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Apple skirt around the issue now, but what is the one of primary scenarios for "lost luggage, keys, bicycles, bags" if not theft?

They have also done videos like https://www.youtube.com/watch?v=JJwdhWM9d0Y where they show Find My as a tool for theft prevention, although in that case it's a Macbook not an Airtag.

It's also kinda weird to use it for anti-theft when you think about how AirTags work. They aren't GPS, rather all these Apple devices are seeing it with Bluetooth and snitching on the location.

maybe they could set something up where local pd handles the tracking if/when necessary

That sounds like yet another reason not to use AirTags, since they now give location access to the authorities...

No, I do not want the solution to this problem to be adding AirTags to the government panopticon.