The Freakonomics of Car Theft

Ian Ayres

The Freakonomics blog has an excellent quiz about auto-theft. The question is what auto-theft device can help both you and your neighbor.

Here's a video, with what I imagine is a cat burglar.

The quiz grows out of a paper that Levitt and I published in the Quarterly Journal of Economics. [I can't tell you the child like joy I experience in seeing the results of my scholarship turned into a cool web video. Simple pleasures. One of the many differences between Steve and me is that the Freakonomics post and video downplay Levitt's authorship.]

But the substance of our study was to show that Lojack (the hidden transmitter that helps cops track down your car if it's stollen) has a powerful general deterrent effect. Professional thieves get scared from taking cars generally when they can't tell which cars are protected.

When we originally studied Lojack, we though that it would help you get your car back if it was stollen but that it would not reduce the chance that anyone would steal your car (because a thief who doesn't know if your car is protected or not).

But in working with Barry Nalebuff a couple of years ago, I actually had a chance to ride one night with New Haven's finest in a police car where we tracked down a lojack equipped car that had been stollen. It turns out the car had been "stollen" by the owner's cousin. The owner had purchased the car used and didn't know that it had Lojack in it. So when the owner tried to steal his own car (with his cousin's help) for the insurance money, Lojack led the cops straight to the cousin's house.

Lojack uncovers self-steeling of used cars fairly often. But what's more important is that Lojack stops a lot of people from stealing their own cars. Auto-insurance fraud is a big problem. But we don't know how big.

A cool empirical study that is just waiting to be done is to test whether Lojack cars are stollen less often than non-Lojack cars. I'm now guessing that they are and that the difference is a good estimate of how much self-steeling is going on.

Insurance companies should give a much bigger discount to Lojack users for two reason. 1) It helps reduce the chance that the cars of other insureds will be sotllen, and 2) It helps signal that the insured will not steel her own car.
Posted 12:01 PM by Ian Ayres [link]