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Source link: http://archive.mises.org/4360/is-crime-prevention-wasteful-should-it-be-taxed/

Is Crime Prevention Wasteful? Should It Be Taxed?

November 22, 2005 by

Steve Landsburg has made some surprising claims regarding theft prevention devices. Some theft prevention devices deter criminals only from preying on the person who employs them. This causes criminals to move on to other victims. If this merely alters the composition of victims without reducing their total number, he says, then the expenditure on theft prevention devices is socially wasteful. There are problems with this argument. FULL ARTICLE

{ 32 comments }

Aaron Singleton November 22, 2005 at 8:47 am

Great article. Landsburg’s claims don’t really surprise me at all. Classically trained economists all seem to share these same traits – 1)an over-reliance on models that do not at all resemble the real world; 2)using them to try and justify a myriad of logically absurd positions 3)a belief that markets are inherently flawed and need supervision from a benevolent government that apparently does not share these same flaws; and 4)a naive trust in the ability and efficiency of such governments to correct these so-called “market failures.” This is the product of a mainstream economics education as anyone who’s run the college and grad school gauntlet can attest. Once armed with these assumptions, many of these economists then scour the world looking for unique and ever more absurd ways to apply them. Good thing there are some professors out there who can see the irony in it all and who still defend the free market.

Phil November 22, 2005 at 9:10 am

Landsburg’s writing is strongly libertarian … I suspect his Slate article was mean to illustrate a point, and not to seriously suggest that security systems be taxed.

Reread the article … at no point does he suggest taxing security. Rather, he says that “by the criteria that economists usually employ … [they] should be taxed.” Which is probably true.

Aaron Singleton November 22, 2005 at 9:44 am

Thanks for the clarification Phil.

Paul Edwards November 22, 2005 at 10:30 am

Phil:

Are you sure Landsburg’s views are strongly libertarian? His article concludes this way:

“…That discrepancy is the sort of thing that leads markets to fail–in this case by providing too many Clubs and not enough Lojacks.”

When markets “fail” and smart observers and planners like Landsburg notice such failures, the solution is pretty obvious isn’t it? After all, I didn’t notice him refuting the conventional economic wisdom that he mentions: “Lojacks should be heavily subsidized”. I’d say he weaseled himself a pretty statist argument in favour of intervention here.

Adem Kupi November 22, 2005 at 10:31 am

I think this line cuts right to the point:
“Perhaps it would be socially wasteful to subsidize security devices for people who value them so little that they refuse to spend money on them.”

All purchases reveal a value preference.

Paul Edwards November 22, 2005 at 10:34 am

On the other hand, MacKenzie’s is a great article showing how the idea of “protection of property” can be used as just another pretext for the state, ironically, to further violate property.

This article also presents an excellent illustration of the fact that only action reveals preference.

“As a practical matter, they [externalities] are impossible to measure.”

billwald November 22, 2005 at 11:19 am

When Sir Robt Peel invented police departments the rich hired their own protection and the poor were routinely murdered and robbed. A hundred or so years later, in the USofA, the rich hire their own protection and the workers are routinely murdered and robbed.

Americans spend more for private protection (Guards, alarms, gated communities) than the total cost of all federal, state, county, and municipal policing. It would be more effective to issue a 12 gauge shotgun to every family and dissolve local police departments. After the initial blood bath (a cleaning of the gene pool) we would have safe communities.

At the very least, all mention of vegitable based drugs should be removed from the books. All the current prohibition does is transfer assets from the poor to the rich, as did the alchohol prohibition experiment. The only difference is that the local police are not getting their cut of the profits, but someone is getting it.

Either this or give the dopers a place to go. Everybody gots to be someplace. All a “drug free area” sign does is move the dopers to my block where there is no such sign. I suggest Nevada. Every other common vice is already legal there. No one goes to Nevada by mistake.

Been thinking about this for 40 years. I was 30 years a Seattle police officer and have been retired 9 years.

Our Constitution was designed for people to whom the Christian social contract was acceptable. People who could not abide civilivation could go west to rape and pilliage the Indian People and each other. After Lincoln’s War the West was fenced and the outlaws realized the big cities were better hiding places.

The outlaws took control of the cities and their power was consolidated by the Volstead Act. Nothing has changed for 80 years.

The rest of us can no longer afford “justice” One out of 100 is already in prison. Would we be “safe” if it was 2 out of a hundred? We need a system which ignores crime and punishment and is designed to seperate the outlaws from the civilized people. The rich people live and work in guarded compounds but the working class doesn’t have that option under current law.

