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That's one of several rumors about why people (almost always male) wear their pants that way, and almost every "expert" on the matter (including two friends who have been incarcerated and would have first-hand knowledge) have all said it's just that--a rumor with no basis in fact....And if those guys only knew the true jailhouse meaning of the low hanging pants.....they may just pull them up!!
M
The real reason is that prisons aren't always well stocked with every size of uniform the prisoners wear, so new inmates are often forced to wear clothes that are too large until proper sizes can be obtained for them. And belts are no longer allowed in prisons because too many inmates have used them to hang themselves over the years. So, oversized pants + no belt = sagging. That's not as "colorful" as the rumors, but it's truer. As for why people wear their pants that way in the "civilian" world, I have no idea.