT's implementation helped reduce the overall crime rate by 9.8%. That translates into a decrease of 47 crimes per 100,000 per county per month. Income-generating crimes were the main source of the decrease, with burglary, larceny and assault falling by 7.9%, 9.6% and 12.5%, respectively. You might speculate that these results are driven by an increase in arrests, not by the EBT program. If police are arresting more people, crime rates should go down. But Wright and his co-authors specifically tested for changes in arrest levels — and found large decreases there as well, thus fortifying their conclusion that the EBT program is reducing crime. By contrast, implementation of the EBT program was not associated with a statistically significant reduction in sex offenses, such as rape, prostitution and sex trafficking. Mr. Wright and his co-authors were also able to speculate about the relationship between having less cash on the street and a reduction in crime. After calculating the total amount of welfare payments in the relevant Missouri counties, they found that it was possible to achieve that 9.8% reduction in the crime rate by eliminating about $55.9 million in cash from circulation each month. To be sure, this is a study of Missouri, not of the U.S. as a whole, and it hardly gives a complete answer to the question of why the U.S. has experienced a decrease in crime since the 1990s. Undoubtedly, there are many contributing factors. Higher levels of incarceration, larger police presences and demographic changes have all been cited. But if we compare the trend lines for Missouri with those for the nation more generally, we will see a lot of overlap, especially for burglary and robbery (and, to a lesser extent, larceny). So it's reasonable to conclude that across the U.S., the EBT program has turned out to be a significant, if unexpected, crime-fighting tool. There are larger lessons here. In recent years, a lot of people have been interested in helping the "unbanked.” If you don't have a bank account, you'll end up having to pay someone to cash your checks, and it will be hard for you to accumulate even a small amount of savings. With these points in mind, the federal government has made numerous efforts to help people have the functional equivalent of bank accounts. An example is the Direct Express program, which gives debit cards to people who receive federal benefits through the Social Security and Supplemental Security Income programs. And in 2010, the Treasury Department significantly increased its electronic payments across the board. These efforts are significant, but there is much more to be done. Mr. Wright and his co-authors contend that if federal and state governments, along with the private sector, took stronger steps to reduce the use of cash, the effects on street crime would be even larger. Over the last decade, there has been a lot of talk about the unintended bad consequences of national initiatives. Fortunately, some of those initiatives have unintended good consequences. When the federal government required EBT, its principal goals were efficiency, speed and accuracy. Crime reduction has turned out to be an unanticipated bonus. A cashless society would hardly be a crime-free society, but reducing the use of cash turns out to be a significant step in the right direction. This story first appeared on Bloomberg.com. Contact the writer of this article, Cass R. Sunstein, at csunstei@law.harvard.edu.