Posted at 7:45 pm on March 31, 2010, by Justin M. Stoddard
When first I saw the headline “Israeli MP plans ‘popcorn law’ for movie munchers’,” I was sure the corresponding article would have something to do with either taxing or banning popcorn at movie theaters because of supposed health concerns. It turns out, the reason given was much less nuanced and rather refreshingly honest:
When I say “refreshingly honest,” I mean that there are no hidden overtones here. Carmel Shama doesn’t appear to be overly concerned with health. This doesn’t appear to be a redistribution scheme, where the proceeds from taxed popcorn would go into some government coffer. This is pure, straight-up theft. This does raise an interesting question, however. Why is popcorn so expensive at the movie theater? Economist Steven Landsburg isn’t so sure that it is. In chapter 16 (aptly named, “Why Popcorn Costs More at Movies”) of his book, The Armchair Economist, Steven Landsburg goes through a number of explanations for why the price of popcorn is as expensive as it is. The reasons may surprise you. Intuitively, we would guess that the price of popcorn is high because once we enter the theater, we are a captive audience. They have, in effect, a monopoly on popcorn, since most theaters won’t allow outside food onto their premises. But, as Mr. Landsburg points out, at that point, the theater has a monopoly on pretty much everything within the sphere of its influence. There are no other restrooms, for example, other than those provided. There are no other drinking fountains or front row seats, etc… And yet, all of these conveniences come gratis with the ticket price. The reason for this is easy enough. Any ancillary charges once inside the theater would make said theater less attractive to customers. In order not to lose those customers, the theater would have to charge less for the ticket price. In essence, it’s a wash. And so it may be for popcorn, as well. We pay higher prices for popcorn in order to pay lower prices for our tickets. But, in order to make prices attractive to all (popcorn munchers and popcorn abstainers alike), a happy medium must be found. This may be a matter of one part of the theater subsidizing another. Not everyone, after all, partakes in popcorn. They are only paying for the ticket to the movie and are therefore taking advantage of those who buy popcorn at a higher price point so ticket prices can economically be lower. Another theory put forth by Mr. Landsburg suggests that since most movie goers go to movies in groups, it follows that some of them will want popcorn and some won’t. If a theater offers low popcorn prices and high ticket prices, those that don’t eat popcorn may not want to go. The same follows, visa-versa. The trick is to get both the popcorn and the ticket prices to a level both groups can agree upon. This is economic theory backed up by the very theater owners that would be affected by such a law:
Also, as a parting shot, it bears remembrance that those who trade $5 for a medium popcorn value the popcorn more than they do the $5. Even if said bags of popcorn sold at $100 per, the same holds true. And although the New Paternalists may have something to say about that (waiting periods for high-cost items, etc…), it is still a voluntary exchange, of nobody’s business but the two parties involved. One last unintended consequence. Carmel Shama may well succeed in making high popcorn prices illegal. If so, people will no longer have to worry about mortgaging “their houses for a soft drink and a snack”. They’ll be doing that just to buy a ticket. Either that, or a whole lot of movie theaters will be going under. [Cross-posted at Shrubbloggers.] Filed under: Economic Theory, Market Efficiency, Nanny State, Unintended Consequences Comments: 3 Comments
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Posted at 2:17 am on March 31, 2010, by Eric D. Dixon
David Boaz reminds us just how amazing markets are when they’re allowed to work:
This reminds me of the inspiring book by Stephen Moore and Julian Simon, It’s Getting Better All the Time: Greatest Trends of the Last 100 Years. The state smacks down the economy every day with its gigantic dead hand, and yet efficiency still finds a way through in many ways, continually improving our lives. Eliminating as much of that dead-weight regulatory loss as possible will absolutely make the world a better place. [Cross-posted at Shrubbloggers.] Filed under: Market Efficiency Comments: 5 Comments
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Posted at 12:04 am on March 31, 2010, by John W. Payne
A group of scientists are now claiming that fatty foods could be as addictive as so-called “hard drugs” like heroin and cocaine:
I don’t doubt the science here. Depending on a person’s brain chemistry, fried chicken could be more addictive to them than a shot of smack. What worries me is that if junk food is just as addictive as illicit drugs, and it is proven to damage the health of people who do not moderate their consumption of it, we should soon be hearing calls for locking up gourmands and criminalizing fried foods and sweets.
