Rising Paranoia, Falling Prices
Spur Surveillance-Gear Sales


By Brooks Barns

Staff Reporter of THE WALL STREET JOURNAL

Most days, Cindy Sciacca spends her free time at home baking, canning vegetables and finger-painting with her daughter. So why is this mild-mannered Mom buying a miniature video camera to install inside her mailbox? "If there's a terrorist living on my block," says the accountant assistant in Ukiah, Calif., "I'm sure not going to wait to hear about it on the news."

Close the curtains: Americans are taking surveillance to a whole new level. Driven by newfound suspicions following Sept. 11, a small but quickly growing number of freelance spies are installing gadgets that were unheard of in the home even a year or so ago -- and whose prices are surprisingly low. Those tiny earphones that Secret Service members use? They're on sale for about $60. Other companies are selling transmitters that track the whereabouts of the family car, gadgets that detect phone taps and video cameras thin enough to slide under doors. One company even offers a lie detector for the home.

In all, sales are up 30% to 60% since last year at spy-gear stores across the country, helping turn security and surveillance into a $5 billion industry. Los Angeles's Bolide International says it's sold 3,200 Spycams in the past two months -- double the number at this time last year. Counter Spy Shops, a chain that sells everything from $800 sew-on tracking devices to that $4,900 "portable truth machine," saw orders triple this fall. And SpyWorld, in Carson City, Nev., says sales of counterspy products -- they help you figure out if someone's watching you -- are up 20% since September.

Of course, all of these gadgets have strong detractors among private citizens and privacy experts. And while there are legal uses for these products, some also have applications that are against the law in many states. On a more practical level, some would-be James Bonds have discovered that the devices either don't work well, or that it's really not worth snooping in the first place. (That camera in Ms. Sciacca's mailbox that was supposed to flush out terrorists? It caught the neighbor's black Lab digging in her yard.)

Still, a growing number of buyers are giving these devices a try, if only because the drumbeat of upsetting news, from terrorism and anthrax to war, has heightened fears. "The paranoia levels right now are absolutely staggering," says Andrew Moe, owner of Spycam Surveillance Equipment in San Diego. In the past, people couldn't have responded this way; spy cameras, tiny recorders and night-vision goggles either hadn't been developed for home use or were prohibitively expensive. Now they're being snapped up by everyone from security-minded homeowners to mistrusting spouses. Parents are taking to them as much as any group to make sure their children are safe -- or at least doing what they're told.

The Backpack Chip

Among the hot sellers: a tiny $800 chip that slips into a backpack and transmits junior's whereabouts to a hand-held device back home. There's also The Ghost, a finger-size microphone that catches conversations clearly, even from inside a shirt pocket. And for the ultimate 007 experience, a company called Armortek International will outfit your car to lay down tacks, tear gas or oil slicks, or shock whoever touches the door. "We sell about 20 or 30 cars with all the bells and whistles each year," says Armortek owner Clint Murphy. (Most go to South America, he says, but a handful stay in the U.S.)

Mike O'Bannon's spy arsenal was far more modest. The Bakersfield, Calif., software salesman used KeyKatcher, a $59 device that tracks activity on a computer keyboard, to find out that his teenage son Matt was skipping school. (Matt had e-mailed a friend about his plans to spend second period in a city park.) "My son was a little surprised to see me at the park, too," Mr. O'Bannon says. "He still has no idea how I busted him."

   


Is all of this legal? Surprisingly, the government doesn't provide as much protection as you might think: Parents can track minor children, and videotaping in your own home, property or business is almost always legal -- even without the subject's knowledge, says Los Angeles privacy lawyer Scott Feldmann. How about recording phone conversations? Everyday folks can do it in 41 states -- as long as one of the parties knows the call is being recorded. (The strictest state: Massachusetts, where secretly recording a conversation can come with a $10,000 fine and a five-year prison term.)

Before the terrorist attacks, many states were working to beef up spying laws, but busy lawmakers have put much of that legislation on the back burner. For now, average citizens who dabble in covert surveillance are more likely to face civil lawsuits on other charges -- privacy violations, trespassing or even burglary. In one closely watched case a landlord in Bay Shore, N.Y., was arrested in November for allegedly planting a camera disguised as a smoke detector in a female tenant's bedroom. The charge: burglary. The landlord's lawyer denies any wrongdoing on his client's part.

We Just Sell It

As far as the busy spy shops are concerned, virtually every retailer has a policy that boils down to: We just sell the stuff. "Macy's sells knives," says Arielle Jamil, a general manager for Counter Spy Shops. "But you can't sue Macy's if somebody stabs you with it." Using surveillance devices without breaking the law, she says, is "the customer's responsibility."

Legal issues aside, sometimes the results are disappointing. Motion detectors can be set off by a rogue tricycle. Lie-detector experts say at-home tests are easy to fool. And you better hope your husband doesn't go to have his oil changed if you have a tracking device installed under his car. While most spy-gadget retailers and manufacturers concede that some devices require careful use, they defend their products. Besides, says Howard Goldman, whose company makes and sells under-the-car tracking systems, most mechanics "aren't observant enough to notice" the transmitters.

And of course, critics ranging from psychiatrists to privacy advocates say routine use of surveillance devices is paranoid, unhealthy and generally creepy. "It's not anywhere close to acceptable behavior in a civilized society," says Jeffrey Rosen, author of "The Unwanted Gaze" and a constitutional-law professor at George Washington University. "This orgy of voyeurism is hardly justified by fears about security."

So what do you do if you're afraid of being spied on? Well, there's always counterspying. Dwight Des Rosiers, a helicopter pilot in Anchorage, Alaska, bought a $35 software program that helps him scour government-agency databases for his name. "These days," he says, "the government is spying on us all."

