Can Goldman Sachs Lower Crime? - Real Time Insight

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The genesis of this Real Time Insight was a unique experience two weeks ago.

I was summoned by a criminal court in downtown Los Angeles to serve as a trial juror. And serve I did:  Multiple defendants, multiple felony counts, drugs, hidden transmitters and undercover police -- the works. That sounds dramatic, doesn't it? Peel this onion one more level. It was also a sorry tale about a loop of drug addiction, homelessness, and deep poverty that served as the compulsion for crime. 

After the trial was over, I found, not surprisingly, the experience made a lasting impression on me, the economist.  The core question it raised, for me the economist, was this?  Isn't there a way to break down access to that sorry loop of behavior? If so, it would certainly make for healthier and better lived lives, create safer communities, lower prison populations, and reduce the expensive need for police, the courts, and the like.

I went online and looked around.  I found out Goldman Sachs is investing in a 'social impact bond' to keep people out of jail in Boston, Massachusetts.

They have teamed up with a group called Roca.

Here is the link to Roca's website. Their mission is to help disengaged and disenfranchised young people move out of violence and poverty.

http://rocainc.org/

Goldman Sachs is investing $9 million in this effort to reduce crime in Massachusetts using a financial product called a social impact bond.  If young men in the program - drawn from a pool of men the state believes are at "high risk" of incarceration - spend less time in jail than their peers, then Goldman stands to profit off its investment. If many of the men still end up behind bars, the bank will lose nearly everything it ventured.

Click the link below to find out how the Goldman Sachs investment works.

http://www.bloomberg.com/infographics/2014-05-08/how-goldman-sachs-can-get-paid-to-keep-people-out-of-jail.html

My weekend RTI:  Can Investors Like Goldman Sachs Lower Crime?

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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