Well, if drug warriors were consistent we would. I know there are groups out there calling for taxes and other legal restrictions on junk food, but I think we will be spared outright bans in this case because there is no way to easily define the potential criminals as “other.” Unlike with drugs, which were usually criminalized for reasons of race and class, almost all of us overindulge our appetites from time to time. And even if we do not personally engage in such behavior very often, we are undoubtedly close to people who do.
What this really shows is that there is nothing more innately harmful about cocaine and heroin than there is about ice cream and Krispy Kreme doughnuts. The difference is in how the government treats these products. The market for junk food is legal, so contracts are not enforced with street violence. Prices for such goods are not driven through the roof by prohibition, encouraging users to spend all of their time securing their next fix and often turning to petty theft or worse to attain the means for it. And most obviously, millions of sucrose addicts aren’t rotting away in a cage because of a personal vice.
So what will it be drug warriors: legal cocaine or criminalized cookies? Cross-posted at Rough Ol’ Boy. Filed under: Drug Policy, Nanny State Comments: 3 Comments
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Posted at 10:48 pm on March 30, 2010, by Christine Harbin
[NOTE: Since the original publication of this blog entry, the classification “libertarian paternalism” has been corrected to “liberal paternalism.”] I recently had a conversation with my good friend Justin who lamented that he had received his third parking ticket this year from the city of Madison, Wisconsin for violating the alternate side parking rule. “Alternate side parking is a racket designed to part the citizens of Madison with their hard-earned cash,” he told me. I think that Justin is onto something, and this raises an additional concern that I have about aggressive ticketing and selective taxes: liberal paternalistic policies frequently fail to accomplish their official purpose. The parking tickets haven’t changed Justin’s behavior; he continues to park on the side of the road that is arbitrarily wrong. The city’s alternative-side parking rules are so confusing and difficult to appeal, even smart people like Justin get trapped. Of course, that’s OK with the city; they’ll receive a steady revenue stream from parking tickets. Selective taxes on fatty food and soda are another example of liberal paternalism that doesn’t accomplish their official purpose, which is to trim waistlines in aggregate. In this example, there is not a scientific consensus on whether they will accomplish that which they allegedly intend. In a recent piece on the Huffington Post, Dr. Pamela Peeke explains how many studies that prove the contrary are being ignored.
Furthermore, slapping selective taxes on soda will be inefficacious at reducing obesity because an individual’s risk of obesity is not a direct function of the amount of sugary beverages that she consumes. Dr. Peeke argues that it is the result of many factors instead — some relating to genetics, others to lifestyle choices. Government actually has an incentive for these taxes to be inefficacious, because then it can continue to generate revenue from them. I consider this to be further evidence that the primary purpose of new taxes to raise more tax revenue to support the government’s spending habit. Just like the indoor tanning tax, selective taxes on sodas and fatty food would be a revenue generator first and a behavior deterrent second. These taxes would easily generate a considerable amount of income for state and local governments. In a previous post on Show Me Daily, I used a revenue calculator for soft drink taxes from the Rudd Center for Food Policy and Obesity at Yale University to determine that Missouri could generate $285 million in 2010 if it taxed sugar-sweetened beverages at $0.01 per ounce, or over $460 million if this tax were expanded to include diet-beverages. [Cross-posted at Amateur Philosophy] Filed under: Health Care, Nanny State, Taxes Comments: 7 Comments
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Posted at 11:19 pm on March 29, 2010, by Caitlin Hartsell
After reading the comments that appeared on Andrew Veen’s re-posting of Jen Pierce’s excellent post on a newcomer’s perspective of libertarian arguments, I wanted to address one of the major problems I’ve encountered when having political debate with libertarians and non-libertarians alike: false comparisons. This is especially a problem when talking about health care, which admittedly is a difficult topic. The argument people sometimes present is “perfect government” (in which the efficient government delivers services efficiently) versus “imperfect markets.” Other times, it’s “perfect markets” versus “imperfect government.” Neither is very useful, as what really needs to be looked at is the actuality of how markets and government play out. Any debate that happens needs to involve what can be realistically expected from both the market and the government. Market solutions, even in “perfect markets,” are relatively upfront about their negative points. A market solution, like one for health insurance, may not “include” everyone; a competitive market will bring the price down to a certain point so as to include more people (and sometimes, even most people) but there may be people who are still priced out and cannot afford the service, or