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FORBES, 6/14/2012 @ 11:40AM

Robbing Banks Not a Good Career Choice, Scientists Say

Jacquelyn SmithForbes Staff

 

 

These are desperate times for millions, and possibly you have just once or twice thought of sticking up a bank. All you need is a bandanna, a fake gun, and an appetite for risk, and you may make thousands of dollars in a few minutes, tax-free.

Don’t do it. Not only because it’s wrong and has a big downside, but because three economists have determined that it’s really not worth it. Professors Barry Reilly of the University of Sussex and Neil Rickman and Robert Witt of the University of Surrey, all in England, decided to do a statistical study of the risks and benefits in bank robbing, drawing on exclusive data from the British Bankers’ Association. Their conclusion, published in Significance, the magazine of the Royal Statistical Society and the American Statistical Association:

The return on an average bank robbery is, frankly, rubbish. It is not unimaginable wealth. It is a very modest £12706.60 [about $19,700] per person per raid. . . .

A single bank raid, even a successful one, is not going to keep our would-be robber in a life of luxury. It is not going to keep him long in a life of any kind. Given that the average UK wage for those in full-time employment is around £26000, it will give him a modest lifestyle for not more than 6 months. If he decides to make a career of it, and robs two banks a year to make a sub-average income, his chances of eventually getting caught will increase . . . after four raids he is more likely to be inside. As a profitable occupation, bank robbery leaves a lot to be desired.

Observing that “crime is an economic activity like any other: it has its profits, its losses, its risks, and its returns,” the professors analyzed it like any other. They determined that only one in a hundred bank branches is robbed in any year and that the location and size of the branch makes no discernible difference. So little money is lost that the banks hardly notice: “California officials said they are not as concerned with the actual dollar loss as they are about trauma to customers and employees and bad publicity.” A third of robberies are unsuccessful, and in the U.S. the take is far lower even than in Britain, averaging a paltry $4,330.

Still, if you feel you must rob a bank, there are three main ways to improve your chances. First, “the bigger the gang, the greater the take. Every extra member of the gang raises the expected value of the robbery proceeds by £9033.20. . . . More experienced robbers operate in teams. It is advantageous to divide tasks.” Second, “the threat of firearm use in a bank raid raises the unconditional expected value of the robbery by £10300.50, again on average and other things being equal. . . . On the face of it, however, the reward does appear modest, given the potentially harsher judicial penalties that apply in a conviction for armed robbery.” Third, stay away from branches with metal security screens that separate staff and money from customers in under a second. These are more common in Britain than in the U.S.

The final lesson the authors draw from their research: “Successful criminals study econometrics. Statistics can help in all walks of life.”

Read the full study below.

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Significance statistics making sense – Significance magazine

Published: Jun 12, 2012 – From issue: Volume 9 Issue 3 (June 2012)

Robbing banks: Crime does pay – but not very much

• Author: Barry Reilly, Neil Rickman, Robert Witt
• Doi:      10.1111/j.1740-9713.2012.00570.x

Professor Barry Reilly is at the Department of Economics at the University of Sussex; Professors Neil Rickman and Robert Witt are at the school of economics at the University of Surrey.

 

‘THE ECONOMICS OF ROBBING BANKS’

 

Robbing banks

Crime does pay – but not very much

 

Robbing a bank is the staple crime of thrillers, movies and newspapers.

But, say Barry Reilly, Neil Rickman and Robert Witt, bank robbery is not all it is cracked up to be. With access to a unique data set, they give us the low-down on the economics of the bank heist.

Crime is an economic activity like any other.

What are the risks and rewards of the average bank job?

It sounds rather glamorous. A few hours of planning, a few minutes of adrenalin-packed work, a truckload of 100-dollar bills or 10-pound notes, no taxes to pay, and the rest of your life on the Costa del Sol or somewhere else warm and sunny with swimming pools and no extradition treaties – why would anyone not choose bank robbery as a career path?

