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Biases Affecting Your Brain and Financial Decision Making, As Told By Real Vs. Imagined Crime

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Crime in America is totally out of control these days, right? Every day you read about some new shooting, robbery, kidnapping etc., and the impression you get is that we live in an age where the streets are not safe and neither is your home.
 
Some of this phenomenon is not crime-related at all. Rather, it is in part stemming from a cognitive bias our brains experience called the recency or availability bias. From Wikipedia, “The tendency to overestimate the likelihood of events with greater "availability" in memory, which can be influenced by how recent the memories are or how unusual or emotionally charged they may be.” 
 
This bias shows may perpetrate your brain after being exposed to various emotionally charged stories and experiences. With money, for example, in the Great Recession in 2008, the recency bias may have caused you to think that the stock market is only going to continue to go down and not recover, given the recency, availability of information and media stories, and emotional reaction the severe stock market decline caused for many at that time. 
 
As for crime, when the Pew Research Center looked at the FBI figures for the quarter century from 1993 through 2015, they came to a somewhat different conclusion than what may be in our brain. Crime in America is actually falling at an impressive rate, when measured by violent crime per 100,000 residents, violent victimizations per 1,000 people, property crime per 100,000 residents or property victimizations per 1,000 households. (See chart) The news about crime, despite relentless headlines and campaign slogans, is almost uniformly good—and has been for some time.
 
The FBI data covers 18,000 different U.S. jurisdictions, while the victimization figures come from the Bureau of Justice Statistics. The former reflects reported crimes only, while the latter is a series of polls of individuals who are asked whether they were victims of a crime in the past six months, whether they reported it or not. The decline in violent crime ranged from 50% (FBI statistics) to 77% (BJS data), while the drop in property crime ranged from 48% to 69% respectively.
 
It appears that this story is not getting out to a mainstream audience. Twenty-one Gallup surveys conducted since 1989 show that most Americans believed there was more crime in the U.S. compared with the year before, despite the general trend downward. In late 2016, a Pew Research Center survey found that 57% of registered voters believed crime had gotten worse since 2008, even though the actual statistics showed that violent and property crime rates had declined by double-digit percentages during that span.
 
Where are you more likely to be a victim in our safer world? The reports show that there were more than 600 violent crimes per 100,000 residents in the states of Alaska, Nevada, New Mexico, and Tennessee. The least violent states, with fewer than 200 violent crimes per 100,000 residents, were Maine, New Hampshire, Vermont, and Virginia. Chicago has drawn widespread attention for its murder rate, but the actual rate in 2015—18 murders and non-negligent manslaughters per 100,000 residents—was far lower than the rate in two cities that are not making the news: St. Louis (59) and Baltimore (55). 


To Your Prosperity,

Kevin Kroskey, CFP®, MBA

This article adapted with permission from BobVeres.com.
Source: http://www.pewresearch.org/fact-tank/2017/02/21/5-facts-about-crime-in-the-u-s/
 

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