The surprisingly complex case against theft

Abstract

article by Lewin and Trumbell,argues that theft is “inevitably” inefficient when the indirect costs of the activity are considered.McChesney traces his analysis to a 1967 paper by Gordon Tullock, in which Tullock discussed theinefficiency of theft, rent-seeking, and monopolies. Richard Posner (1985; 1992) provides a differentline of reasoning that focuses on the direct costs of theft. He claims that, because the market is adeptat transferring goods to their highest valued use, those who bypass the market -- thieves -- on averagevalue the goods they steal less than the owners. Neither analysis of theft, however, is entirely sufficient to explain its inefficiency. As Part Iof this paper explains, the Tullock-McChesney resolution is flawed. Notwithstanding the existenceof indirect costs, theft is efficient if incurring those costs avoids incurring larger transaction costsfrom a voluntary sale and the thief values the good more than the owner does. More generally, anefficiency analysis requires comparing the indirect costs of legalized theft with the transaction costsof market sales. In Part II, we make this comparison. Unsurprisingly, theft is inefficient, though formore complex and less certain reasons than the Tullock-McChesney thesis suggests: because indirect