Car Alarm Externalities

[tyler_cowen]

Originally posted on December 3, 2009.

According to the Census Bureau, New Yorkers are now more bothered by false car anti-theft alarms than by any other feature of city life, including crime or bad public schools. If you ask me, it is the whooping ones that are worst of all, it is hard to stay overnight in Manhattan without hearing one. It also appears that the alarms do not hinder theft. First, most are false alarms and everyone now ignores them. Second, thieves have learned how to disable the alarms quickly.

False alarms also can make a community more dangerous, by signaling to everyone either that a) theft is common, or b) no one cares, or both. It becomes common knowledge that the community has poorly defined property rights. Here is the full story on this aspect of the problem.

Alternative technologies (see also this paper on positive externalities created by Lojack by Steve Levitt and Ian Ayres) do a much better job of stopping car theft. You can buy a silent pager that communicates the theft only to the car owner. This one works only for tough guys, though, if I knew that my (insured) car was being stolen, I would run the other way. Better is the “silent engine immobilizer,” which simply shuts down the engine when a thief is tampering with the ignition. General Motors and Ford are now using this technology.