insurance, or good. This is a flaw that is often used to attempt to discredit the solution. The problem is that the government solution has flaws that are not initially apparent. For instance, in places like Massachusetts, Canada, and Great Britain, everyone has health insurance and coverage, but that equates to long wait times and rationing of care and quality. A lack of competition (and an excess of bureaucracy) stifles innovation possibilities and slows any moves toward efficiency. Also, governmental solutions have the backing of the law behind them; if one is unhappy with the service, there are limited legal methods to bypass them. (Tangential note: Some may argue that rationing happens currently in the system we have, but rationing by price is a very different and more efficient mechanism than rationing by political clout. At any rate, the current system is too distorted by special interests and governmental infrastructure to be considered a market.) The case of the sick little girl that Jen mentioned draws upon another part of the argument oft overlooked by pro-government solution proponents: the role of private charities. In the competitive market solution, people have more money to spend on other goods, including private charity. Private charities must do good work in order to garner further donations; so in the long-term, the better charities will receive the most money and make the most impact. The market may leave some people out, but the private sector can pick up the loose ends. So, while the market solution admittedly does not “include” everyone, it is disingenuous to compare it to a governmental solution that does “include” everyone. Each has their own faults, but the market solution has mechanisms to fix them, whereas one must resort to the black market to get around the flaws in the governmental solution. (Also posted at Lady Libertarian) Filed under: Economic Theory, Government Spending, Health Care, Uncategorized Comments: 1 Comment
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Posted at 9:06 pm on March 29, 2010, by Justin M. Stoddard
If you’ve had occasion to listen to the radio for any amount of time recently, you’ve probably heard the slew of commercials about the ongoing Census. What you’ll hear, unfortunately, is not an explanation of the original purpose of the census, but instead a rather inane and commonly incorrect interpretation of basic economics. The one I hear most goes something like this (and I’m paraphrasing):
I’m not as droll as the narrator of this piece, but I can attest that this is the thrust of the argument. If you don’t fill out the census, public transportation will become ineffectual because, well, apparently that whole “three overly crowded buses” in a small metropolitan area is not enough to signal to the powers that be that…”hey, we need more buses!” Ironically, what this commercial hints at is the complete failure of centralized planning (a rather funny unintended consequence). A public transit system needs a form filled out every 10 years letting them know how many people live in the area in order to function? Really? Would several competing, privately owned mass transit companies need this information? Of course not. Private companies pay attention to the ‘signaling’ their costumers telegraph their way. It’s not too difficult to literally SEE buses becoming overcrowded. What inferences would you draw from that observation? Perhaps it’s time to put another bus on the road? If markets were more fully involved in supplying transit services, when people demand more buses, the market will provide more buses, until supply and demand meet at a parity. But that’s another post altogether. I just can’t tell if this propagation of incorrect economics is willful or just ignorant. Perhaps both? Edit: Marginal Revolution just picked up on this phenomenon, independent of myself. [Cross-posted at Shrubbloggers.] Filed under: Economic Theory Comments: 5 Comments
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Posted at 9:01 pm on March 29, 2010, by Audrey Spalding
According to a report from The Lottery Post, 18 states are considering expanding state gambling laws and institutions in order to make up revenue shortfalls. Right now, New Hampshire is considering a bill that would allow video slot machines and table games at six casinos. To use an over-used phrase, it looks like state lawmakers and local media outlets are “all in.” The Concord Monitor colored the state’s budget problems as unavoidable and unfixable. Even though some New Hampshire lawmakers have put forward propsed budget cuts, reporter Shira Shoenburg wrote, the cuts just aren’t enough to cover the state’s deficit. So really, the reasoning goes, the only hope is to increase state revenues somehow. Sen. Lou D’Allessandro, a major proponent of expanding casino operations in the state, offers up this rosy forecast: “If the gaming proposal is passed, there will be a significant influx of jobs and revenue. Some people have seen the light.” Let me be clear. I don’t have a problem with gambling per se. However, there are several reasons that make state legislators’ turn to gambling as a budget shortfall fix especially awful: 1. Cuts can be made. The choice presented, that New Hampshire can either make up its budget shortfall with new gaming tax revenues, or cut extremely important programs to the detriment of state residents, is a false one. I guarantee that New Hampshire still has some programs and dubious spending that the state could cut. New Hampshire could eliminate some state tax credits, thereby leveling the field for businesses. The state could also take a long, sober look at its budget, and reconsider how much it pays its highest-paid employees, the usefulness of certain regulatory boards, and whether some of its agencies really need to spend as much as they do on “professional development,” “awards,” and travel. 