Andy D November 22, 2005 at 11:36 am

Bill,
do you mean welfare system workers are the ones who are murdered and robbed? The vast majority of people killed are killed by those who they know, and are also drug related. The middle class is increasingly harrased by the welfare class, that’s why I believe more right to concealed carry handgun laws have been passed. Especially after katrina, the middle class in increasingly sypathetic, and even suppportive of private firearm ownership.

Of course the whole externality argument is moot if private property rights were recognized under the law.

iceberg November 22, 2005 at 1:48 pm

What I don’t get is why Landsburg would pin the externality on the owner of the protected property– the theft of others’ properties would be the direct result of the action of the criminal, and should not have any connection to the protected-property owners.

MLS November 22, 2005 at 1:58 pm

This article is hilarious. One can argue that crappy old cars are socially wasteful because they transfer the theft to the newer fancier cars! So by this moron’s logic we should tax the poor people that drive the crappy cars and subsidize the richer folk who drive the better cars? This sounds to me exactly what public universities do.

Should one actually institute some sort of central plan – a better one would be just to get a tax deduction or credit.

Phil November 22, 2005 at 3:00 pm

(re: Paul Edwards comment, 10:30am)

Hi, Paul,

Landsburg’s writings are indeed libertarian, especially “Fair Play,” his second book. (For instance, if I recall correctly, he argues that confiscatory taxation is like one child stealing a second child’s toy just because the second child has more toys and can afford it.)

And while he does consider the underuse of LoJacks to be a market failure, he doesn’t explicitly call for government subsidies, except again “by the criteria that economists usually employ.”

My between the lines reading is that Landsburg wants to make a point about externalities, but at the same time doesn’t want to explicitly advocate government intervention. So he chose his words very carefully.

But, hey, I don’t know Landsburg personally, and have no real interest in defending him against charges of statism. It’s just the way I read it.

Phil

Paul Edwards November 22, 2005 at 3:35 pm

That’s cool, Phil. I hate to put words in people’s mouths too. He may not have intended to imply that some intervention would be a good thing for this instance of “Market failure”. But i can see why MacKenzie interpreted him to do so. I did as well.

The term “market failure” is troublesome for me. What it implies is that there is some objective measurement against which you can judge how the market performs. That is, beyond the ex ante psychic profit maximizing decisions of individual producers and consumers, there is a way to externally determine maximum social benefit. And when this performance does not compare favourably against this yard-stick, we can judge it to be market failure. I believe the concept is a myth and really only serves the interests of the interventionists. It seems to me that this would be the view of all libertarian economists.

Don Beezley November 22, 2005 at 4:03 pm

A good article. The only point I want to make, which was implied but not explicit in the article, is that I reject the first premise of any externalities outright (in terms of a criminal going elsewhere)–I have every right to protect my property. If I do so successfully, and a crminal therefore chooses not to harm/invade my property, his/her subsequent choices are none of my concern or responsibility, and calling such action an externality, and the implied direct logical connections therefrom, seems to stretch that definition. An externality in my crime prevention efforts would be if I were to place 80 million watts (or whatever amount would be excessively bright) of lighting in my yard to illuminate it–thereby illuminating the entire neighborhood–my specific action would be specifically invading the (real) property of others in a specific manner attributable to my direct actions, causing them harm (although some might value the illumination, I suspect most would see it as a disvalue, the potential for midnight football games in the street not withstanding). Contrarily, if smoke from my burning leaves in the yard fills the neighbor’s house with smoke, that is a negative externality. If the smoke were sentient and could choose where to go (capable of values, like a person/criminal), and it chose to invade the neighbors house rather than respecting his property rights, then the burden of that bad action would be based on the smoke’s individual (bad) choice, and not related to me at all as any sort of externality of my actions.

Don Beezley November 22, 2005 at 4:20 pm

I thought Paul’s comments required a strong second–”market failure” is an oxymoron. And LoJack is a great example–how can the market fail me? The product is available, and only I am capable of evaluating the costs and benfits (risks and returns) of the situation in question as it relates to me–protection of MY property. To Paul’s point, it does seem like a back door for interventionism–if I am making the “wrong” decision, clearly I need the guidance of an overseer. Security is about managing risk. Even if my car gets stolen and chopped up in Mexico because I don’t have LoJak, doesn’t mean I was wrong or the market failed, just means I showed up in the wrong part of the probability distribution. That information may lead me to different conlusions in the future. Even if there was a failure–it was mine in possibly evaluating the risk inaccurately, not the market’s.

