Super Crunchers Read Online Free
Author: Ian Ayres
Clubâ on your car, it probably doesnât stop crime, it just causes the thief to walk down the street and steal another car. The cool thing about LoJack is that itâs hidden. In a city covered by LoJack, a thief doesnât know whether a particular car has it or not.
This is just the kind of perversity that Levitt likes to explore.
Freakonomics
reviewers really got it right when they said that Steve looks at things differently. Several years ago, I had an extra ticket and invited Steve to come with me to see Michael Jordan play with the Chicago Bulls. Steve figured heâd enjoy the game more if he was invested in it, but (in sharp contrast to me) he didnât care that much about whether the Bulls won or lost. So just before the game, he hopped online and placed a substantial bet that Chicago would win. Now he really was invested in the game. The online bet changed his incentives.
In an odd way, LoJack is also a device for changing incentives. Before LoJack, many professional thieves were almost untouchable. LoJack changed all that. With LoJack, cops not only recover the vehicle, they often catch the thief. In Los Angeles alone, LoJack has broken up more than 100 chop shops. If you steal 100 cars in a LoJack town, youâre almost certain to steal some that have LoJack in them. We wanted to test whether LoJack scared thieves from taking cars generally. If it does, LoJack creates what economists call a âpositive externality.â When you put the Club on your car, you probably are increasing the chance the next guyâs car will be stolen. If enough people put LoJack in their cars, however, Steve and I thought that they might be helping their neighbors by scaring professional car thieves from taking any cars.
Our biggest problem was convincing LoJack to share any of its sales data with us. I remember repeatedly calling and trying to convince them that if Steve and I were right, it would provide another reason for people to buy LoJack. If LoJack reduces the chance that thieves will take
other
peopleâs cars, then LoJack might be able to convince insurance companies to give LoJack users more substantial discounts. A junior executive finally did send us tons of helpful data. But to be honest, LoJack just wasnât that interested in the research at first.
All that changed when they saw the first draft of our paper. After looking at auto theft in fifty-six cities over fourteen years, we found that LoJack had a huge positive benefit for other people. In high-crime areas, a $500 investment in LoJack reduced the car theft losses of non-LoJack users by $5,000. Because we had LoJack sales broken down by both year and city, we could generate a pretty accurate estimate about the proportion of cars with LoJack that were on the road. (For example, in Boston, where the state mandated the largest insurance discount, over 10 percent of the cars had LoJack.) We looked to see what happened to auto theft in the city as a whole as the number of LoJack users increased. Since LoJack service began in different cities in different years, we could estimate the impact of LoJack separate from the general level of crime in that year. In city after city, as the percentage of cars with LoJack increased, the rate of auto theft fell dramatically. Insurance companies werenât giving nearly big enough discounts for LoJack, because they werenât taking into account how much LoJack reduced payouts on even unprotected cars.
Steve and I never bought LoJack stock (because we didnât want to change our own incentives, to tell the truth) but we knew we were sitting on valuable information. When our working paper went public the stock jumped 2.4 percent. Our study has helped convince other cities to adopt the LoJack technology and has spurred slightly higher insurance discounts (but theyâre still not nearly large enough!).
The bottom line here is that I care passionately about number crunching. I have been a
This is just the kind of perversity that Levitt likes to explore.
Freakonomics
reviewers really got it right when they said that Steve looks at things differently. Several years ago, I had an extra ticket and invited Steve to come with me to see Michael Jordan play with the Chicago Bulls. Steve figured heâd enjoy the game more if he was invested in it, but (in sharp contrast to me) he didnât care that much about whether the Bulls won or lost. So just before the game, he hopped online and placed a substantial bet that Chicago would win. Now he really was invested in the game. The online bet changed his incentives.
In an odd way, LoJack is also a device for changing incentives. Before LoJack, many professional thieves were almost untouchable. LoJack changed all that. With LoJack, cops not only recover the vehicle, they often catch the thief. In Los Angeles alone, LoJack has broken up more than 100 chop shops. If you steal 100 cars in a LoJack town, youâre almost certain to steal some that have LoJack in them. We wanted to test whether LoJack scared thieves from taking cars generally. If it does, LoJack creates what economists call a âpositive externality.â When you put the Club on your car, you probably are increasing the chance the next guyâs car will be stolen. If enough people put LoJack in their cars, however, Steve and I thought that they might be helping their neighbors by scaring professional car thieves from taking any cars.
Our biggest problem was convincing LoJack to share any of its sales data with us. I remember repeatedly calling and trying to convince them that if Steve and I were right, it would provide another reason for people to buy LoJack. If LoJack reduces the chance that thieves will take
other
peopleâs cars, then LoJack might be able to convince insurance companies to give LoJack users more substantial discounts. A junior executive finally did send us tons of helpful data. But to be honest, LoJack just wasnât that interested in the research at first.
All that changed when they saw the first draft of our paper. After looking at auto theft in fifty-six cities over fourteen years, we found that LoJack had a huge positive benefit for other people. In high-crime areas, a $500 investment in LoJack reduced the car theft losses of non-LoJack users by $5,000. Because we had LoJack sales broken down by both year and city, we could generate a pretty accurate estimate about the proportion of cars with LoJack that were on the road. (For example, in Boston, where the state mandated the largest insurance discount, over 10 percent of the cars had LoJack.) We looked to see what happened to auto theft in the city as a whole as the number of LoJack users increased. Since LoJack service began in different cities in different years, we could estimate the impact of LoJack separate from the general level of crime in that year. In city after city, as the percentage of cars with LoJack increased, the rate of auto theft fell dramatically. Insurance companies werenât giving nearly big enough discounts for LoJack, because they werenât taking into account how much LoJack reduced payouts on even unprotected cars.
Steve and I never bought LoJack stock (because we didnât want to change our own incentives, to tell the truth) but we knew we were sitting on valuable information. When our working paper went public the stock jumped 2.4 percent. Our study has helped convince other cities to adopt the LoJack technology and has spurred slightly higher insurance discounts (but theyâre still not nearly large enough!).
The bottom line here is that I care passionately about number crunching. I have been a
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