MMECC

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EVALUATING THE COST OF ORGANISED CRIME AT A
COMPARATIVE LEVEL WERE WE GO
ERNESTO U. SAVONA, PROFESSOR OF CRIMINOLOGY,
UNIVERSITA CATTOLICA IN MILAN AND DIRECTOR OF
TRANSCRIME
Milan, 5th December 2008
MMECC is funded by the European Commission under
the Sixth Framework Programme
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Difficulties in comparing OC data at
international level
There is a great difficulty in comparing data on
the cost of crime at an international level.
Initiatives reported are usually confined to one
specific geographically defined zone. This
approach is understandable in light of the
difficulty of collecting common, standardised,
international data. The comparison of results
across countries is particularly difficult due to
diverse approaches and the varying definitions of
crime and cost . Even where UN surveys on data
relating to expenditure in criminal justice
systems exist, the authors themselves note that
such surveys should be developed and improved by
the application of accounting principles in order
to achieve consistent international comparisons.
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Variation of O.C. activities
Approaches to the quantification of costs vary
from focusing on a total population (o
examination of a particular segment of the
population (Those organised crime activities
included in the quantification may also vary
(money laundering, illicit drugs, environmental
crime, selected contraband, economic crime,
migrant trafficking, counterfeit products, and
motor vehicle theft), as might the nature of the
costs ultimately quantified (economic,
social-political, violence, health and safety and
environmental). Despite the attention of the
literature to a rigorous and comprehensive
evaluation of the impact of organised crime's
activity, several problems still remain.
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Difficulties in definition and measures
A first problem appears in relation to the
difficulty of providing an acceptable definition
and correct measure of economic and financial
costs of organised crime's activities. Data
produced in this area is, for instance, often
obtained through interviews, with the consequent
risk of subjective bias based on perception and
possible under or over estimation of the total
cost. One of the other difficulties is the
definition of indirect costs of organised crime.
The assignment of a monetary value to
psychological variables or variables of feeling
is not an easy task. For instance, the emotional
and physical stress caused by victimisation may
have an impact on family life, on behaviour at
work and so on, and these types of costs are
almost impossible to quantify.
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Difficulties in measuring systemic costs
Moreover, there are few studies that deal in
depth with so-called systemic costs (the costs to
wider society), probably because they are not
directly quantifiable in so far as they reflect
particular perceptions of reality. Nonetheless a
few isolated examples (such as Porteous (1998),
and, to a lesser extent, Maltz (1990)), do come
close to such an approach through examination of
costs such as the impact on basic values of
society.
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Difficulties in data gathering
One of the other main problems encountered in the
literature concerns data gathering. In many
studies, data is not available (Von Lampe 2002)
or is missing such as data on illegal
immigration and fraud (Mayhew 2003a, 2003b),
money laundering (John Walker Consulting Services
1995), property crime related to drugs
(Canadian Center on Substance Abuse 1996), the
exact number of people employed by organised
crime (Fishman, Rodenrys and Schink 1986, Rey
1993), the effective turnover of organised
criminal activity (Rey 2003), or the exact
number of crimes and/or estimated average value
of crime (Census 1992). In other respects, the
use of such data as is available may create
problems if it is inadequate, especially for
estimating economic costs.
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Difficulties in methodology for data gathering
and estimating costs
Lastly, the data gathering method itself may
cause problems through recourse to
non-appropriate techniques because of the nature
of the crime (Brand and Price 2000,
Richter-White 2003). Finally, the methodology
used to estimate costs may also generate some
difficulties. For example, an approach such as
the human capital method requires calculation
of the future value of different variables.
Future values are of course, by their nature,
uncertain and the future costs may therefore be
too approximate to constitute useful arguments
for the public decision maker.
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All these difficulties risk to make the cost of
O.C. useless...but.... something is changing
The demand for estimating the cost of O.C.
conflicts with these difficulties, which, if not
solved, make the exercise useless. We need better
data and better methodologies, and moreover, we
need to explain the utility of estimating the
cost of OC. Things are changing for
international comparisons of data on the cost of
crime at European Level. This process is slow but
there are signals that something is changing
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New data on OC activities
The forthcoming European Sourcebook report will
concern fraud corruption and money laundering.
The Experts Group on the Policy Needs for Data on
Crime and Criminal Justice of the European
Commission together with the task force of
Eurostat are moving in the right direction in
producing harmonised data on different crimes,
including OC activities. An European Business
Crime Victims Survey will soon be launched, and
this will be the first data gathering instrument
for analysing the cost of OC crime activities
such as corruption, extortion and fraud at a
comparative level. A specific section on O.C
will be introduced. Data gathering processes will
be speeded up if all these activities are framed
in a perspective found useful by decision makers.
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Theme 10 Security of The 7 FP
The 7 FP Theme Security has requested, among the
many topics, research on foresight based
methodologies for rigorous assessment of
security investments and tradeoff between
security and other societal objectives (e.g.
privacy and social cohesion) Università
Cattolica - TRANSCRIME in cooperation with 17
European research units and law enforcement
agencies has answered to this call with a project
proposal named FUTURE. This could be an example
on how to use new and old data in a comparative
perspective useful for policy makers.
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Project proposal FUTURE
The consortium has answered to this call
proposing a methodology based on a long term
foresight perspective combined with the short
term monitoring of a specific crime. Why focusing
on OC and measuring its cost? Because the
request is about securities with catastrophic
effects and the consortium has decided to focus
on six crime areas where the foresight
methodology could be applied Serious organised
crime, terrorism, environmental crime,
cybercrime, corruption , money laundering have
been selected because of their systemic effects
an economic externalities
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The nine steps of the project FUTURE

• Nine methodological steps
• .
• How to define the target crime?
• The general structure of the European Security
  Foresight Methodology (E.S.FO.M) should be
  focused on a specific criminal activity
  (henceforth called target crime) chosen among
  the many belonging to each of the six criminal
  areas.

