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Real World Economics: Theft is in the eye of the beholder



Real World Economics: Theft is in the eye of the beholder

The St. Paul City Council and mayor struggle over funding, staffing and make-up of the police department. The Ramsey County sheriff has a row with county commissioners over who determines his budget. Minneapolis is in a highly divided fight over a ballot initiative that would fundamentally restructure police and public safety.

Edward Lotterman

Compared to all of this, last week’s brazen theft of our 18-year-old, high-mileage, dented and rusted pickup truck from the parking lot of our university faculty retirement condo is small potatoes. But details of our case illustrate more fundamental economic insights that are relevant to struggles across the nation to reduce crime but also modify the way we do policing and punishment.

There are economic questions of why people commit crimes, what the effects of these crimes are on the perpetrator, the victim and on society as a whole. This is far too much to address in one column, but try to make a start, at least let’s look at thefts and robberies, but not assaults, sexual and other, or murders, which are an order of magnitude more complicated.

It was long thought that people stole things because they were evil, sinful. Some experts observed that many thefts by poor people were done out of need, they could not meet basic needs with resources legally available. Still others, including a Nobel-winning economist, have suggested stealing as a rational process by which the criminal weighs the probability of being caught and of being sentenced, together with the severity of punishment, against expected value gained in successfully carrying out the theft. And some neuropsychologists now argue that people are born with varying genetic levels of predisposition to commit crimes, including stealing.

As far as effects of crime on those involved — perp and victim — and on society as a whole, the simplest model would be of one person taking $1,000 from another. The victim’s level of satisfaction in living, or what economists call “utility,” drops. That of the thief increase. In money terms, there has been no change in overall satisfaction to society as a whole, but a transfer between victim and perpetrator. Philosophically, it might be no different than taking dollars in taxes from one person and giving it out to another as Medicaid or as farm payments.

That assumes, however, that the gain in “utility” from one new dollar by the perpetrator, or subsidized farmer, is exactly equal to the units of “utility” lost from a dollar seized from a victim or taxpayer.

Here we hit a problem that plagues all of economics: You cannot measure this “utility,” or level of satisfaction, of someone in objective, comparable units like bushels of corn, pounds of bananas or gallons of gas. Different people get different levels of satisfaction from identical chocolate malts, for example, or from ownership of a clapped-out Ford pickup. Without measurement, you cannot say how much the satisfaction of either thief, victim or society as a whole changed.

This brings an important note — crime has what economists call “externalities: A stolen Ford pickup is a loss to the victim and gain to perp — but also frightens owners of vehicles in the same situation into worrying about how they themselves might be victimized. When there is a spate of crimes in an area, such as here in my neighborhood of St. Anthony Park, the satisfaction of hundreds of residents is eroded because they feel less safe. Their behavior may change in how and where they park their cars; they may spend money they otherwise wouldn’t on car alarms or security cameras.

Such “disutility,” or “”psychic cost,” varies between people in any identical situation, but the more intrusive or violent the taking, the greater the harm to wellbeing. News of neighborhood muggings may change people’s decisions to walk their dogs.

Go from having your jumper cables swiped from an open pickup bed, to a car window smashed to grab a laptop, to having someone break into your garage, to breaking into your house while you are gone, to a break-in theft of a TV while you and the baby are sleeping a few feet away, to having a knife or gun thrust into your face, to being beaten unconscious so someone can take your laptop.

Psychic costs rise with the market and sentimental value of objects stolen and with the personal threat. One end of the spectrum is only a little more annoying than driving away having left a coffee cup on the roof of your car while fishing out your keys. The other extreme may be a life-altering experience, after which you may have PTSD, or permanent scars and you will never be the same.

Going further, even without violence or home invasion, theft always involves transaction costs. In our case, the thieves only used our pickup to jerk an ATM out of a building, then fleeing with the cash. How much they got and how that increases their “utility,” or satisfaction in life, I don’t know. I, myself, did not like opening our door at 2 a.m. to two deputies asking if I knew where my pickup was and when I had last seen it. Then there was a half hour on the phone answering questions about whether a particular set of chains and crowbar were mine, whose fingerprints might be on the vehicle and might they take things apart and swab key areas for DNA.

We got the truck back unharmed except for destruction of all three locks. We spent hours getting it from an impound lot, calling our insurance company, getting case numbers from deputies for Falcon Heights, where stolen, and police in Plymouth, where it was used in a felony.

There will be repair estimates, time taking it to a shop, waiting to get it back, and all that. These non-cash costs still are real and often amount to more than the monetary value of what was taken.

Yet another issue is how much people lose to crime versus willingness to pay taxes to “reduce crime and the causes of crime.” If you took the cash and non-cash costs just of all the catalytic converters and bicycles stolen in our area over the past year, it would equal a substantial rise in police, social work and criminal justice budgets. But real outrage is concentrated in the small minority of residents actually victimized, while the rest are sympathetic, but not clamoring to pay higher taxes.

Remember also that the poor suffer from much higher crime rates than the rich. The theft of an uninsured old beater the kids drive around in from a middle-class household is vexing, but stealing the only car, one needed to get to work or to medical services, from a poor family can be devastating. Again, the subjectivity of economic loss comes into play.

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