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Economic theory gives us two ‘weapons’ to combat gun violence

REUTERS/Joshua Lott
Treating gun violence as an externality assumes that weapons markets are legitimate and that we must live with the consequences.

In the coming weeks, I’ll use whatever power this office holds to engage my fellow citizens, from law enforcement, to mental health professionals, to parents and educators, in an effort aimed at preventing more tragedies like this, because what choice do we have? We can’t accept events like this as routine.

President Obama, prayer vigil in Newtown, Conn., Dec. 16

When I heard President Obama’s remarks on Sunday evening, I asked myself, “Is there anything the field of economics can contribute to this effort?”  After all, in these situations we generally turn to sociologists, psychologists, ministers and law enforcement professionals before consulting economists.

Two ideas come to mind.

‘Externalities’ and gun violence

In economic terms, “externalities” are activities that impose costs on or generate benefits for people not directly involved in those activities. In plain language, externalities are the side effects of producing and consuming goods.

Second-hand smoke, for example, is a negative externality. When someone lights up, this affects both the smoker and everyone around him.  This is why we’ve banned smoking in most public places.

Firearms and ammunition create negative externalities in the form of injuries and death to innocent people. Gun manufacturers don’t take these costs into account in making their production decision; guns are therefore cheaper, and more are purchased than if prices were higher.

Economics addresses this problem by using the tax system to affect the externality; in other words, taxes raise prices and thus customers bear more of the cost of the product. These types of taxes, known as compensatory taxes, are charges imposed on markets that have externalities.

They are levied for two reasons. First, the tax raises the price of the item and thus reduces the amount bought and sold, thereby reducing the side effects. Second, the tax revenue can provide funds to compensate those unfairly affected by the externality.

Excessive alcohol consumption, for instance, creates a variety of spillover effects, such as drunk driving. One justification for alcohol taxes is to make drinking more expensive, thereby decreasing alcohol consumption and reducing the amount of drunk driving. The tax revenues can be used to pay for increased highway patrols and drunk-driving prevention programs.

Compensating taxes on guns and ammunition would have similar effects. First, fewer guns would be sold, and the spillovers of injury and death caused by violent gun use would be reduced. Second, taxes could be imposed in such a way as to minimize the effects on hunters and sport shooters and maximize the effects on those who purchase guns to harm others.

Taxes on ammunition could vary with the size of clips so that small clips would be cheaper on a per-bullet basis than larger clips; higher taxes per weapon could be levied on assault rifles than on sport rifles. Third, the taxes collected could be used to compensate the victims of gun violence and to pay for additional law enforcement and mental health resources.

Noxious markets

Treating gun violence as an externality assumes that weapons markets are legitimate and that we must live with the consequences.  However, certain aspects of this market may not be legitimate. Markets do not exist in a vacuum.  They are created and designed by people, and societies can decide to modify or restrict markets depending on its values and goals.

Debra Satz, a professor of philosophy at Stanford University, addresses this in her book “Why Some Things Should Not Be for Sale: The Limits of Markets.” At the heart of her analysis is the concept of noxious markets, i.e. “markets that people find especially objectionable” and which should be curtailed or eliminated.

One important reason why societies deem some markets as noxious is that trade in these goods causes extreme harm to individuals and/or society.  Markets in assault rifles, large-capacity ammunition magazines and related items could be thought of this way. The damage caused by guns used to commit crimes is so great that we must regulate them and, in some cases, eliminate them.

At the heart of much debate over gun control is this very question: Are markets for assault weapons, large-capacity magazines and similar items noxious?  Obviously there is no consensus on the issue at this moment in our political history. 

At the prayer vigil, President Obama said, “If there’s even one step we can take to save another child or another parent or another town from the grief that’s visited Tucson and Aurora and Oak Creek and Newtown and communities from Columbine to Blacksburg before that, then surely we have an obligation to try.”

Compensatory taxes on guns and ammunition can help, and we should impose them as a step towards reducing gun violence. In the longer term, we need to face the fact that there are some things that should not be for sale in a civilized society.

Susan E. Riley contributed to this article.

Comments (17)

  1. Submitted by Andrew Richner on 12/20/2012 - 09:13 am.

    Secondary Market

    Not being trained in economics, I still see one point that might be missing from this analysis. Namely, the consumer arms market is itself a secondary market. The primary market for assault weapons is composed, of course, of various militaries around the world. It shouldn’t be ignored that the U.S. government pours millions (if not billions) of dollars of capital into arms and munitions manufacturing every year. Reducing that subsidy to the industry may also be an economic “tool” to be used to keep these weapons out of the hands of people who would use them to commit acts of mass violence.

  2. Submitted by Stan Robins on 12/20/2012 - 10:34 am.

    Overlooks the key consideration

    I am a DFL’er and generally favor gun control that would reduce or eliminate the American plague of mass-murder by firearms. I don’t own a firearm. But I also respect the Constitution and the orderly processes it embodies. You say:

    “In the longer term, we need to face the fact that there are some things that should not be for sale in a civilized society.”

