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Theft and Welfare in General Equilibrium: A Theoretical Note
Department of Economics, Auburn University, Auburn, USA
Phoenix Center for Advanced Legal and Economic Public Policy Studies, Washington DC, USA
Department of Economics, Auburn University, Auburn, USA
Department of Economics, Auburn University, Auburn, USA
- 1 Department of Economics, Auburn University, Auburn, USA
- 2 Phoenix Center for Advanced Legal and Economic Public Policy Studies, Washington DC, USA
- 3 Department of Economics, Auburn University, Auburn, USA
- 4 Department of Economics, Auburn University, Auburn, USA
Theoretical Economics Letters·Volume 02 (2012)·Pages 470–473·Published 19 December 2012·DOI10.4236/tel.2012.25088
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Abstract
We show that in a dynamic general equilibrium model theft lowers social welfare even if it is costless to steal, there is no theft prevention cost, and all stolen goods are immediately returned to society. Theft lowers social welfare because it distorts the investment decision, resulting in undercapitalization and a lower steady-state level of capital. This sheds a new light on the literature originated by Tullock [1].
KeywordsGeneral EquilibriumTheftEfficiency
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