Wednesday, September 12, 2007

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.


Hi Ian,

That's impressive, but isn't it likely to shift the crime elsewhere? It's widely reported that the appearance of The Club increased carjacking, because people could no longer steal cars when they were stationary. Shouldn't we expect that criminals denied the theft of a car will turn to other illegal means of making money? So maybe this is positive news for car-insurance companies, but isn't it completely neutral news for law enforcement?

Here's a deterrent effect: drive a car over 25 years old (like two of ours) that clearly is in need of a paint job or other conspicuous improvements. Professional thieves just aren't interested, and I can't blame them. Incidentally, insurance companies don't appear to be giving us a break on our rates.

I should add, before someone else does, especially since our cars are both volkswagens: Now *that's* Freakonomics!

I'd attribute it to typographical error if it appeared just once, but it's "stolen", not "stollen!"

I prosecute Grand Theft Auto, Carjacking, and Chop Shops. LoJack is extremely effective at recovery of individual vehicles and I would suspect it has a somewhat general deterrent effect. Funny enough though, I had a recent case where the culprit said he knew the car had a LoJack system but took it anyway. Deterrence doesn't always work on idiots.

Of course, it is important to the general deterrent effect that the existence of a LoJack system remain secret. If they start sticking LoJack stickers on cars equipped with it, then they would know, of course, which cars not to steal. In fact, I suspect, you could protect your car pretty good by sticking a mock LoJack sticker on it because car thieves are aware of how effective it is.

As an aside, I don't think there is any validity to the idea that having a club increases the risk of a carjacking. There are plenty of cars around without a club.

It's also 'steal' not "steel"

And here I thought the point was that it was easier to recover a car that are actually German fruitcakes in disguise. :)

Improve your article by spelling 'stolen' and 'stealing' correctly. I found your article interesting, by the way.

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