TEL  Vol.2 No.5 , December 2012
Theft and Welfare in General Equilibrium: A Theoretical Note
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].

Cite this paper
T. Randolph Beard, G. S. Ford, L. V. Stern and M. L. Stern, "Theft and Welfare in General Equilibrium: A Theoretical Note," Theoretical Economics Letters, Vol. 2 No. 5, 2012, pp. 470-473. doi: 10.4236/tel.2012.25088.
References
[1]   G. Tullock, “The Welfare Costs of Tariffs, Monopolies and Theft,” Western Economic Journal, Vol. 5, No. 3, 1967, pp. 224-232.

[2]   P. Samuelson, “Further Commentary on Welfare Economics,” American Economic Review, Vol. 33, No. 3, 1943, pp. 604-607.

[3]   P. Samuelson, “The Gains from International Trade,” Canadian Journal of Economics and Political Science, Vol. 5, No. 2, 1939, pp. 195-205. doi:10.2307/137133

[4]   G. Stigler, “The New Welfare Economics,” American Economic Review, Vol. 33, No. 2, 1943, pp. 335-359.

[5]   L. Kaplow and S. Shavell, “Fairness versus Welfare,” Harvard University Press, Cambridge, 2002.

[6]   D. Dolinko, “Review Essay: The Perils of Welfare Economics,” Northwestern Law Review, Vol. 97, No. 1, 2002, pp. 351-393.

[7]   M. B. Dorff, “Why Welfare Depends on Fairness: A Reply to Kaplow and Shavell,” Southern California Law Review, Vol. 75, 2002, p. 847.

[8]   R. Becker, “Capital Income Taxation and Perfect Foresight,” Journal of Public Economics, Vol. 26, No. 2, 1985, pp. 147-167. doi:10.1016/0047-2727(85)90002-7

[9]   S. Siwek, “The True Cost of Copyright Industry Piracy to the US Economy,” Policy Report #189, Institute for Policy Innovation, 2007.

 
 
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