Book reports industry mooches off taxpayers

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01/22/2008
So after a few days on backorder from my favorite local bookstore, I finally got around to reading Free Lunch by David Cay Johnston. The main argument is this: taxpayers foot the bill for responding to false alarms which equals the profits reported by the security industry. Hence, the free lunch reference. Here’s the argument verbatim: “These profits are huge because the alarm industry does not pay its largest single cost, labor to check out alarms. The taxpayers pick up this expense. Each time the police check out an alarm it costs more than $50, the police in Seattle and other cities have determined. The average alarm goes off more than once each year. The police responded to about 38 million alarms in 2000 at a total cost to taxpayers of $1.9 billion. The burglar alarm industry collected $7.9 billion from residential and commercial burglar alarm customers that year. So if the industry’ estimates are reliable, it means that profits were almost $1.9 billion, almost exactly the value of the taxpayer subsidy in having police check out false alarms.” Johnston concludes with this: “The burglar alarm industry charges hefty fees for a service that costs it very little. Then the industry dumps onto the taxpayers the real costs of providing the very service it sells. This is economic pollution sold to people under the guise of making them safe. In fact, it makes them less safe.” The “safe” argument that Johnston tries to work into his argument is fairly weak, in my opinion, and a manipulation of numbers, but I won’t divert to that right now. Instead, I would say that the alarm industry is certainly aware that false alarms are an issue, but the real question is: How will the industry deal with this negative public image? Any ideas?