Steven E. Landsburg, political economic maverick extraordinaire, and supposed advocate of free enterprise, has written a paper on theft and externalities entitled "Property Is Theft: When protecting your own property is stealing from others." In it, he calls for greater government intervention into the economy, more taxing, regulating and subsidizing; and he does so on the ground that only in this way may we become more economically efficient. Where was he when the Politburo needed commissars?
In his view, there are several ways to protect your home or car from theft. One is to do so in an ostentatious way. For example a burglar alarm with a sign posted on your front door, advertising its presence; or the "Club," which is fastened to the steering wheel, making it impossible for the robber to turn the vehicle. While this might turn some criminals onto the paths of righteousness, the dedicated member of this "profession" is more likely to seek easier, softer targets, that is, houses and autos without such visible protection.
States Landsburg, "When your neighbor installs a burglar alarm, thoughtful burglars are encouraged to choose a different target — like your house, for example. It’s rather as if your neighbor had hired an exterminator to drive all the vermin next door."
In contrast, there are hidden protections against break-ins and theft. If the robber does not know which cars or houses are defended against his depredations, but knows for sure that a significant number of them are, then he is more inclined to leave this field entirely. Here, each potential victim who protects himself protects his neighbors, and indeed, all others, as well.
"The u2018Lojack’ is a hidden radio transmitter that can be activated after your car is stolen, to lead police to the thief (or, better yet, to the chop shop that employs the thief). The transmitter is hidden randomly within the car, so thieves cannot easily find it and deactivate it. The Lojack is completely hidden. There’s no way to look at a car and know whether it has a Lojack installed. So unlike, say, the Club, a Lojack will never prevent any particular car from being stolen; it will only increase the chance of its being recovered. But from a social point of view, the Lojack has the huge advantage of helping your neighbors rather than hurting them. The Club convinces thieves to steal someone else’s car instead; the Lojack convinces thieves not to steal."
From this, our author concludes that unseen safety devices are not only a vast improvement over flamboyant ones, but that the former are to be supported by law, the latter condemned and legally penalized. He not only says, in effect, "Lojack, good, the Club, bad;" he also maintains that we should subsidize the Lojack, and tax the Club.
But this, splutter, splutter, amounts to socialism, okay, okay, to fascism (Socialism is outright government ownership; fascism, stylistically different only, favors heavy government regulation, as does Landsburg). He does so for the oft-used reason on the part of neoclassical economists, "market failure." It is only a slight exaggeration to define successful mainstream economists as those who have, more cleverly than their peers, discerned more and more "market failures" in more and more obscure places. If Landsburg were just an ordinary economist, this would not really bother me too much. But, as he is widely seen as a free enterpriser, I find this perturbing in the extreme.
What are the specifics? Let us allow Landsburg to tell the grisly tale himself:
"By the criteria that economists usually employ, this suggests that Lojacks should be heavily subsidized, just as visible security systems — like my neighbor’s home burglar alarm or the Club — should be taxed. When you’re doing something that makes strangers better off, you should be encouraged to do more of it.
"If we all used the same insurance company, you might expect that company to supply the appropriate subsidy. As long as your Lojack reduces the number of insurance claims, the company should be willing to pay you to install it. But with multiple insurance companies, that doesn’t work so well: A company that insures only 10 percent of the populace will reap only 10 percent of the Lojack’s benefits, and so will undersubsidize them. Worse yet, large insurance discounts are illegal in many states.
"The media have recently paid a lot of attention to research on other kinds of self-protection, most notably the work of John Lott and David Mustard on concealed handguns. But the Lojack research is in many ways more informative, because the authors were able to do a thorough job of distinguishing between benefits to the purchaser of a Lojack and benefits to the community at large. That discrepancy is the sort of thing that leads markets to fail — in this case by providing too many Clubs and not enough Lojacks."
Now for the (long overdue) criticisms of Landsburg.
