What Craigslist safe places say about our economy

We probably don’t want to hear about it but an economy is human-like in one area: it has needs, too. The comic possibilities of this aren’t enough to conceal a basic relationship: As an economy’s ability to supply what we need grows, the greater and more complex its demands on our society become.

That fundamental idea was illustrated recently by Mike Andrews, the sheriff of Durham County, North Carolina. He recently announced that the parking lot of the county Justice Center would be staffed by a deputy on weekday evenings and, from nine in the morning until nine at night, on Saturdays and Sundays. The deputy’s presence will ensure that the location is a safe place for people to complete the transactions that buyers and sellers have agreed upon after posting information on Craigslist.

Sheriff Andrews’ action was taken just a few weeks after a similar program was announced by the sheriff in nearby Orange County, and both sheriffs are quick to point out that they got the idea from similar law enforcement actions across the country. There are no official tallies or a lot of media attention yet, but “Craigslist Safe Places” have been set up in places as geographically dispersed as Cleveland and Las Vegas.

Clearly the safe place programs are addressing a need, but while it illustrates how a real economy works you won’t find this stuff in the usual economic models. At this point it is just too small a segment of the market to be considered significant in the macroeconomic picture. Still, it’s important because it is such a clear expression of something outside the price mechanism that our economy needs, and we should be paying attention.

Craigslist-type transactions include what economists might call an exogenous market risk factor — due to the possibility that one of the transaction’s parties might steal the item or cause bodily harm, even death, to the other.

This type of market risk exists elsewhere in our society. The diamond market in New York, of course, comes immediately to mind, but there are many others, including such microeconomic market subsets as garage or yard sales.

On Internet auction and sale sites, for example, where typical transactions are between strangers, there is a significant payment risk. Much of the success of sites like eBay can be attributed to eliminating that risk through what espionage experts would call a “dead drop” — in this case PayPal, which collects the payment funds and allows both buyer and seller to reduce their visibility and vulnerability if they wish to do so.

There is a sector of the market, however, that eBay and similar sites find difficult to serve. Some no-longer-needed household items have a market value high enough to justify advertising it separately, but not high enough to justify the hassle and cost of shipping. A vintage or high performance bicycle might be worth it but ordinary bicycles are too bulky and simply weigh too much. Most need to be sold locally.

Individuals wishing to dispose of items such as bicycles, boats, lawn mowers, cars and trucks, then often turn to local listings, and Craigslist is the leader of the Internet form of these. Its popularity has transformed its name into a near-generic term for the process.

In today’s world, the problem with this type of transaction is that it leaves one of the parties vulnerable to the risks of economic loss and bodily harm. A seller has advertised something that that a buyer wants, but often displays the product and conducts the transaction at home, with a stranger.

Buyers are vulnerable to a similar risk because the seller knows one important thing about them; they will be carrying the purchase price in cash to the transaction site.

The “safe place” for these transactions provided by law enforcement officers will reduce or eliminate this type of exogenous risk and will very likely encourage the growth of this market sector. The fact that these places are needed, though, says something about our society and its economic environment that is both unappealing and puzzling. The macro-level crime statistics are telling us one story, and microeconomic reality is telling us another.

At both macro and micro levels, the health and growth of our economy depends on a relatively crime-free environment. Contracts need to be enforceable; lies and falsehoods need to be punished; bribery and corruption need to be exceptions; and dangerously criminal people need to be separated from the rest of society. Our willingness and ability to meet these basic needs without a government footprint on everyone has separated our economy and our nation from all but a few others. Most of us would like to continue to set this standard.

James McCusker is a Bothell economist, educator and consultant. He also writes a column for the monthly Herald Business Journal.