A Dark Side of Coffee

We’ve looked at an egg heist and egg smugglers.

Now, it’s coffee.

Coffee Thefts

The wholesale price of arabica beans has more than doubled since last year:

And so too has criminal activity.

In the U.S., the heists typically involve fake transportation companies. Hired to move beans from a port to the roaster, a bogus trucker instead sells beans that could be worth $180,000. One freight broker told Reuters, “Importers should be careful about who they hire.. .Once they get the coffee, they disappear.”

But Brazil, our top source of green beans, has a bigger problem:

In Brazil, farms and warehouses reported coffee heists. Farmers describe middle-of-the-night thieves that awaken caretakers, go to onsite storage facilities, and take hundreds of bags of beans in several trucks. The media also reported two São Paulo merchants that simply sold all they stored. Horrified farmers soon discovered an empty warehouse with $10 million of missing beans. In addition, law enforcement is dealing with gangs that hijack trucks.

Our Bottom Line: Tradeoffs

In his Nobel lecture, economics laureate Gary Becker tells us that he began thinking about crime after rushing to an obligation on the Columbia University campus. Unable to find a parking space, he had to decide between an illegal spot and a costly parking lot. Choosing the illegal alternative, he said the tradeoff was worth it since the ticket was unlikely.

Similarly, explaining a rationale for crime, Becker suggested that a low probability of punishment be paired with a highly undesirable punishment. Consequently, we can reduce what we spend to fight crime while retaining the cost of committing it. Or, as he explained, like all economics, managing crime is about allocating resources. As always, society and the perpetrator consider cost and benefit tradeoffs.

However, at Marginal Revolution, we are asked, “What Was Gary Becker’s Biggest Mistake?” They specifically conclude that criminals are not “rational actors.” But they add that police do deter. Here though, they ask if the deterrent doubles when a 10-year sentences becomes 20 years.

So, where are we? Certainly, as the price of coffee increases, the benefits of coffee thefts rise.

Even with crime, we can think economically.

My sources and more: For a classic and often criticized rationale for crime, Nobel economics laureate Gary Becker wrote the classic paper. Next in Marginal Revolution, we have the ideal response. And after that, this Reuters article on coffee theft was the complement as was this look at Brazil from The Washington Post. For more on the warehouse heist, a Brazilian newspaper had the story.