First, minor point, he ought to change the title of his paper. As he has it: "Property Is Theft: When protecting your own property is stealing from others." In saying that "property is theft" Landsburg is provocatively putting himself on the side of the avowed enemies of civilization.
For example, according to Proudhon, (Proudhon, Pierre-Joseph. 1966 . What Is Property? New York: Howard Fertig. p. 131. Quoted from Stewart Edwards (ed.) 1969. Selected Writings of Pierre-Joseph Proudhon. New York: Anchor Books. p. 124.) :
"If I had to answer the question u2018What is slavery?’ and if I were to answer in one word, u2018Murder,’ I would immediately be understood. I would not need to use a lengthy argument to demonstrate that the power to deprive a man of his thoughts, his will and his personality is a power of life and death, and that to enslave a man is to murder him. Why, then, to the question u2018What is property?’ may I not likewise reply u2018theft,’ without knowing that I am certain to be misunderstood, even though the second proposition is simply a transformation of the first?"
Second, there is that bit about "When protecting your own property is stealing from others." Surely, when Jones installs a Club he is not exactly stealing from his neighbors. Rather, at worst, he is deflecting the attention of car thieves from himself to others. But the same can be said about anyone who locks his bicycle or the front door of his house when his neighbors do not.
Third, his attack on The Club is totally unwarranted. With it, one piece of property that might have been looted is saved. It is hardly the Club owner’s fault that the monster then turns around and rips off somebody else’s car. Further, the example set by The Club is socially useful; more people will protect themselves. A more reasonable way to look at the Club is as a totally innocent attempt to safeguard private property.
Fourth, the analogy with "vermin" is highly problematic. The neighbor is just as free to employ the services of an exterminator. A better way to look at the matter is this: suppose everyone utilized the Club. Then, there would be no shifting about of criminal attentions from one victim to another. Cars, all cars, would be better protected. The problem, here, lies not with those who utilize exterminators and the Club; rather, it lies with those who do not.
But what of this charge of "market failure?" This false indictment of free enterprise stems from the fact that Landsburg has not read and digested Hazlitt’s most famous book, where he admonishes us to trace the effects of a given policy or phenomenon as far as possible; not only in the short run, but also in the long run; not as it affects only some people, but all. Why, then, can the market not ensure that people use the Lojack instead of the Club (assuming roughly equal costs between them; if these are radically different, then all bets are off)? It is because the relevant market has been already preempted by the government. It has not been allowed to operate. It has been nationalized (or statized or municipalized). It has disappeared. There can be no "market failure" here because this simply is no "market."
I refer, of course, to roads, streets, highways, avenues, lanes, and all other vehicular thoroughfares where automobiles are to be found. Not a one of them is a part of the market. Suppose streets were all privately owned. Let us posit, arguendo, that Landsburg is totally correct in his comparative analysis of the Lojack and the Club, and that these two protective devices are equally costly. Is there any doubt that the road owner would either compel the former and forbid the latter, or, at the very least, charge people in such a way for street use to bring about the same state of affairs? That is, do exactly what Landsburg is calling upon the government to do: subsidize the Lojack and penalize the Club. Nor is there any doubt that if the road owner did not pursue precisely this policy, he would lose out in the competition between different firms in his industry.
So, of course the market can internalize the externality about which Landsburg is (properly) concerned. That is, if a market is allowed in the first place. If not, it is a bit much on Landsburg’s part to blame the market ("market failure") for something the government has forbidden to it. For more on this see my article Block, Walter. 1983. “Public Goods and Externalities: The Case of Roads,” The Journal of Libertarian Studies: An Interdisciplinary Review, Vol. VII, No. 1, Spring, pp. 1—34.
I have often written about the problem of road socialism over the years. See here, here, here, here, here, here, here, here, here, here, here, here and here. As it happens, I have a book forthcoming with the Mellen Press on this topic. Its title: Privatize Roads and Highways, Now! The book is based on several of these previous publications of mine, and will include much new material in it as well.