Pete Canning November 22, 2005 at 5:41 pm

Landsburg is no friend of liberty. If he, through some other poorly constructed model, discovered that some egregious violation of individual rights was “socially beneficial” he would happily endorse it. The only fortunate point is that Landsburg is less mentally inept then he is morally bereft. Thus, somewhat accidentally, he often comes up with a moderately reasonable conclusions.

One thing is certain. Bad economics is “socially wasteful”.

Phil November 22, 2005 at 6:55 pm

I agree with Don Beezley that The Club on my car does not impose any negative externalities; but I do argue the LoJack *does* create *positive* externalities.

As for “market failure” — I have seen the term used many times when there is no failure at all, but, rather, where the market result is not to the tastes of the writer. Those arguments upset me too. But that doesn’t seem to be the case here.

Suppose we make some assumptions: (a) a car with The Club is 99% protected, (b) when 60% of the cars on the road have LoJack, all cars are 100% protected, (c) LoJack costs only 5% more than The Club, (d) 80% of car owners on the road are ready to go out and buy The Club, and (e) car thieves are not part of the 80%.

Then, a good market solution for the 80% who would otherwise buy The Club would be to voluntarily get together and contract to all pay into a pool to buy LoJacks to be randomly inserted into 3/4 of their cars. Every Club buyer is better off. (And, as an aside, all non-Club owners are better off except the car thieves.)

If this contract does not occur, due to coordination, free rider, and bargaining problems, is it not legitimate to call this “market failure”?

It seems to me there are two separate issues here — the economic one, of whether market failure has occured, and the moral one, of whether state coercion is thereby justified.

Is it not possible to agree that there are times the market does not come up with the optimal solution, but that government intervention is even then both dangerous and morally abhorrent?

U. Phold November 22, 2005 at 7:12 pm

Hilarious article!
How about if all the USA goes to the Vermont (and I think Alaska) plan: No gun regulation at all (other than what is forced by the phedzz). Carry anything you want – rob or murder anyone and it’s a crime, but just having a piece with you: no problem.
So, the place is so peaceful that few bother to tote heat. But, if there is any problem, they all can! Concealed carry? Sure! Open carry? No prob.
Notice to all criminals: Any Vermonter just might be totin’. That li’l ole lady? Drill you between the eyes.
Years ago my Dad stopped at a little store on his traeling salesman rounds in Alabama. He went in and saw the old lady who ran the store (Mom of Mom and Pop) standing behind the counter looking over it at a nice looking (except for the hole in his brow) young man sprawled out on the floor on his back. Smoke was still rising from her gat. Young fella picked the wrong store to rob that day – curtailed his developing criminal career. He sure wasn’t deterred to go rob a weaker victim. No burglar alarm there.

I used to have a tenant who rented an old garage in a bad part of town, between the river and the bus station, union rescue mission and salvation army. Constant stream of bum…uh, homeless persons going by. Every day there was at least one trying to make off with something, break into a customer’s car, crawl into a junk car to sleep. Every day, he beat new ones with his pick handle, sicked his junkyard dog “schiestkopf” on them (nastiest dog I ever knew – would absolutely gobble anyone up, bite chunks out of them, shred their clothes, even go up on top of cars after them). They would run off down the street with their shredded pants trailing after them, broken arms from the pick handle, and by the time he got back there would be two more trying to steal something, or peeing on the front of the shop building. He sent many to the hospital, but still there seemed to be an unending supply of new thieves to be beaten and dog-eaten.

Many of these people had no respect for anything but looking down a gun barrel. Amazing! And for some you’d have to fire off a shot into the ground to convince them that it wasn’t a toy or on a TV set in front of them.

This is just not an area that the market (in any readily recognizable form) can deal with. Or am I missing something?

Lance Cansino November 23, 2005 at 11:11 am

Two things that were missed. 1. The Club does cost the criminal. It costs him time and thus keeps him from robbing as many victims as he otherwise would have. It also deters him because if he sees a significant number of them he might well decide there is an easier, safer way to make money than crime.

2. The second aspect is cost for the property owner. The Club is less expensive than the LoJack
and allows many more potential victims to use it and thus produces a greater preventative and deterent effect on crime. Thus both anti-theft systems can provide cost effective ways of reducing crime. The market can best decide which is the best and reward that company with more sales.

Lance Cansino

billwald November 23, 2005 at 11:35 am

“do you mean welfare system workers are the ones who are murdered and robbed?”

Workers and residents.

“The vast majority of people killed are killed by those who they know”

True regarding crimes of passion.

“and are also drug related.”

Most drug crimes are business, not passion.

