http://www.slate.com/Economics/97-08-02/Economics.asp
to me, included below for your perusal. I love the line:
> From a social viewpoint, if the total number of thefts does not
> change, then the expenditure on alarm systems is pure waste.
Also:
> A 1 percent increase in Lojack sales can reduce auto-theft rates by 20
> percent or more. What's happening to all those car thieves?
It's as if the city governments and/or car insurance companies should
pay to install Lojacks in every car, for the greatest social good and/or
economic benefit...
> When you're doing something that makes strangers better off, you
> should be encouraged to do more of it.
What a curious variation on the Golden Rule.
Nice article, I feel like buying the guy's book:
http://www.amazon.com/exec/obidos/ISBN=0029177758/forkrecommendedrA/
Hey, with the sending of this post my personal email to-answer queue
dips below 500, the first time since April...
------------- 8< snippety snip snip snip 8< -------------------------
Property Is Theft
When protecting your own property is stealing from others.
By Steven E. Landsburg
(956 words; posted Saturday, Aug. 2)
When your neighbor installs a burglar alarm, thoughtful burglars are
encouraged to choose a different target--like your house, for example.
It's rather as if your neighbor had hired an exterminator to drive all
the vermin next door. On the other hand, if your neighbor installs video
cameras that monitor the street in front of both your houses, he might
be doing you a favor. So the spillover effects of self-protection can be
either good or bad.
Consider the different ways that people self-protect against car theft.
Devices like alarm systems and the "Club" have a social upside: Their
proliferation might make car theft so unprofitable that potential
thieves would decide to seek more useful employment (though, on the
other hand, it's possible that they'll seek employment as, say,
arsonists or killers for hire). But those same devices have a social
downside: They encourage thieves to prey more heavily on those who
haven't bought one. From a social viewpoint, if the total number of
thefts does not change, then the expenditure on alarm systems is pure
waste.
For a much lower cost, you can install "fake" self-protection--say, a
little blinking red light that looks like it's attached to an alarm
system, or a cheap piece of foam rubber that looks from a distance like
the heavy metal Club. Here again you're imposing a cost on your
neighbors: If these devices become common, the value of the real thing
is diluted.
That point was driven home to me the last time I shopped for a
car. Acura offered a security system as mandatory equipment. Toyota
allowed you to buy a car without a security system. You could then go
out and install your own system for considerably less than what Acura
was (implicitly) charging.
But I decided that Acura's system--even at a much higher price--was the
better deal. Professional car thieves know that the security system is
mandatory on an Acura, and therefore know that my blinking red light is
for real. With the Toyota, even if I do install a real security system,
thieves might suspect me of trying to fool them and smash my windows to
find out.
There's another kind of security system, available only in a few
cities. The "Lojack" is a hidden radio transmitter that can be activated
after your car is stolen, to lead police to the thief (or, better yet,
to the chop shop that employs the thief). The transmitter is hidden
randomly within the car, so thieves cannot easily find it and deactivate
it.
The Lojack is completely hidden. There's no way to look at a car and
know whether it has a Lojack installed. So unlike, say, the Club, a
Lojack will never prevent any particular car from being stolen; it will
only increase the chance of its being recovered. But from a social point
of view, the Lojack has the huge advantage of helping your neighbors
rather than hurting them. The Club convinces thieves to steal someone
else's car instead; the Lojack convinces thieves not to steal.
And it does so with remarkable effectiveness. Economists Ian Ayres and
Steven Levitt have examined the effects of the Lojack in about a dozen
cities over the past 10 years (its first introduction was in Boston in
1986). Their task wasn't easy, because just as the prevalence of the
Lojack affects auto-theft rates, so auto-theft rates affect the
prevalence of the Lojack--first because consumers buy more security
equipment when theft rates are high, and second because regulators
behave differently when thefts are high.
But after sorting all this out, Ayres and Levitt found that the Lojack
has an astoundingly large effect on auto-theft rates. It turns out that
a 1 percent increase in Lojack sales can reduce auto-theft rates by 20
percent or more. What's happening to all those car thieves? Are they
moving to other cities, or are they becoming house burglars, or are they
turning into socially useful citizens? Ayres and Levitt examined these
difficult questions also, and their bottom-line conclusion is that the
Lojack really does prevent a lot of crime, rather than just moving it to
other venues.
In fact, although it costs only about $100 a year to have a Lojack,
Ayres and Levitt estimate that each individual Lojack prevents about
$1,500 a year in losses due to theft. In most cases, that $1,500 benefit
accrues not to the Lojack owner, but to strangers.
By the criteria that economists usually employ, this suggests that
Lojacks should be heavily subsidized, just as visible security
systems--like my neighbor's home burglar alarm or the Club--should be
taxed. When you're doing something that makes strangers better off, you
should be encouraged to do more of it.
If we all used the same insurance company, you might expect that company
to supply the appropriate subsidy. As long as your Lojack reduces the
number of insurance claims, the company should be willing to pay you to
install it. But with multiple insurance companies, that doesn't work so
well: A company that insures only 10 percent of the populace will reap
only 10 percent of the Lojack's benefits, and so will undersubsidize
them. Worse yet, large insurance discounts are illegal in many states.
The media have recently paid a lot of attention to research on other
kinds of self-protection, most notably the work of John Lott and David
Mustard on concealed handguns. But the Lojack research is in many ways
more informative, because the authors were able to do a thorough job of
distinguishing between benefits to the purchaser of a Lojack and
benefits to the community at large. That discrepancy is the sort of
thing that leads markets to fail--in this case by providing too many
Clubs and not enough Lojacks.
Home Automation Systems Inc. describes a massive array of home-security
and video-surveillance options for sale. One Lojack page explains the
advantages of the system, while the Lojack Moscow site pitches the
Lojack to crime-wary comrades (11 of the 13 stolen Lojack-equipped cars
in Moscow have been recovered). The CarJacker device claims to be the
only effective defense against such an attack. The OrcaWeb Crime Finder
lets you analyze crime rates in your own area.
Steven E. Landsburg, author of The Armchair Economist: Economics and
Everyday Life, is a professor of economics at the University of
Rochester. You can e-mail him at armchair@troi.cc.rochester.edu
----
adam@cs.caltech.edu
If all printers were determined not to print anything till they were
sure it would offend nobody, there would be very little printed.
-- Benjamin Franklin