What are victim costs?
Victim costs, also referred to as victimization costs, are losses suffered by crime victims and include tangible and intangible costs. Tangible losses are those that easily translate into financial disadvantage, for instance, medical costs, lost income, and property loss incurred because a person was the victim of a crime. Intangible losses refer to the pain, suffering, and reduced quality of life that a crime victim may experience and are usually harder to monetize than tangible losses.
How victim costs are estimated
Placing a dollar value on victimization can be challenging, but several studies have estimated both tangible and intangible victim costs. A 2010 study by McCollister et al. provides the most current estimate of victim costs, using the cost-of-illness and jury-compensation approaches. The cost-of-illness approach measures tangible costs like medical costs (using information from hospital databases) and lost earnings. The jury-compensation approach uses the money awarded to victims by juries to estimate the intangible victim costs of crime. The figure below summarizes the tangible and intangible victim costs presented in McCollister’s study.
* For most offenses, values in the Total column do not equal the sum of the values in the Tangible and Intangible columns. The tangible and intangible costs of murder are estimated using two distinct methodologies. Tangible costs reflect the value of forgone lifetime earnings, whereas intangible costs represent the value of a statistical life (Viscusi & Aldy, 2003). These two estimates should not be combined to create a “total victim cost per murder.” The tangible and intangible costs for the other offenses listed in Figure 1 include valuations of the risk of homicide costs attributable to those crimes, therefore the total victim costs were adjusted to avoid double-counting. See McCollister, French, and Fang (2010) for more information about these calculations.
Other studies use the contingent valuation approach to estimate victim costs. This method, which can capture both tangible and intangible costs, relies on surveys that ask people to place a dollar value on changes in crime levels. A survey might ask individuals how much they are willing to pay for a reduction in crime (Cohen, 2009), or, alternatively, how much they would have to be compensated for experiencing different types of crimes (Cohen, 1988).
In addition to surveys, researchers use market prices to infer how individuals place a dollar value on crime and safety. Some analysts estimate the dollar value residents place on crime and potential victimization by examining the effects of crime on property values (Cohen, 2010). Estimates developed through this hedonic valuation approach, however, do not apply to specific types of offenses, such as rape or theft, but to crime overall. Wage differentials are also used to determine how much workers in occupations like mining and construction need to be compensated to accept jobs that involve a risk of death. These compensation premiums are used to calculate the value of a statistical life, which serves as the estimate of the victim cost of murder.
Cost-benefit analysis and victim costs
A comprehensive cost-benefit analysis of an initiative that affects crime, whether directly or indirectly, needs to take into account victim costs. If a policy or program reduces crime, then the costs of avoided victimizations are counted as benefits. If a policy or program increases crime, victim costs are incurred.
To calculate the costs or benefits of a specific initiative to victims, first estimate the number of crimes that occur or are averted as a result of the policy or program. Since not all crimes are reported, determine the number of victimizations by dividing the number of estimated crimes by the percentage of crimes reported to the police, using data from the National Crime Victimization Survey. Decide which victim cost figures you want to use, based on which methods of estimation you find most credible, and, finally, multiply the number of victimizations by the victim costs estimates to get the total victim costs or victim benefits. Note that if you are using offense-specific victim cost estimates, such as those presented in Figure 1, you’ll need to disaggregate the crime impact of the initiative you’re examining by type of offense.
When reporting on victim cost results in your cost-benefit analysis (CBA), we recommend whenever possible that you present the tangible and intangible components in separate columns. Readers of your CBA may be skeptical about the methods used to calculate intangible costs, particularly given that, for certain types of offenses, intangible costs can be several times larger than tangible costs. By displaying both types of costs, you’ll give people the information they’re interested in while also exposing them to the full array of victim cost estimates.
Keep in mind
The studies and methods described above represent the best available research on victim costs. This body of research does have limitations, however. Contingent valuation surveys may overstate what people are actually willing to pay to avoid crime, for instance. In addition, most studies do not calculate victim costs for drug offenses, even though substance abuse affects health outcomes and generates medical costs for users and society, or for white-collar crimes. Future research will likely address these limitations. In the meantime, using current victim cost figures is generally better than excluding these estimates from your cost-benefit analysis.
Crime victims may experience substantial financial, psychological, and physical harm. In recent years, economists have placed a dollar value on these harms to measure the victim costs of crime. This document defines victim costs, describes the methods used for estimating them, provides cost estimates from recent studies, and discusses the role of victim costs in cost-benefit analysis.