I understand that recently Christie’s auctioned off some treasures that the Greek government feels may have been illegally removed from Greece. I’m something of a Philistine when it comes to art – I can tell from looking if something is a Henry Moore or a Rodin, but frankly, I have no appreciation. Most art just doesn’t do anything for me.

But the story did get me thinking about stolen property. Art, I understand, is easy to trace. Let’s talk, I don’t know, diamond earrings. I assume that if I were to purchase a pair of diamond earrings, and it turned out to be stolen – the item would go back to its rightful owner. But what about the money I paid for the property? Is the seller (and from here on, I’m assuming all the seller was equally innocent of the items provenance) supposed to reimburse me? And is the person he/she bought it from supposed to reimburse him/her? I’m not an attorney – perhaps one of our readers that is might inform the rest of us.

But… the answer to the reimbursement question presumably says something about incentives as well. If the buyer of stolen property takes the entire hit (i.e., the item is seized by the rightful owner, and the buyer is not reimbursed), it increases the incentive to ensure that items one buys are not stolen, but decreases the incentive to ensure that items one sells are not stolen. (Also… buyers are then encouraged to turn around and resell quickly.) If the seller takes the hit (i.e., is required to reimburse the buyer for items seized by the rightful owner), selling stolen property becomes discouraged, but not buying it. Thus – one has a greater incentive to buy and hang onto stolen property.

So… which approach (penalizing buyers or sellers) is more likely to lead to less theft? In the first transaction, the buyer is buying from the thief. The thief is obviously not discouraged by engaging in an illegal act, given that he/she is a thief. The odds of the thief being willing or able to reimburse the buyer upon seizure of the property are minimal. Thus, the first buyer, at least, will take a hit, no matter how many further transactions occur. And all else being equal, the first buyer in a chain of transactions is also the one most likely to be able to spot the potential problem. Increasing the penalties on this first buyer may be the best way to reduce thefts.