People could cut their odds of being murdered or robbed in half by staying out of places that serve booze.

Alex November 23, 2005 at 5:16 pm

Using Landsburg’s logic, if I, a member of a defined benefit pension plan, excercise and eat well, thereby increasing my life expectancy, I should be taxed for such behavior because I am increasing the pension costs of the plan for all other members.

The Honda Civic is the most popular car for theives, so they say. So, again applying Landsburg’s logic, those of us who change our behavior from owning Civics to owning non Civics should be taxed because such actions increase the probability that any remaining Honda Civic car owner will have her car stolen.

Paul Edwards November 23, 2005 at 6:09 pm

Phil:

I sympathize with the direction you’re going, and excuse my wild hack and contract of your paragraph to this:

“Suppose we make some assumptions:…Then, a good market solution… If this contract does not occur, … is it not legitimate to call this “market failure”? … Is it not possible to agree that there are times the market does not come up with the optimal solution, but that government intervention is even then both dangerous and morally abhorrent?”

Economics is an a priori science and is all based on human action. All economics can ever identify for sure, as apposed to what could ever be assumed, is what is revealed in human action. That is that two individuals expected to benefit from the exchange they made. We do not know that our speculative assumptions are correct, and they could easily not be. Therefore, from the perspective of an economist, there is no such thing as identifying, ever, what is popularly referred to as market failure. In other words, the definition of a free market is perpetual market success.

Phil November 24, 2005 at 2:58 am

Hi, Paul,

If I may paraphrase, what you seem to be saying is that we can’t ever decide that a situation is a “failure” because economics can’t know what the market participants really want.

Which is often true, but not in this case, because it’s quite a reasonable assumption that “people who want to protect their cars generally want to do so at the lowest possible price.” If that assumption is “speculative”, then so are the laws of supply and demand, such as “people generally buy more of a good at a lower price.”

It’s like where the experimenter tells 100 people that if at least 50 of them independently choose to contribute $50 to a pot, each of the 100 people will receive $100. Only 10 people do so, while the other 90 try to free ride. Nobody gets any money. Are we to say that this is a “market success,” because, after all, how do we really know that everyone wanted the $100, and maybe those people who contributed only $50 really wanted to lose it?

The same argument holds for LoJack. Under the very reasonable assumption above, everyone prefers the Pareto improvement of randomly using LoJack instead of The Club. But because of the same issues as the $50 experiment — positive externalities, free riding, and coordination problems – it doesn’t happen.

If you want to argue that calling this “market failure” is not proper because the market didn’t actually “fail”, I have sympathy with that. But then the dispute is just one of terminology. The underlying issue remains.

P.M.Lawrence November 24, 2005 at 6:37 am

Billwald writes “When Sir Robt Peel invented police departments the rich hired their own protection and the poor were routinely murdered and robbed.”

Not so (and he didn’t invent police departments, just an organised “new police”). Before his time there were other methods, which had become less effective by then, things like constables appointed very much like juries, drawn from householders. You will see a literary example of this in Shakespeare’s Constable Dogberry. Nor was that the only method. Anyway, it was not left up to people to fend for themselves, so leaving the poor without practical recourse. The thing is, not knowing where robbery would strike, everyone had an interest in keeping crime down – the rich couldn’t ignore crime among the poor, any more than they could ignore disease among the poor.

Gibbon wrote something to the effect that a good police (meaning polity) should provide cleanliness, plenty and safety. I’m sure someone can find the precise wording.

billwald November 25, 2005 at 10:03 am

OK. But general Libertarian thought seems to be that neither the police nor the govt can provide cleanliness, plenty, or safety.

Soviet Moscow provided citizen to citizen safety. It was the govt that was dangerous.

averros November 25, 2005 at 9:49 pm

> Soviet Moscow provided citizen to citizen safety.

Only in the official propaganda. I am a veteran of street fights, heh. Have badly healed broken bones to show for it, too. Foreighners, not aware how local criminals looks and behave tended to miss noticing them completely (and most criminals were rather afraid of getting tangled with foreighners, as this could’ve offend some higher-ups, which greatly increased chances of retribution). Thus the myth of the Soviet “order”.

One of the most unpleasant feelings I have when I visit ex-Soviet Union is the ingrained feeling of danger – any observer can still notice that people in the streets tend to avoid eye contact; the reason is that they’re afraid to attract the wrong kind of attention.

Paul Edwards November 26, 2005 at 3:03 am

Hi Phil:

I would modify your paraphrase from:

“we can’t ever decide that a situation is a “failure” because economics can’t know what the market participants really want.”

to the following:

“we can’t ever decide that a situation is a “failure” because economics can’t know what the NON-market participants really want.”

