High Positive Externalities from LoJack
Wikipedia defines an "externality" this way:
In economics, an externality is a cost or benefit from an economic transaction that parties "external" to the transaction receive. Externalities can be either positive, when an external benefit is generated, or negative, when an external cost is imposed upon others.
Here are a few examples Wikipedia provides of goods that generate positive externalities:
* A beekeeper keeps the bees for their honey. A side effect or externality associated with his activity is the pollination of surrounding crops by the bees. The value generated by the pollination may be more important than the value of the harvested honey.
* An individual planting an attractive garden in front of his house may provide benefits to others living in the area, and even financial benefits in the form of increased property values for all property owners.
* Education leads to a more civically-minded citizenry with a greater sense of altruism, and leads to a work force that can create more wealth.
Although it doesn't use the term "positive externality", a recent press release by LoJack, the makers of a well-known and highly effective car security system, looks as if it could add another example to the list above. First, a description of the system from the company's website:
The patented LoJack System includes a small radio frequency transceiver hidden in up to 20 places in a your vehicle. Each LoJack System has a unique code that is tied into the Vehicle Identification Number (VIN). When a theft is reported to the police, a routine entry into the state police crime computer results in a match of the LoJack System's unique code against the state VIN database. This automatically activates the LoJack System in your car, which emits an inaudible signal. Law enforcement authorities who are equipped with LoJack vehicle tracking units - in their police cruisers and aviation units - are always listening for a LoJack signal. Police use the LoJack vehicle tracking units to track and recover your LoJack equipped vehicle.
That page goes on to describe how over $4 Billion in assets have been recovered with the assistance of the Lojack system. A recent press release, entitled "Week of High Profile LoJack Recoveries Underscores System's Benefits to Society", add this information:
In the past week, LoJack Corporation's (NASDAQ: LOJN) Stolen Vehicle Recovery System has been instrumental in helping police arrest criminals involved in carjacking, kidnapping and other criminal activities and has again led police to major organized crime rings. The events of the past week underscore LoJack's effectiveness in recovering stolen mobile assets, and in helping police to apprehend the violent criminals behind these and other more serious crimes.
Here are two specific examples:
On March 6, Washington State Police uncovered the second of two related major chop shops, recovering more than $300,000 in stolen construction equipment, trucks, cars and motorcycles. The investigation began when a LoJack-equipped dump truck was reported stolen and tracked and recovered by police in less than four hours after activation. Police discovered the first chop shop at a Battle Ground, WA location and, during the investigation, identified another suspicious location in Ridgefield, WA, which was found to be a second chop shop. Two suspects were arrested and the investigation continues.
In this recovery, a Massachusetts State Trooper began tracking the LoJack signal from a vehicle, which had been stolen about an hour earlier in Boston. The police gave chase, and the suspect abandoned the vehicle and ran on foot to the Marshfield Middle School. The Marshfield Middle School and High School were immediately put into lockdown by alert staff. The Marshfield Police Department arrived on the scene, while the suspect attempted to open a number of locked doors to the middle school. The suspect, who according to local authorities had a "long record of violent acts," was subsequently arrested at the high school.
Thus, a good whose primary intended use is the recovery of stolen cars, trucks, and motorcycles generates positive externalities in so far as it helps bring to a quicker end to the work of career criminals and/or identifies the networks through which they work. Society, the police, Lojack customers, probably auto insurers, and ultimately shareholders all benefit. What's not to like?
Disclosure: I own shares in Lojack.