And then there's Thomas Crowley, a bartender at New York's Bar 89 restaurant. He recently discovered that, with advancing technology making these devices cheaper and easier to hide, almost anything's possible in the spy game. There are even video cameras in neckties, like the one Mr. Crowley recently went shopping for ($500, in paisley). What will he do with it?

"Wouldn't you like to know?" he says.

Write to Brooks Barnes at brooks.barnes@wsj.com

RELATED NOTES

1. Scarcity is the limited nature of society's resources.

2. Rational people think at the margin - meaning they compare the marginal benefits of some action to the marginal costs.

3. An externality is the impact of one person's actions on the well-being of a bystander.

4. Microeconomics is the study of how households and firms make decisions and how they interact in markets.

5. A competitive market is a market in which there are many buyers and sellers so that each has a negligible impact on the market price.

6. Quantity demanded is the amount of a good that buyers are willing and able to purchase.

7. The law of demand is a claim that, other things equal, the quantity demanded of a good increases when the price of the good decreases.

8. The demand for a good tends to be affected by consumer tastes and the number of buyers in the market.

9. Supply is the relationship between the price of an item and the quantity supplied.

10. Supply is affected by the number of sellers serving the market.

11. When the supply of a good or service increases, a surplus of that good or service will exist, leading to lower prices and an increase in quantity demanded.

12. When the demand for a good or service increases, a shortage of that good or service will break out, leading to higher prices and an increase in quantity supplied.

13. For more on externalities see http://www.ems.psu.edu/eceem/environm.html

14. For more on the economics of spying see http://www.computereconomics.com/cei/00/eflash/051100.html

15. For more on supply and demand analysis see http://pittsford.monroe.edu/jefferson/calfieri/economics/SupDemand.html

RELATED QUESTIONS

  1. Why has he price of spy gear been falling?

  2. Is the demand for spy gear increasing or is quantity demanded increasing?

  3. If the demand for spy gear is increasing, why aren't prices increasing?

  4. Is the consumption of spy gear and example of a negative externality?

  5. Is the consumption of spy gear proof of the problem of scarcity and rational thinking? Why or Why not?

POSSIBLE ANSWERS

  1. The price of a good or service will fall for any of the following reasons. First, if there was a surplus of spy equipment before September 11th, the surpluses could be eliminated by lowering prices. A surplus means that at the prevailing price quantity supplied exceeds quantity demanded and consumers are signaling the sellers that prices are too high. If prices do not fall, the surpluses will remain and the sellers will lose money.

    The second way prices can fall is if the demand for a good or service decreases. A decrease in demand means buyers are less willing and able to buy the product than they were before. The decrease in demand leads to surpluses and lower prices.

    The third way prices can fall is if the supply of the good or service increase. This appears to be the case for spying equipment. As more and more companies have entered the market to cash in on our paranoia, the overall supply of spy equipment has increased (see diagram below). The increase in supply has led to a surplus of equipment and downward pressure on prices to an new equilibrium level.

     

  2. Both. The quantity of spying equipment demanded is increasing because prices are falling. As you can clearly see on the previous diagram, when the supply of a good increases and prices fall, the lower prices causes more and more people to be willing and able to purchase the good. As the law of demand indicates, a lower price will entice more of us to take a peak at our neighbors to see if they are harboring terrorists!

    The demand for spying equipment is increasing too. An increase in demand means that even if prices did not fall, more people would be willing and able to purchase such equipment. As consumer tastes shift towards surveillance equipment and more buyers enter the market, the overall demand for this equipment will increase.

  3. It appears that in the market for spy equipment the supply of equipment is increasing by a larger amount than demand is increasing. As the diagram below illustrates, when demand increases (due to more buyers in the market) but supply increases by a larger amount (due to far more sellers entering the market) the overall effect will be lower prices and an increase in the equilibrium quantity of the good in question. Any upward pressure on prices caused by the increase in demand is offset by the downward pressure on prices caused by the increase in supply.

     


  4. It could be argued (see normative analysis in your textbook) that the purchase of this equipment creates a negative externality. Recall that a negative externality exists when one persons' consumption of a good or service injures some other person who was not part of the original market transaction. Second-hand smoke comes to mind as an example of this problem. Some could argue that if people use this equipment to violate the Constitutional rights their neighbor has to privacy on their own property then a negative externality has been created. Of course others could say that as long as the equipment is used to keep track of your own children or is used in your own home or to view public property like the street in front of your house then a negative externality might not exist.

  5. Consumption of any good or service proves that the problem of scarcity is omnipresent. Whenever we buy a gallon of gas or a movie theater ticket or a telescopic lens to peer into other peoples' homes there is some imbalance we are trying to deal with in our lives. All purchases are made in order to narrow or close the imbalance between what we want or need and the resources we have to meet our wants or needs. People who buy spy equipment face an imbalance between the amount of information they have and the amount of information they desire. Purchasing this equipment helps them narrow that imbalance.

    Are people who purchase such equipment rational? Economists would assume they are. Rational behavior implies that when people make a decision they consider the benefits of that decision and the costs. The benefits of such equipment could be greater feelings of security, enhanced knowledge of possible threats and even the fun of being nosy. The costs include the price of the equipment and the value of the next best thing that could have been purchased. If the benefits of the equipment exceed the costs - to the individual purchasing it - then we would have to contend that they are rational.

     

This article is reprinted by permission of theWall Street Journal Interactive Edition. ©
2002 Dow Jones and Company , Inc. All Rights Reserved. Instructional materials by Jack A. Chambless, Valencia Community College.