Is Legalizing Car Theft Optimal?

If you have not yet listened to Russ Roberts’ EconTalk interview with Robert Frank, I recommend that you do. They discuss Ronald Coase, specifically his work on economic externalities. Both Roberts and Frank are sharp, and you can tell how smart they are by paying attention to how they interpret and apply Coase’s work. An example, Roberts on car radio theft,

So the cheapest way to reduce radio theft might be to not make it be illegal. You’d say: That’s impossible; it can’t — that could never be the case. And I would make the claim; and I have I think some empirical evidence for it, that actually owners of radios prefer a world where it’s legal to steal somebody’s radio. And the answer is, your point in a different context. Which is that over time, radio-makers, manufacturers, car manufacturers, will find ways to make it useless to steal the radio. And that’s likely cheaper — in fact, I’m very confident that it’s cheaper than the costs of policing the streets and making sure you lock your car.

Robert Frank’s position is that car stereo theft should be illegal, but that enforcement should be limited. Then, there is a bit of confusion, I think, because Roberts clarifies that it should be immoral — illegal by social standards —, but not illegal (in the public, legal sense). They go back and forth on this for a minute or so.

I don’t quite agree with this minor point — I do agree with minimal enforcement —, because if we assume government already exists, I don’t think the costs of passing a law against car stereo theft are greater than the benefits. And, Frank was alluding to the fact that there would be positive spillover effects (positive externalities) from existing enforcement of other laws (e.g. a police officer giving out parking tickets might witness and stop a car stereo theft). But, this is an empirical question, in any case.

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