Nir Kshetri
Abstract
Introduction
The meteoric rise in cybercrime has been an issue of pressing concern to our society. According to Federal Bureau of Investigation (FBI), nine out of 10 U.S. companies experienced computer security incidents in 2005 which led to a loss of $67.2 billion. A survey conducted by IBM found that U.S. businesses worry more about cybercrimes than about physical crimes. Internet-related frauds accounted for 46% of consumer complaints made to the Federal Trade Commission (FTC) in 2005. Total losses of Internet fraud victims reporting to FTC increased from $205 million in 2003 to $336 million in 2005. In a July 2007 interview with USA Today, McAfee CEO reported that his company received 3,000--5,000 threat submissions per day from customers and 10% of them were new.
This paper offers an economic analysis to explain cybercrimes' escalation. We define cybercrimes as criminal activities in which computers or computer networks are the principal means of committing an offense. Examples include cyber-theft, cyber-trespass, cyber-obscenity, critical infrastructure attacks and cyber-extortions.6 The most notable features of the cybercrime environment include newness, technology and skill-intensiveness, and a high degree of globalization. Factors such as a wide online availability of hacking tools, information sharing in the cyber-criminal community, availability of experienced hackers' help to less skillful criminals and congestion in law enforcement systems produce externality effects within the cyber-criminal community as well as across society and businesses.
We focus on three positive or self-reinforcing feedback systems to examine increasing returns in cybercrime related activities. In this article, we first provide an overview of the positive feedback loops that reinforce cyber-criminals' behavior. Then, we describe mechanisms associated with externality in cybercrime related activities.
- Arthur, W.B. Increasing returns and the new world of business. Harvard Bus. Rev. (Jul-Aug. 1996), 101--109.Google Scholar
- Banisar, D. Computer hacker's sentence spotlights high-tech crime prosecutions. Criminal Justice Weekly, (Aug. 3, 1999).Google Scholar
- Becker, G. S. The economics of crime. Cross Sections, (Fall 1995), 8--15; http://www.rich.frb.org/pubs/cross/crime/crime.pdf.Google Scholar
- Drinkard, J. Nation's moral values declining, most say; Poll: Majority see USA as deeply split. USA Today, (Nov. 23, 2004), A.11.Google Scholar
- Gaviria, A. Increasing returns and the evolution of violent crime: The case of Colombia, Journal of Development Economics 61, 1, (2000), 1.Google ScholarCross Ref
- Kshetri, N. The simple economics of cybercrimes. IEEE Security and Privacy 4, 1 (2006), 33--39. Google ScholarDigital Library
- Noda, T. and Collis, D.J. The evolution of intraindustry firm heterogeneity: Insights from a process study, Academy of Management Journal 44, 4 (2001), 897--925.Google Scholar
- North, D. C. Institutions, Institutional Change and Economic Performance Cambridge University Press, Cambridge, U.K., 1990.Google Scholar
- Phukan, S. IT ethics in the Internet age: New dimensions, InSITE, June (2002); http://proceedings.informingscience.org/IS2002Proceedings/papers/phuka037iteth.pdf.Google Scholar
- Rogers, E.M. Diffusion of Innovation, 4th edn. Free Press: NY, 1995.Google Scholar
- Sah, R. Social osmosis and patterns of crime. Journal of Political Economy 99, 6 (1991), 169--217.Google ScholarCross Ref
- Scott, R. Institutions and Organizations, Sage, Thousand Oaks, CA, 2001.Google Scholar
Index Terms
- Positive externality, increasing returns, and the rise in cybercrimes
Recommendations
Situational Crime Prevention (SCP) techniques to prevent and control cybercrimes: A focused systematic review
Highlights- Evolution and developments of cybercrimes into cyber-focused and cyber-enabled crimes.
AbstractSituational Crime Prevention (SCP) is a criminological approach that is shown to reduce crime opportunities drawing from five different strategies comprising 25 techniques. With the global increase in cybercrime, practitioners and ...
Digital Forensic Analysis of Cybercrimes: Best Practices and Methodologies
This paper reviews the existing methodologies and best practices for digital investigations phases like collecting, evaluating and preserving digital forensic evidence and chain of custody of cybercrimes. Cybercriminals are adopting new strategies to ...
The Simple Economics of Cybercrimes
Cybercrimes are becoming increasingly pervasive and sophisticated, and can have more severe economic impact than many conventional crimes. Technology and skill intensiveness, a high degree of globalization, and their newness make cybercrimes ...
Comments