Photo: Erik Calonius / EPA
It worked for New York City before. And it could work Wall Street today.The recently departed James Q. Wilson’s “broken windows” theory is often credited with transforming New York City from a crime-infested black hole into a gleaming urban playground.
Professor William Black of the University of Missouri-Kansas City, explains:
The metaphor was what happens to a vacant building when broken windows are not promptly repaired. Soon, most of the windows in the abandoned building are broken. The criminals feel little compunction against petty destruction because the building’s owners evince no concern for the integrity of their building…[Wilson] urged us to take even minor blue collar crimes and breaches of civility seriously and to demand that they be contained through social pressure and policing.
Black think’s this idea should be applied to Wall Street.
Writing on the website New Economic Perspectives, Black sees the same problem in white-collar crime that Wilson saw in blue: a willingness to tolerate relatively minor crimes that leads to social disintegration and epidemics of severe crimes.
“Businesses or CEOs that cheat gain a competitive advantage and bad ethics drives good ethics out of the markets,” he writes. “These offenses degrade ethics and erode peer restraints on misconduct.”
And we’ve already witnessed the social disintegration this has caused, in the form of neighborhoods destroyed by predatory lending and foreclosure fraud, he writes.
The only solution is to ramp up prosecutions. On everything.
“Taking Wilson’s “broken windows” reasoning seriously in the elite white collar crime context would require us to take a series of prophylactic measures to restore integrity and strengthen peer pressures against misconduct,” Black says.