The market participants have spoken through their actions: their buying and selling. Did more clubs than LoJacks get produced and sold? That is because more people thought the club was worth its price than did those who thought the LoJack was worth its price.

“it’s quite a reasonable assumption that “people who want to protect their cars generally want to do so at the lowest possible price.”"

We don’t need to assume that, we know that. However, what we also know is at least these two other facts:

1. that people who bought clubs valued protecting their vehicles more than the money it took to buy the club.

And

2. Those who bought no protection for their cars valued the money required to obtain any protection over the protection that the money would have afforded them.

What we know is that everybody got what they freely chose. They were not coerced. Each individual actor maximized his satisfaction ex ante. Economic analysis shows this is true and that it is beyond doubt.

The assumptions required to conclude there was a market failure literally requires conjecture. We need to speculate on the values of those who revealed no preferences due to their inaction on the market.

Finally, I would revise your analogy

“It’s like where the experimenter tells 100 people that if at least 50 of them independently choose to contribute $50 to a pot, each of the 100 people will receive $100.”

because the scenario is overly contrived. Try this one:

It’s where a group of entrepreneurs offer to sell LoJacks at the market clearing price and find they can only sell 10. Where as another group of entrepreneurs offer to sell clubs at the market clearing price and find they can sell 100. We know that based on the actions of the 10 buyers and sellers of LoJacks and the actions of the 100 buyers and sellers of clubs, that both customer satisfaction and allocation of resources were optimized. As far as we can possibly know via the science of economics, there was no market failure.

Peter November 27, 2005 at 10:30 pm

Forcing criminals to spend more time looking for lucrative and poorly-defended targets won’t do much to reduce crime. Criminal types typically have way too much time on their hands to being with, in most cases lacking legitimate jobs and with few or no responsibilities. It’s not as if a typical burglar will be unable to spend another 20 minutes casing possible targets because he’s already late for an appointment with his financial advisor.

billwald November 29, 2005 at 11:23 am

“Thus the myth of the Soviet “order”.”

Similar to Chinatown gangs being no threat to tourists?

averros November 29, 2005 at 8:41 pm

billward – you do not understand. There were no “just tourists” in the Soviet Union. People visiting there were closely watched. Unauthorized contacts with foreighners were seriously discouraged. The “crime” of unofficial trading with foreigners even got a special name: “fartsovka”.

A run-of-the mill petty criminal wouldn’t want to run the chance of getting into ways of the secret police (of course, some still braved it, for exotic pickings) – when there were enough practically defenseless locals (the local police wasn’t interested in much of anything but cooking up crime stats so their higher-ups would look good).

So, yes, presently the safest streets in the world for a foreighn tourist are in North Korea – I know people who went there and liked it a lot. If you’re a local, it’s an entirely different game, though.

Besides, you may want to look up the meaning of “Potemkin’s villages”, which is pretty much what most foreighners visiting USSR saw.

Maharbbal December 13, 2007 at 8:42 am

Hi all,

Although very logical this article misses one tiny feature for actually being interesting: empirical data. We are asked to decide whether or not a proposed policy is relevant without knowing its consequences.

For instance, even if a priori one shouldn’t support taxation of private means to ensure one’s security, I’d be more than ready to revise my position if it was shown that, say, each dollar invested by the top earning 20% in the country in private security cost 2 dollars to the bottow 20%.

In this case as long as the process of taxation costs less than the double of what the top earners invest in private security, it would be a good idea.

Overall one can regret that no deeper analysis of the question was conducted. Private protection is an incredibly complicated issue encompassing the right to bear arms, the question of neighborhood watch and so on.

Anthony December 13, 2007 at 2:54 pm

And how, exactly, would one prove with ‘empirical’ data how else this money might’ve been spent (let’s forget the discoordination in the capital structure caused by intervening with the economy)? By asking the rich ‘oh, how would you spend your dough if we didn’t rob you of it’? Or I suppose by computing their utility (‘yes, we can’t measure utility, but let’s suppose for the sake of theft that we could!’.)

Thomas October 12, 2008 at 3:39 am

I think that Crime Prevention can be taken up by anyone that gives a damn. If you get someone in the community that is fed up, then get together and start a Crime Prevention Team, have meetings and visit sites like knowgangs.com, streetgangs.com and http://www.lacrimeprevention.com to get the information you need to get involved the right way. Then it will spread like “pay it forward” and then it doesn’t cost a thing (but your time).

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