Sunday, 13 September 2015

Rational onion theft

Most people wouldn't consider criminals to be particularly rational thinkers. However, one of Gary Becker's many contributions to economics was the development of an economic theory of crime (see the first chapter in this pdf).

Rational decision-makers (including criminals) weigh up the costs and benefits of an action, and will take the action which offers the greatest net benefits. That doesn't mean that every decision-maker is a calculating machine, but at least we can usually say that if the costs or benefits of an action change, then people may make different decisions. In other words, economists recognise that people (including criminals) respond to incentives.

So, when the price of onions increases, we might expect to see more onion thefts. Why? The benefits of onion theft have increased, while the costs (in terms of the risk of punishment) probably haven't much changed. We can describe two mechanisms for why this would increase onion thefts. First, career vegetable burglars (or maybe just the generally criminally-inclined) recognise that there are larger profits to be had by stealing onions for resale. So, they steal more onions (or maybe they start stealing onions). Second, ordinary people now face higher costs of purchasing onions. So, perhaps stealing onions becomes a lower cost alternative for them, so they steal rather than purchase. Either way, increases in onion theft. According to the article:
Prices of the vegetable -- a staple in Indian diets -- have almost doubled since July, leading to a series of widely reported heists in recent weeks. One victim, Anand Naik, had 750 kilos (1,653 pounds) of onions snatched from underneath a tarp by his roadside stall in Mumbai last month.
How can the farmers of onions fight back? The most effective way must be to increase the costs of onion theft to the thieves (by at least enough to offset the greater benefits the thieves obtain). This can be achieved by making the punishments higher, or by making the risk of being caught higher. With little chance of the increased punishment from the authorities, onion farmers have resulted to trying to catch the onion thieves themselves:
In Mumbai, Naik estimates that it will take him six months to recover from the 38,000-rupee loss. To prevent further thefts, he asked his nephew to sleep on the street each night beside sacks of onions.
Which demonstrates that the incentives for farmers have changed as well (and they are responding rationally as well). Onions are more valuable, so the farmers are willing to face higher costs to protect them.

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