Tuesday, September 25, 2012

Your Tuesday Afternoon Reading: The Economics of Bike Theft

Posted By on Tue, Sep 25, 2012 at 1:48 PM

Considering how prevalent bicycle theft in this town, it makes sense that we should take a bit of time to figure out why so many bikes disappear from their rightful owners. While there are a number of good reasons (aside from "bike thieves are joyless, soulless humans with unsatisfying lives"), Priceonomics decided to take a look into why thieves make the effort to run off with people's t/rusty steeds.

It seems as if stealing bikes shouldn’t be a lucrative form of criminal activity. Used bikes aren’t particularly liquid or in demand compared to other things one could steal (phones, electronics, drugs). And yet, bikes continue to get stolen so they must be generating sufficient income for thieves. What happens to these stolen bikes and how to they get turned into criminal income?

. . .

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.

. . .

Bike thievery is essentially a risk-free crime. If you were a criminal, that might just strike your fancy. If Goldman Sachs didn’t have more profitable market inefficencies to exploit, they might be out there arbitraging stolen bikes.

Ooh, burn.

For more, including where profiles of bike thieves and where they tend to fence their ill-gotten goods, take a look at Priceonomics.

[Priceonomics - What Happens To Stolen Bicycles?]

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