Crime seems to be rising. The British Crime Survey reports a 2% rise in all crime in the 12 months to June 2011. Although statisticians say this is not statistically significant, the rise in theft from households is significant.

This is just what you'd expect when unemployment is rising. I say this not because I'm a liberal lefty, but because I'm an economist. The first rule of economics is that people respond to incentives. And when you're unemployed you have more incentive to commit crime. This is partly because you have less to lose - you'll not lose your job if you go to prison - and partly because, being poor you have a higher marginal utility of consumption and thus a stronger desire for money.

This paper estimates that a one percentage point rise in the UK unemployment rate leads to a rise in robberies, burglaries and thefts of around 45,000. And this paper finds that long-term unemployment is strongly associated with violent crime, perhaps because it leads to a feeling of alienation.

All this raises a question. If unemployment raises crime, why has the increase in crime been so small?

It's because something else is going on. The decision to commit crime (or not) is not merely one taken by a rational maximizing isolated individual. It has a social dimension. People are more likely to commit crime if others in their social networks do, and less likely to do so if their peers are law-abiding. If your friends are robbers, there's a high chance you will be too.

These peer effects mean that trends in crime can feed on themselves. If crime falls for several years - as it did in the 90s and 00s - it might continue to do so, because there are fewer 'bad apples' to influence others to commit crime.

What we're seeing now is the interplay of these two forces: higher unemployment is tending to raise crime, but the favourable peer pressures caused by a lack of crime recently is tending to reduce it.

And herein lies a danger. If further rises in unemployment lead to more crime, then we could get a further rise in crime, as the peer effects arising from there being more criminals magnify the initial increase in crime.