Turn either to morality, to law, or to statistics for the answer. For morality and law, consult other sources – your vicar or your local friendly police station will be happy to advise. For the statistics, look no further. We can help. We can tell you exactly why robbing banks is a bad idea.

We can do this partly because we have been given rare, perhaps unique, access to a normally confidential data set. This has let us construct, for perhaps the first time, a model of the economics of robbing banks.

Crime is an economic activity like any other: it has its profits, its losses, its risks, and its returns. It has also its inputs, of labour and of capital, and its costs.

So it can be analysed in just the same way as any other economic activity. And for many types of crime this has been done. (A popular account is in Freakonomics, by Steven Levitt and Stephen Dubner[1], which tells why drug dealers tend to live with their mothers: for the rank-and-file dealers the activity is so unprofitable that they cannot afford a place of their own.) Surprisingly, bank robbers have never had the benefit, if that is the right term, of independent econometric analysis of their activities. One reason may be that in the UK no major crime survey includes bank robbery as a separate class of crime (the FBI, in contrast, reports specifically and quarterly on bank robberies in the USA).

 

Another major reason may be the lack of a crucial element of data: how much money the robbers manage to get away with.

Bank robberies are high-profile crimes. They get publicity. But banks normally keep the amounts they lose in robberies a closely guarded secret. For one thing, it is commercially sensitive; for another, it might encourage copycat raids. However, our research was concerned with the various factors that determine the proceeds from bank robberies; hence, we could work out (among other things) the economics (to the criminal) of attempting one, and the economics (to the banks) of trying to thwart it. How much should banks spend on such security precautions as fast-rising screens in order to deter robbery attempts and to foil those attempts that do take place? And we were lucky enough for this purpose to be granted access to exclusive data from the British Bankers’ Association.

This was under conditions of confidentiality, so we cannot share all the raw data with you; we can, however, share our analysis and conclusions. They give a remarkable picture of the profitability of bank robberies – a picture that is rather different from the popular imagination or from the depictions in big-budget movies.

First, how many banks are robbed? Figures for the UK show that there were 106 bank robberies or attempted robberies in 2007; there are approximately 10 500 high-street bank branches. This gives us one important factor in analysing the economics, to banks, of security measures: relatively few of their branches – one in a hundred – are likely to suffer a raid or an attempted raid.

In the same year there were 80 000 robberies recorded by the police, of which 7500 were committed against businesses; so clearly even among the criminal fraternity robbing banks is a minority occupation.

In the US, the data are for 2006. Altogether 440 000 robberies were reported, of which 12,000 involved banks[2], [3]; Mastrobuoni[4] reports slightly higher incidences of bank robberies in Europe.

Next, what kind of banks are most targeted?

Does the size of the branch, or its location, or how busy it is make a difference? We used distance from the nearest police station as a proxy for location. A small distance would imply a city; a larger distance, a smaller country town. The number of staff present during the raid was our indicator for the size of the branch, and the number of customers in the bank was our guide to how busy it was.

We found that none of these factors had any significant effect on whether the branch was targeted. There seems no favourite type of branch to rob. Of all the branches that were subject to robbery attempts in 2007, only 13 were targeted twice, and only one three times. The choice would seem random. Nor does the size of the haul depend on the type of branch. If larger floats of cash are held in bigger branches, or if smaller
branches have less security, this does not seem to enter the calculations of the robbers in selecting their targets.

 

And what are the effects of bank robberies?

Obviously, one is to transfer money from the bank to the criminal; but that, perhaps surprisingly, is generally not what most concerns the banks themselves. The psychological costs borne by staff, and by clients who happen to be in the bank at the time, are not small. As an example, “Californian officials said they are not as concerned with the actual dollar loss as they are about trauma to customers and employees and bad publicity”[5].

