Economics of Stolen bicycles

A superb post on Priceonomics (HT: thebrowser.com)

It seems lots of bicycles are stolen in US. What is the economic basis for such thievery? Applying Gary Becker’s ideas, the authors say the risks to stealing bikes are very low. There is hardly any punishment for stealing bicycles in US:

In 1968, Chicago economist Gary Becker introduced the notion that criminal behavior could be modeled using conventional economic theories. Criminals were just rational actors engaged in a careful cost-benefit analysis of whether to commit a crime. Is the potential revenue from the crime greater than the probability adjusted weight of getting caught? Or, as the antagonist in the movie The Girl Next Door puts it, “Is the juice worth the squeeze?”

Criminal activity (especially crime with a clear economic incentive like theft) could therefore be modeled like any financial decision on a risk reward curve. If you are going to take big criminal risk, you need to expect a large financial reward. Crimes that generate more reward than the probability weighted cost of getting caught create expected value for the criminal. Criminals try to find “free lunches” where they can generate revenue with little risk. The government should respond by increasing the penalty for that activity so that the market equilibrates and there is an “optimal” amount of crime.

Using this risk-return framework for crime, it begins to be clear why there is so much bike theft. For all practical purposes, stealing a bike is risk-free crime.  It turns out there is a near zero chance you will be caught stealing a bike (see here) and if you are, the consequences are minimal. 

There are a few great accounts of journalists getting their bikes stolen and then going on a zealous mission to try to capture bikes thieves (see here and here). In each account, they ultimately learn from local police that the penalty for stealing a bike is generally nothing.

Superb stuff..There is a matrix which gives the risk-return payoff depending on which markets sell stolen cycles..

 

 

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One Response to “Economics of Stolen bicycles”

  1. Economic incentives to crime. | Riotous Assembly Says:

    […] Economics of Stolen bicycles (mostlyeconomics.wordpress.com) […]

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