2. Legislators cannot have it both ways. I thought that the reason states imposed restrictions and regulations on gambling was because it was an unsavory activity, judged by many to be immoral, or was considered costly to the state. As reported in The Concord Monitor, New Hampshire Senate President Sylvia Larsen never supported expanding gambling — until her state needed the extra money. If Larsen truly believed in her publicly stated convictions, that gambling is in some way harmful, the recession should have changed none of that, and she has no excuse for supporting such unsavory activity. Along those lines, because states have welfare programs designed to bail out those who, say, gamble away their paychecks, I doubt that expanding gambling would, in fact, help states’ bottom lines. A 1999 report from the National Gambling Impact Study Commission estimated the nationwide cost of gambling, which includes things like welfare payments and unemployment benefits for gamblers who bet the farm, as about $5 billion per year. Either state-sanctioned gambling is morally bad for the state, or it is morally good; either gambling has a net positive economic impact or a net negative one — the verdict shouldn’t change based on the government’s budget. 3. This is not found money, it is a terrible wealth transfer. Just like everything else, gambling tax revenues are not found money. The money came from someone. In this instance, the person (cash cow) at least chose what to do with his or her money, and was taxed and charged accordingly. However, expanding casino operations is not akin to creating money or jobs. It is simply transferring them from a different, possibly less taxed, part of the state’s economy. Furthermore, when politicians do try to justify wealth transfers, they explain the process as necessary to help the needy. Under that rationale, we have programs such as welfare, and we have student-equalized state payments to public school districts instead of leaving each district to raise all of its revenues within district boundaries. I see expanding gaming, if it does in fact increase state revenues, as a transfer of wealth from the less well off to the middle class. As John W. Welte noted, people with more money tend to try gambling; “…but higher socioeconomic status gamblers had lower rates of pathological gambling, and lower extent of gambling involvement, particularly for lottery.” 4. Who really thinks this will work? Interestingly, one major reason states are considering gaming expansions is that gaming revenues have fallen, likely due to the fact that people have less money to play around with. From 2008 to 2009, according to The Lottery Post’s report, gambling revenues fell an average of 5.6 percent. Some states, like Illinois, are facing declines greater than 14 percent. So, people have less money, and are prioritizing accordingly. Turns out, gambling is not a top priority for many. Why do states think that expanding gambling might change that fact? Again, from The Lottery Post: “People don’t have as much to spend,” said Freda Lofthus, 71, as she was playing slot machines at Prairie Meadows Racetrack and Casino near Des Moines. “I spend about half of what I used to.” 5. Why is the state involved in the first place? Lest I get too much gaffe from the libertarians for reasoning within the constraints of the current system, let me point out that the state really shouldn’t be involved in gambling in the first place. State-sponsored lotteries that claim to fund schools seem, to me, to be even more deceptive than a private casino claiming that I can strike it rich. The state stamp of approval adds a certain authoritative nod that this sort of activity is somehow safe, and a good idea. I submit that if the state were not involved in gaming regulation, then perhaps casino competition would increase, maybe even along the lines of increased return rates and a better overall experience — instead of casino owners working to curry favor with politicians. Filed under: Uncategorized Comments: 1 Comment
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Posted at 4:14 pm on March 28, 2010, by Eric D. Dixon
Tom Palmer‘s book reviews are more than enough to explain why Cass Sunstein is an extraordinarily sloppy thinker, but bad ideas never die — and Sunstein’s bad ideas are plentiful. One of his pet theories, developed with Richard Thaler, is “libertarian paternalism,” which posits that central authorities can frame the choices available to people in society in such a way that “better” choices will more often be made — all without running afoul of libertarian objections to authoritarian compulsion. David Friedman has made compelling arguments that “nudges,” attempts to establish innocuous choice architecture, would likely soon become more like shoves. Yesterday, I discovered that economists extraordinaire Mario Rizzo and Glen Whitman (check out this nice encomium to Rizzo by Peter Boettke) had thoroughly dismantled the idea that would-be paternalists have the ability to make better utility-maximizing decisions than the aggregate population they hope to influence, let alone cement this ability in a set of public policies that would implement the benefits of their omniscience in practice. Titled “The Knowledge Problem of New Paternalism,” one additional reason it caught my eye is because they published it in the law journal of my own alma mater. (Last time I went poking around the archives of BYU’s scholarly journals, incidentally, I stumbled across this gem from 1976, which provides the interesting bit of trivia that Milton Friedman and Dallin H. Oaks had been friendly colleagues during their mutual time in Chicago.) At any rate, Rizzo and Whitman give “libertarian paternalism” the full Hayekian analysis, concluding:
It’s an excellent piece, worthy of a full, careful read. [Cross-posted at Shrubbloggers.] Filed under: Economic Theory, Nanny State, Regulation Comments: 3 Comments
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Posted at 12:59 am on March 28, 2010, by Justin M. Stoddard
I honestly could not initially decide whether or not to post this, as I could not determine if it was a hoax or parody (a la The Onion). But the more I thought of it, the more plausible it seemed. Outlaw pot farmers in Calif. fear legalization could actually hurt their business:
The irony is deliciously delicious…in so many ways. But, foregoing all that, this is basically an issue of rent seeking. People who deal in black-market goods are protected from the ‘legal’ market. Not only do the goods they are producing/trading have an unnaturally high price point, they are shielded from competition from the free market. If anyone can get into the pot growing business, prices will dramatically fall. Some of the former illegal growers will then be priced completely out of the market. We see this type of rent seeking behavior every day. Groups from manicurists and hair stylists to HVAC repairmen to interior decorators insist on licensure laws as requirements to enter their professions. Those doing the rent seeking will nearly almost always claim that these types of licensure laws are needed so that only qualified people get the job. It’s a safety issue. Or a quality issue. Or, well, pick your reason. In truth, it’s none of those. Rent seeking protects jobs using the force of government by way of restrictive fees and time-costing measures. It protects the few at the cost of hurting everyone else by way of decreased competition, higher prices and fewer employed people. You have a limited amount of money and you want to become a florist? Do you have the right license? Have you paid enough fees and attended enough classes? Sorry, you’re now priced out of the market. Some select florists benefit; the aggregate suffers. But back to the rent seeking pot farmers of Humboldt County, California. Not only are their actions unbelievably immoral, they’re frightfully hilarious. The whole thing reminds me of the Simpsons episode where Homer Simpson is bullied out of the chiropractic market:
As pot legalization becomes more likely, I would expect to see more of this type of behavior. Just remember, the behavior is equally ridiculous when applied to interior decorators or florists, or the nearly other 30% of the workforce that requires licensure. [Cross-posted at Shrubbloggers.] Filed under: Drug Policy, Economic Theory, Regulation Comments: 7 Comments
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Posted at 10:40 am on March 27, 2010, by Christine Harbin
The 10% tax on indoor tanning services is the government’s latest effort to save us from ourselves. From an article on CNNmoney:
This tax represents an unfortunate and disturbing trend in public policy: it’s disguised as a means to “nudge” people into improved behavior, but its primary purpose is to provide an additional revenue stream. This 10% tax on indoor tanning will generate a considerable amount of money: $2.7 billion over ten years. How could a politician resist? State and local governments are facing large deficits, and they are understandably trying to account for their expenses. Government wants individuals to stop their bad habits, but not completely, because then it will generate no revenue from them. If all Americans switched to spray tanners and vitamin D pills as a consequence of this tax, then Congress would have something else to Moreover, these selective sales taxes assume that the government/”choice architect” actually knows what the “right” choice is for other individuals. Whether something is healthy is subjective; it depends on who you ask and when. Some herald indoor tanning as healthy because it is a source for vitamin D; others say that it is unhealthy because it increases an individual’s risk of melanoma. Also, government is notoriously swayed by the interests of lobbying groups instead of the interests of their constituents — corn syrup is not very nutritious, but it certainly secures a significant amount of assistance from the U.S. government. I don’t know who to believe — the rent-seeking lobbyist trying to save his industry from an imminent leftward shift of the demand curve, or the U.S. senators who just want my tax money to fund their pet projects to please their constituents to secure their re-election. I’ve made the decision that the risks associated with indoor tanning outweigh the benefits for me personally, and I know that other individuals may come to a different conclusion in their cost-benefit analysis. As a libertarian, I disagree that it should be the role of government to tell individuals how to behave. Filed under: Health Care, Nanny State, Taxes Comments: 9 Comments
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