The indirect financial costs are not small either. Branches in Italy spent an average of €10 700 ($14 000; £8700) on robbery prevention in 2006 (yielding a total cost of over €300 million ($395 million; £245 million)), with a further 60% of expenditure on courier protection [endnote 4]. These costs are ultimately borne by consumers through bank charges. Bank screens cost $1000 per linear foot to install in the USA, while our own research suggests that a single fast-rising security screen can cost around £4500 to install in the UK. In addition to deterrence or prevention costs, there are detection costs, as well as longer-term costs of recovering proceeds, all borne largely by police forces and, hence, tax payers.

And we have not yet even considered the money that the thieves actually get away with.

Table 1 shows that the average haul from a bank raid in the UK between 2005 and 2008 is £20 330.50. The standard deviation is £53 510.20. The sample size of 364 raids includes those that were foiled; as the table shows, one-third of raids were unsuccessful, meaning that the robbers got way with no money at all. The average haul per successful robbery is therefore around £30 000. But again, some “successful” raids – around 20% in both the UK and the USA – are detected and the perpetrators caught and sentenced, and in some cases the money is recovered; this reduces the expected gain to the robbers.

The average US bank robbery nets considerably less: some $43 303, compared to an average of $1589 for all commercial robberies. (There is a sector low of $769 for robberies from convenience stores.)

Table 1. 364 bank raids in the UK between 2005 and 2008, variable description and selected summary statistics

 

Description	Symbol/units	Mean	Std. dev.	Min.	Max.
The amount stolen	pounds sterling	20 330.50	53 510.20	0	425 610.00
Bank raid successful? (dummy variable)	1 if successful, 0 if not	0.662	n/a	0	1
Bank staff present at time of the robbery	Number	5.417	4.336	0	25
Customers present at the time of the bank robbery	Number	2.000	3.684	0	30
Bank raiders involved	Number	1.637	0.971	1	6
Firearm displayed? (dummy variable)	1 if displayed, 0 if not	0.357	n/a	0	1
Fast rising screen in the   banking outlet?	1 if present, 0 if not	0.118	n/a	0	1
Alarm activated during the   raid?	1 if activated, 0 if not	0.854	n/a	0	1
Travel time from nearest police station to bank   outlet	Minutes	4.557	4.028	0	22
Location	1 if a shopping high street,   0 if not	0.670	n/a	0	1

 

Ill-gotten gains, loss and risk

All this information allows us to create an equation, balancing the potential robber’s inputs against his expected gains or losses.

A bank robbery can be thought of as a production process. It has “inputs”, which the potential robber has to supply; and “outputs” – the money, if any, that he gets away with. The nature and size of the inputs affect the output.

As with any commercial enterprise, the inputs include both labour and capital, as well as factors that affect productivity – the efficiency of your factory or the ease or difficulty of your raid.

For the potential robber, the main “inputs” are the number involved in his gang (which we can think of as the labour input), whether firearms were displayed in the course of the crime (which is part of the capital input), and a raft or vector of what you could call difficulty or deterrent factors that may influence the effectiveness of the inputs: bank security measures (such as the presence of a fast-rising screen), whether the alarm was activated during the robbery, the number of staff and customers present during the robbery, and so on. The “output” is a function of all of these and is the value of the money that is stolen. In an unsuccessful raid of course this is zero. The output might also include capture and a lengthy term in jail. Our equations let us model the effect of varying one or more of the inputs on the expected output.

As we have seen, the “average” proceeds from the “average” robbery is £20 331, but about one-third of robberies yield nothing at all. The average number of raiders is 1.6 (Table 1), though a sole raider was involved in 60% of cases. The average number of customers present was 2 and an alarm was activated in 85% of cases. A firearm was displayed in over one-third of robberies, and just over 10% of banks raided had a fast-rising security screen system in place.

 

As we have also seen, neither the numbers of customers nor of staff in the bank at the time of the robbery affects the output. However, the number of raiders involved most definitely does. It yields a positive well-determined coefficient. The bigger the gang, the greater the take. We were able to use maximum likelihood estimates to quantify it. Every extra member of the gang raises the expected value of the robbery proceeds by £9033.20, on average and other things being equal.

