"Who in their right mind is going to steal a chipped-by-law-dog in broad daylight, in front of a busy store? "
The answer to this is right there in Sharnita's answer.
Where I live (in a near-suburb of a very large US city, with all the crime that goes along with it) the idea of going to a store and tying up a dog that you ever expect to see again, let alone love or care about, is unthinkable. Thieves would very casually stroll up, untie your dog, and walk away with it. It might become a bait dog for dog-fighting (yes.... torn to bits to teach the thief's fighting dog to be aggressive and have that much-admired "killer instinct". You can then enter your killer dog into a dog fight, place bets and get richer than if you sold drugs!)
We're lately experiencing a rash of thefts of dogs from their fenced in back yards. Owners have been warned to never let their dogs out of their sight outdoors. Dogs have been stolen out of locked cars while their owners dash into a store. The thieves simply break a window. There's not much public interference in these case. Witnesses never know if the thief is armed.
Not all thefts are for bait-dog training. There are cases where dog owners find their stolen dogs placed for sale on Craig's List. This can be lucrative, especially if it's a cute toy breed or one of the latest "in-vogue" breeds.
In the US, micro-chipping is voluntary. Veterinarians charge around $40 to $50 to place the chip and get it registered. Lots of folks, especially those who don't have an excess of money, are not going to prioritize this expense. There are many rescue groups who will have micro-chipping events where you can get it done for $25-$30. And as much as the manufacturers of the microchips try and get the scanners into the hands of all police and shelters/pounds, again, it's all voluntary whether they're used or not.
Not all places who receive stray/abandoned/dropped off animals will bother or remember to scan incoming animals. Some go straight to the euthanasia room, if there are no available cages. The irony in some cases (thankfully, not often) is that the cages might be full of confiscated fighting dogs on "police hold" awaiting trial of their owners.
Just saying all this to point out that things are different, all over the world. What's "out of touch with reality" isn't universal or concrete.