#corecivic

A link between crime & IQ?

IQ

While updating all of the data for crime in Japan, CM was intrigued by the IQ test data compiled by the Ministry of Justice (MoJ) for all 20,000 new inmates in 2016. The average IQ recorded was 81.4. All said and told, 57.4% of new inmates scored an IQ of more than 80. The MoJ also recorded that the level of education attained by criminals showed 62.5% had attained a maximum of middle school (years 7-9) or dropped out of high school (years 10-12).

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Japan has a high school matriculation rate of around 95% which places it in the top 4 countries around the world. The US has around a 76% completion rate (rank 13) for high school according to the OECD.

To study IQ for inmates on a more global basis, a 2003 study by Ellis & Walsh revealed that of all the Texas inmates who entered the prison system in 2002 approx. 23% of the inmates scored below 80, almost 69% scored between 80 and 109, and only 9.6% scored above 110. The average was 85. The Prison Reform Trust in the UK said 1/3 of prisoners had an IQ less than 80 and one-third of that was less than 70. A Levine study in 2011 showed that those who had been to jail had a mean IQ of 89.61 while those who had not who had a mean IQ of 100.6.

Although a deeper look at serial killers showed extremely high IQs. The Dating Game serial killer Rodney Alcala had a reported IQ of 170. Uni-bomber Ted Kaczynski 167 and Jeffrey Dahmer 144. Hideo Murai, chief scientist of the Aum Shinrikyo (responsible for the Tokyo subway sarin attacks), was also reported t have an IQ of 160. On the other and, Australia’s worst mass murderer, Martin Bryant, reportedly has an IQ of only 68.

We shouldn’t forget that months after winning a national title, Harvard’s debate team lost to a group of New York prison inmates. A three-judge panel concluded that the jailbirds had raised arguments the Harvard team had failed to consider or was it a slight bias that the judges feared repercussions were they ever released?

Many prevailing theories of intelligence suggest people with lower IQs are most likely to break the law, since impulsivity, struggles at school and a lack of social bonding are all linked to criminality.  Although James Oleson, a criminologist based at the University of Auckland in NZ, suggests real-life geniuses have a penchant for breaking the law. He noted there may be an IQ threshold after which a high it becomes more of a risk factor for committing crimes. Intelligent offenders were more likely to get away with their crimes.

The flip-side to claiming mental disability is also that of avoiding execution. In the US, there are some states debating whether an inmate with an IQ below 70 cam be executed on the grounds he or she may not have sufficient mental faculty. Abandoning the 70-point IQ cutoff could double the number of death row inmates who claim they are mentally disabled.

According to the 2005 Annual Report on Government Measures for Persons with Disabilities published by the Japan Cabinet Office, of the total estimated 3,600,000 people with a mental disability, 459,000 people possessed the Certificate of Mental Retardation – 12% of all mentally disabled people in Japan possess it vs. 6.3% of mentally disabled inmates. The Yokohama National University suggested this clearly indicates a tendency that people who are bound to be in prisons are less likely to have possessed the certificate, therefore likely to have missed some form of assistance from social welfare programs.

Morie and Matsushi wrote, “5.9% of all population on average is categorized as intellectually disabled. However, the percentage of children who are classified as mentally disabled and receiving special education as well as social welfare is stagnant at 1%. Because the Certificate of Mental Retardation is only issued upon request, many of the parents/guardians are reluctant to apply due to the fear of being stigmatized. This is especially true for a mild case of mental retardation. Lack of appropriate education and opportunity to receive social welfare can lead the children with mental disability to anti-social behavior, ultimately connecting them to crimes. Therefore, guardians should be strongly recommended to apply for the certificate without hesitation…”

Although it is worth noting that despite prison capacity in Japan expanding 50% over the last decade, the number of inmates is 31% lower at around 56,000 or 62% capacity, down from 105% at the peak. Compared to the 2.2mn prisoners in the US, Japan is still at the very low end of the crime spectrum. That is to say the US has 13.1x the number of prisoners relative to the population than Japan. The US ranks 1st while Japan ranks 35th.

Lock’em up – Prisons in America – The facts

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The Nation reported that the number of privately run prisons is on the move under Trump. At the moment private prisons make up around 5% of the 2.3mn prison population at present. The US now spends $90bn every year to incarcerate these jailbirds or around $39,000 a head (similar to Japan). According to the Bureau of Economic Analysis we had a lull in expenditure on jails after the Lehman collapse. Indeed several states were releasing ‘lower’ risk criminals from prison in order to cut their deficits. This has driven the growth in private prisons.

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According to The Nation, “18 states spend more on incarceration than on higher education, and one study found that the total cost of incarceration, including social costs, adds up to $1 trillion. One point seven million children in the United States have a parent in prison, more than 70 million Americans (about one in three) have a criminal record, and those enormous impacts are suffered unequally: While African Americans are about 13 percent of the US population, they make up 37 percent of the male prison population.

The Nation highlights also that “these private prisons are important to understand and discuss because, while only about 8 percent of the current state prison population is housed in for-profit facilities, about 18 percent of those behind bars in the federal system are in these prisons, and over 60 percent of immigration-detention beds are operated by these corporations” the newspaper is overstating the performance of the stocks. While indeed the largest company, CoreCivic (CXV0 rallied off the election it has none-the-less returned to earth.

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Also earnings whether in revenue or profit terms actually peaked under Obama’s administration.

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While the numbers are horrific in themselves, incarceration in the US costs the equivalent of the Slovak Republic’s GDP.

On public safety alone the US is now spending $375bn p.a or the equivalent of Austria or just over half what the country outlays on defence. So combined the US spends $1 trillion per annum on ‘protection.

The Nation also notes, “The Trump administration appears to be focused on expanding the number of undocumented individuals who are detained behind bars in this country. For one, his administration requested more than $1.2 billion [in reality a 1.3% increase] in the 2018 federal budget to expand detention capacity to more than 48,000 beds a day. To put this into perspective: According to ICE, the current daily capacity ranges from about 31,000 to 41,000. And in April, the administration handed GEO group a $110 million contract to build and run a 1,000-bed detention center in Conroe, Texas. And, most recently, ICE issued “requests to identify,” which are basically pre-requests for proposals, from contractors who can house immigrant detainees in South Texas as well as in the interior of the country in places like Chicago, Detroit, and Salt Lake City.

As a reference the border wall is priced at around $10bn.

As an investment, perhaps the US private jails look a bit oversold with the hype immediately  post the election behind us. At 13x P/E for CVX perhaps a turnaround in its earnings potential is ahead of us and a discount to the market with minimal downside risks make it a proper bricks and mortar investment. The above forecasts look reasonably conservative.

Who will do the bidding to accommodate Mrs Clinton? Perhaps a premium will be warranted.

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