This may well reflect the effect of criminal organisation. More experienced robbers operate in teams[6]. It is advantageous to divide tasks – monitoring the bank lobby, accompanying staff to vaults to ensure maximum takings, driving the getaway car and so on. A larger gang may have spent more time on planning and reconnoitring – in short, it may be more professional, and the larger returns may reflect that. Even so, if the gang splits the proceeds equally, although the total haul goes up the haul per person goes down.

 

If the robbers use a gun

The other major factor that affects the output is whether the robbers are armed or not. The threat of firearm use in a bank raid raises the unconditional expected value of the robbery by £10 300.50, again on average and other things being equal. This is plausible, as the penalties for using a firearm in committing a robbery are significantly greater than for unarmed robberies, thus raising the ante: it becomes a higher stakes game. The possible penalties are greater so one would expect the potential rewards to be greater as well. (They might come, for example, through increasing the potential cost to bank staff of failing to comply at speed with robbers’ demands.) On the face of it, however, the reward does appear modest, given the potentially harsher judicial penalties that apply in a conviction for an armed robbery.

The third factor that significantly affects the size of the proceeds is whether or not the bank branch has fast-rising security screens.

These are more common in the UK than in the USA, where security is more often in the form of armed guards, who are seldom, if ever, seen in Britain. The metal security screens rise, by compressed air, in about half a second when triggered, separating staff and money from the public areas. About 12% of UK branches in our sample have them. They have a demonstrable effect on the size of a robbery’s take.

A fast-rising screen in a banking outlet relative to other counter security arrangements reduces the expected value of a robbery by £24,463.30, on average and other things being equal. (Those last seven words take care of the fact that the expected reduction in haul is £4000 greater than the expected average haul. A screen in no case has actually resulted in raiders handing over £4000 of their own money to the bank cashiers before fleeing the premises.) The figures do highlight the effectiveness of this particular type of system.

However, an important supplementary question is whether this effect comes primarily from reducing the probability that the raid is successful, or from reducing the amount taken in a successful raid. Do they foil raids, or just reduce the take?

We estimated a simple probit regression model of bank raid success using the variables – number of staff, firearm use, etc. – that we have already mentioned. The impact effect for the fast-moving screen suggests that the probability of a successful bank raid is reduced (on average and other things being equal – we cannot avoid those words), by 32.2 percentage points compared to any other bank counter security system. Given that 66% of bank raids are at present successful, the overall introduction of screens could potentially reduce the bank raid success rate in Britain by almost one-half.

Our computation suggests that about two-thirds of the impact effect of £24 463.30 from the fast-rising screen is due to a reduced probability of bank raid success (£15 443.50), with the reminder (£9019.80) assigned to a reduced level of take in robbery proceeds.

Thus, the primary channel through which the fast-rising screen works is through its impact in reducing the probability of a successful bank raid.

 

The incentive to commit a bank robbery

A robber will attempt a raid if and only if the expected benefit outweighs the expected costs – both costs and benefits being as perceived by the robber. This assumes, of course, that potential robbers behave rationally and self-interestedly. That people behave thus is a central assumption in all economics and is no more true, and no more false, for bank robbers than for anyone else.

The expected benefits are, of course, the haul multiplied by the probability of getting it and keeping it; the probability of getting it is the probability that the raid is successful, that of keeping it is the probability of not subsequently getting caught. The expected costs are the lengthy term in jail – converted into monetary terms at the robber’s own conversion rate – times the probability of serving that term – that is, of being caught and convicted. The balance between these costs and probabilities can be expressed as an equation, as in the box at top left.

Expressing the main deterrent – the potential prison sentence – in terms of money is of course problematic. It does not include the psychological effects of prison but treats incarceration in purely financial terms as merely a period of non-earning. The fear of jail may well outweigh calculations of lost earnings as a deterrent. On the other hand, in certain subcultures serving time in jail is a “badge of honour” or rite of passage, a perverse incentive if you like. Similar considerations apply to the expected gain: the kudos from planning and executing a raid may be a greater incentive than the financial reward. Attempts to quantify this we leave to others.

