I think there are lots of preferable situations. The simplest and best is probably if theft was simply viewed as a personal moral failing and looked down on. This is reinforced by shaming and is how it works in high trust societies.

Other options include making sure people have enough success that they have something material to lose from getting caught stealing.

Despite agreeing with you in broad strokes I still don't see this being completely feasible. We should obviously strive for a society where people don't need to steal and don't feel compelled to steal either. That said, even in a much better situation there will still be someone who does it. At some point you really do have to go "investing more resources into this is not productive for society".

Like I said, it depends on the assumptions, but I agree that for most assumptions, there will be some tradeoff and non-zero level of theft occuring.

My main rejection is the idea that the current state is the best possible situation given all possible permutations.