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Mapping crime target in 27 countries
2) How to map the current impact of the target
crime in 27 EU MS. The research team will
determine the methodological steps and criteria
needed to elaborate a map for 27 EU MS dealing
with the current impact of the target crime, in
terms of origination, victimisation and potential
threat/risks to individuals, state organizations,
financial and economic institutions (banks, stock
markets, etc.) and commercial and industrial
organizations (stores, supply chains, warehouses,
etc.). The methodological steps will include the
requirements to collect data on the target crime
and evaluate its impact in terms of economic and
social costs.
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Define the European vision
3) How to define the European vision.
The research team will determine the criteria
necessary to elaborate a European vision based on
various benchmarks, such as the principles stated
within the international/European conventions as
well as the current impact of the target crime in
each of the 27 EU MS. By vision is meant what
can be achieved or aspired to in a given time
frame relative to the target crime (i.e. a
reduction of women trafficked at time intervals
t1, t2, t3, tn) by answering the following
question to what extent should the target crime
be reduced and by when?
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Define exogeneous variable
4) How to identify the exogenous variables and
on the basis of assumptions their link to the
target crime? The research team will determine
the criteria with which to identify, among the
exogenous variables influencing the target crime
(i.e. the contextual environment, which
encompasses social values, geopolitics,
governance, sustainability, and technology as
well as the situational environment, which
encompasses countermeasures and investments),
those that shape the target crime (endogenous
variable) more than others in terms of its
magnitude and geographical dimensions.
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Operationalise exogeneous variables

• .
• How to operationalise the exogenous variables
  identified?
• The research team will determine the
  criteria with which to operationalise the
  exogenous variables identified in terms of
  indicating, also on the basis of the most
  reliable sources available, a set of indicators
  to measure rigorously any changes in the
  exogenous variables.

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Building alternative scenarios

• How to build alternative scenarios in the short
  (5 years) medium (10 years) and long term (15
  years)?
• The research team will determine the
  methodological steps to be followed in building
  alternative European/country scenarios for the
  target crime using the exogenous variables trends
  in each of the abovementioned interval times.

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Scenarios
For each interval (short, medium and long),
three alternative European/country scenarios
could be built 1) scenario trend based on
projection into the future of past target crime
trends 2) best alternative scenario and 3) worst
alternative scenario. Scenarios 2 and 3 could be
built as follows a) analysis of the past trends
in the exogenous variables b) identification of
variables exhibiting unstable trends in the past
and their outliers.
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Mapping the risk on the basis of scenarios
7) How to map the risk on the basis of scenarios
for each of the 27 EU MS? The research team
will determine the methodological steps and
criteria needed to plot risk maps showing, with
reference to the target crime, the changes in
risk according to the alternative scenarios
constructed. This activity could consist in the
plotting of three risk maps at a European/country
level, based on each scenario (point 6) at each
time interval, showing the magnitude of the risk
and where the risk is located. In particular, the
risk maps could provide information on the
displacement of the risk according to the
alternative scenarios previously built.
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Identifiy investments for reducing crime
8) How to identify a set of measures/investments
which could be used to reduce the impact of
target crimes at European and/or national level?
The research team will determine the
criteria with which to identify the
measures/investments aimed at reducing the impact
of the target crime to be further assessed. The
research team, having taken account of the
technological, policy and organisational
evolution of the measures, will also draw up
guidelines for identifying the investments that
could be applied in the future.
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Assessing impact alternative security investments
. 9) How to assess alternative security
investments and their impact in the short, medium
and long term? The research team will draw
up guidelines on the methodology to be used to
assess alternative investments as well on the
methodology with which to collect a set of
indicators measuring the effectiveness and the
economic and social efficiency of the above
investments.
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Criteria to be used
The criteria used for assessment of the
investments could be as follows
Effectiveness of the investment (EF) in terms of
the outcome (variation of the target phenomenon
at t1, t2, t3tN). By outcome is meant the
measurable effects of the investments upon the
target phenomenon, with values from 0 to 1 (0 no
effectiveness 1 max effectiveness)
Efficiency of the investments in terms of A)
economic efficiency and B) social efficiency.
Economic efficiency (EE) includes direct economic
benefits and costs of the investment (variation
of benefits and costs at t1, t2, t3tN), with
values from 0 to 1 (0 no economic efficiency1
max economic efficiency). .
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Social efficiency
Social efficiency (SE) includes social benefits
and costs in terms of compliance with defined
human rights benchmarks, defined civil rights
benchmarks (privacy) and defined social cohesion
benchmarks (variation at t1, t2, t3tN), with
values from 0 to 1 (0 no social efficiency1
max social efficiency).
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Concluding remarks
Many other projects related to the
theme 10 Security of the 7 FP go in the same
direction. They start from the assumption that
data on the cost of crime collected in the future
at European level could help european and
national policy makers and practitioners to make
rational decisions. Future is uncertain
!