The basic economic model of crime (attributable to Becker[7]) argues that rational criminal acts occur if and only if the perceived expected benefits are positive.

 

The expected net benefit of a crime can be expressed as an equation.

The equation is

Expected Net Benefit = v[qR – (1–q)P] + (1–v)[q× 0 – (1–q) P] (1) where R is the proceeds from the robbery, v is the probability of a successful raid (i.e., leaving with R > 0), q is the probability of not subsequently being arrested (i.e. retaining the proceeds), and P is the penalty perceived by the robbers when planning the raid should they be apprehended and punished. This being an economic equation, the penalty is expressed in pounds or dollars. The equation simplifies to Expected Net Benefit = vqR – (1–q)P (2)

 

For the robbery to take place, the expected net benefit must be positive. If we set the left-hand side of the equation to be zero, we can work out the size of penalty which will be just enough to persuade the criminals that it is not worth attempting the robbery. Setting the benefit to be zero, and making P the subject of equation (2): P = vqR/(1 – q)

Taking values from our data, we know that v, the probability of a successful raid, is 0.66. The probability of getting caught, 1 – q, is 20%, which means that q is 80% or 0.8.

The average bank job involves 1.6 raiders and nets £20,330.50, so R, the average proceeds per raider, is £20.330.50/1.6 = £12,706.60.

Putting these values into the equation, we get P = 0.66×0.8×12 706.6/0.2 = £33,545.40

This estimate represents the monetary penalty, if caught – the fine, if you like which would make the individual indifferent between robbing the bank and not doing so.

A greater penalty would deter him from attempting the crime, just as greater parking fines deter many of us from illegal parking.

This simple exercise provides a “back-of-the envelope” calculation of the magnitude of the penalties required to deter bank robbery activity in Britain.

In practice, of course, bank robbers are not fined but imprisoned. The average bank robber tends to be unemployed with a low level of education[8]. The £33,545 deterrent penalty could be considered the cost in lost opportunity: it is approximately equivalent to the earnings from 3 years in a minimum wage-rated job; a 3-year jail sentence would in theory deprive him of about that amount of possible earnings. Whether the deterrent effect of 3 years in jail can simply be equated to 3 years of lost earnings is a different matter.

Coincidentally or not, the average sentence of a convicted bank robber in Britain is just under 3 years.

 

Why robbing banks is a bad idea

It is here that we can answer our original question of why, statistically speaking, robbing banks is a bad idea. The return on an average bank robbery is, frankly, rubbish. It is not unimaginable wealth. It is a very modest £12 706.60 per person per raid. Indeed, it is so low that it is not worth the banks’ while to spend as little as £4500 per cashier position at every branch on rising screens to deter them.

A single bank raid, even a successful one, is not going to keep our would-be robber in a life of luxury. It is not going to keep him long in a life of any kind. Given that the average UK wage for those in full-time employment is around £26 000, it will give him a modest lifestyle for no more than 6 months. If he decides to make a career of it, and robs two banks a year to make a sub-average income, his chances of eventually getting caught will increase: at 0.8 probability per raid, after three raids or a year and a half his odds of remaining at large are 0.8 × 0.8 × 0.8 = 0.512; after four raids he is more likely than not to be inside. As a profitable occupation, bank robbery leaves a lot to be desired.

It is worth noting that the criminals themselves seem to have learnt this. Robbing banks is no longer what you could call the crime of choice. Bank robberies and attempted bank robberies have been decreasing, in both the USA and the UK; in the UK, robberies from security vans are on the increase. Security vans offer more attractive pickings. Our framework provides a way of thinking about this, partly by allowing us to look at the expected value of committing a robbery, but also because it effectively introduces a competing product into the robbers’ “product space” and asks them to think about which will generate more proceeds.

The lesson of which would seem to be: successful criminals study econometrics. Statistics can help in all walks of life.