Economic Analysis of Public Security Prevention

[Abstract] Based on the economic analysis perspective, this paper analyzes the economic attributes of security prevention and control from the assumption of rational security preventive agents, and explores the costs and benefits of prevention and control, as well as the relationship between the two.
[Keywords] Economics, Public Security, Air Defense, Rational Person Assumption. Crime, as a social problem, is like a mouse and a cat, a spear and a shield, yin and yang; where there is crime, there must be a response—that is, public security and prevention. Just as crime research can be viewed from multiple perspectives, so too can public security and prevention research. Here, we will also analyze it from an economic perspective.
First, the concept of a "rational security and prevention agent" carries the same implied meaning as that of a "rational criminal." The very phrase "rational security and prevention agent" implies that the assumption of "rational man" remains a premise for our analysis. Since "economic analysis is a unified method applicable to explaining all human behavior," and security and prevention behavior is no exception to the category of "human behavior," organizations, societies, and individuals all seek to maximize benefits and minimize harm. Therefore, it is logical to assume that the subjects of security and prevention—individuals, organizations, or societies—are "rational."
The idea that law enforcement officers are rational is similar to the implication of the assumption that "humans are rational maximizers" in the context of "rational criminals"—that "people respond to incentives, i.e., if a person's environment changes and they can increase their satisfaction by changing their behavior, then they will do so." When we understand or define "people" as "law enforcement officers," we arrive at another inference: law enforcement officers respond to incentives; if their environment changes and they can increase their satisfaction through prevention and control, then they will take preventative measures.
Therefore, in an economic sense, there is a substantial difference between "rational law enforcement officers" and "rational criminals." Both are merely "sub-categories" with relative significance under the "general principle" of "rational man." They differ in appearance but are unified in essence. There is also no substantial difference between law enforcement behavior and criminal behavior. They are essentially both economic behaviors, although their purposes are diametrically opposed.
II. Prevention and Control Costs and Benefits Public security prevention and control activities are essentially economic activities, which means that, like other economic activities, costs and benefits are two decisive factors.
1. Crime prevention and control costs. Crime prevention and control costs refer to the costs incurred by society in preventing crime. These typically include the following aspects:
First, there are the material costs of crime prevention and control. Just as crime isn't always a free lunch, crime prevention and control isn't just empty talk. All prevention and control measures, even according to the current "three-pronged" approach of human, physical, and technological defenses proposed by public security organs, require a certain amount of cash investment, sometimes even a huge sum. These material preparations for crime prevention all fall under the material costs of crime prevention and control.
Secondly, there is the psychological cost of public security prevention and control. Public security prevention and control is not just about material investment. The mental work people do for prevention and control, such as thinking, planning, calculating, and even the suffering they endure in some cases, is also an investment. These mental losses, such as energy and mental strain, should be included in the cost of public security prevention and control.
Secondly, there's the opportunity cost of crime prevention. Similar to the opportunity cost of crime, the opportunity cost of crime prevention means that by allocating resources to prevention, people forgo potential gains from other uses. In other words, the determination of the opportunity cost of crime prevention is "referenced" to the value of another economic activity with the same resource investment.
Finally, there is the expected cost of security and crime prevention (also known as the expected prevention cost). The expected prevention cost is the cost that the preventive entity intends to invest or can invest; it is the product of existing resources and the probability of being harmed. Since the rationality of the preventive entity dictates that it will strive to achieve the greatest benefit with the least investment, the measurement of expected losses will determine the amount of prevention cost invested.
2. Benefits of Security and Prevention. Benefits of security and prevention refer to the losses avoided due to the investment in security and prevention costs. These avoided losses include both material and psychological losses. Compared to the ease of measuring material benefits, psychological benefits are difficult to quantify. Therefore, for the sake of simplicity in analysis, we limit the benefits of security and prevention to material benefits and ignore psychological benefits, even though they increase overall social welfare.
The benefits of security and prevention depend on the losses avoided by the prevention and control costs, and the magnitude of the losses avoided by the prevention and control costs depends on people's expected losses, which is the product of existing resources and the probability of being harmed.
What public security prevention and control aims to avoid is future losses, that is, losses that have not yet occurred; similarly, the benefits that public security prevention and control aims to obtain are also future benefits, that is, benefits that have not yet been obtained. Therefore, the benefits of public security prevention and control are essentially expected benefits, and it seems more appropriate to call the benefits of prevention and control "expected prevention and control benefits".
III. Comparative Analysis of Prevention and Control Costs and Benefits Due to the unity of "rationality" between criminals and preventers, and the unity of "economy" between criminal behavior and prevention and control behavior, the crime model can be fully applied to explain public security prevention and control behavior; that is, the expected benefits of public security prevention and control exceed its expected costs. To distinguish it from the crime model in its application context, we will tentatively call it the public security prevention and control model.
The crime prevention and control model's summary of the conditions for prevention and control behavior implies that, within the "rationality" of those involved in crime prevention and control, proactive action will only occur when the vested interests outweigh the costs. This means: First, when those involved in crime prevention and control believe their expected gains exceed their expected costs, they will take preventative measures to stop illegal activities; and the greater the expected gains, the greater the likelihood of them investing capital in prevention and control. Second, when those involved in crime prevention and control believe their expected gains are less than their expected costs, they are less likely to invest capital in prevention and control, and the smaller the expected gains, the less likely they are to invest. Third, when criminals believe their expected gains are equal to their expected costs, those involved in crime prevention and control may adopt an indifferent attitude towards crime prevention and control.
Since both expected costs and expected benefits depend on expected losses, and all other things being equal, expected losses depend on the probability of the infringement occurring, the probability of infringement incentivizes those who take preventative measures. In other words, the frequency of infringements—such as theft—has a greater impact on those who take preventative measures than the value of the infringement. This is consistent with the statement that "changes in probability have a greater impact on the number of illegal acts than changes in penalties," because this is "a common and general characteristic of human behavior."
The security and prevention model also implicitly includes a variable related to expected benefits and costs: time frame—that is, the duration over which expected benefits and costs are calculated. Security measures are not one-time consumption products, and those responsible for security measures are not seeking one-time purchases. From their perspective, the longer security resources remain effective, the better; the longer the time, the higher the benefits, and the lower the relative costs. Given the same security effectiveness and price, a security technology product that can be used normally for 5 years will certainly sell better than one used for 3 years. And given the same service life, security effectiveness and price are the key factors determining whether those responsible for security measures will pay for them.

References:
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[2] Guo Dong: The Economic Essence of Crime [J] Public Security Research, 2007, (04)