    This doesn’t square with the language of the Second Amendment that “. . . the right of the people to keep and bear arms shall not be infringed.” I don’t think economists should be given a pass when it comes passing Constitutional muster. One doesn’t need a grounding in economics or a Phd to come up with the obvious solutions of taxing or prohibiting outright the sale of firearms to reduce or eliminate their availability.

    Those same solutions have been offered by others to eliminate, for example, pornography. Sometimes with the same blithe disregard of the Constitution. The result is an exercise in futility.

    Professor Johnston puts forth his solution to the proliferation of firearms in America without even the nuance of distinguishing between types of firearms, which is likely to be a part of the actual solution, assuming we can arrive at one.

    So the task for academics is to propose a solution that squares with “shall not be infringed,” without resorting to sophistry.

    • Submitted by JP Winker on 12/20/2012 - 02:01 pm.

      Regulating firearms does not contradict the 2nd amendment

      Stan – with due respect, I disagree with your assertion that banning certain types of firearms infringes on our constitutional rights. The term “arms” can be construed as a guns, tanks, missile launchers, etc.. We have no trouble limiting access to many such arms. Furthermore, the term “people” is just as broad. We tend to limit dangerous things to adult use, but the broader interpretation would allow toddlers to carry handguns. Again, there’s a consensus restricting rights there as well.

      Controversial arguments play out on a very narrow point on the spectrum. Hunting rifles are similar to automatic rifles. Moving the line a little to the left does not eliminate one’s right to bear arms substantively more than keeping bazookas illegal for private use. And if it saves lives, it is well worth it. (If it doesn’t save lives, the challenge is to find a solution that does. Otherwise the conversation will revolve around gun control for lack of a better alternative).

      Last, congress has full power to amend the constitution, which is how the second amendment was added in the first place.

      • Submitted by Stan Robins on 12/20/2012 - 03:56 pm.

        I basically agree

        with you. To the extent firearms can be limited or regulated without infringing the Second Amendment, it will be a matter of defining arms to eliminate as many “problem” weapons as is semantically and logically possible (and tolerable to gun owners). The problem, I think, will be handguns.

        And, of course, amending the Constitution would be the best solution, albeit not the easiest given present day politics.

    • Submitted by Jon Kingstad on 12/20/2012 - 02:04 pm.


      If I understand your point it is that the Second Amendment prohibits “we, the people” from adopting a a law that would make gun sales, or for that matter, possession, illegal, without resorting to sophistry. I beg to differ. The full text of the Second Amendment reads: “A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.” The terms of the Second Amendment speaks to a “Militia” and not just any motley assorted crowd with weapons, but a “well regulated Militia.” I think the draftsmen of this Amendment were referring to the Minutemen or some group like met the British on Lexington Green in 1776. As long as we had a “Militia” in this country where “the people” had to provide their own arms and protect themselves through self-organized militias (like self-defense cooperatives) the right of said “people” to keep and bear arms could not be infringed.

      We the people no longer have a “Mlitia” or militias in this country. It probably stopped when the government began drafting people to serve in civil and foreign wars against their will. Without a Militia, there is no “right to keep and bear arms.”

      Put it another way, if there is a “right to keep and bear arms”, it’s only part of an organization of “the people” into a “well regulated Militia”. It’s not sophistry to read the sentence as it was written.

      • Submitted by Stan Robins on 12/20/2012 - 04:27 pm.

        On Sophistry

        Jon, you say “It’s not sophistry to read the sentence as it was written.”

        Well, of course it is, at least to read it as you propose here. Your response was anticipated in my original post.

        We do have militias in this country — state national guards and federal armed forces.

        So the full sentence could also be read to mean it is necessary to permit the people to bear whatever arms are necessary “to regulate” the national guards and the armed forces. One set of semantics is as valid as another, except that mine applies (unfortunately) to circumstances that actually exist, not to a fanciful notion that we no longer have militias in this country.

        And how far politically is the argument that

        ‘Without a Militia, there is no “right to keep and bear arms” ‘ going to take gun control advocates?

        My original point was that the right to bear arms, ingrained deeply in the psyche of many Americans, has literal support in the language of the Second Amendment. Like it or not, the expression “shall not be infringed,” is going to overpower the other language in the Amendment, and tends to reduce arguments that permit infringing the right to bear some sort of arms to empty rhetoric.

        A solution that begins with the premise that all firearms must or can be banned without amending the Constitution is, in my view, doomed to failure.

        • Submitted by Jon Kingstad on 12/20/2012 - 07:58 pm.



          You’ll get no argument from on the political difficulty of banning all weapons. Nobody I know, including me, has ever made such a proposal anyway. That’s part of the problem: hearing that someone says there is no constitutional right to own a gun is interpreted by many hearers as “They want to take away our guns!” Not true! Saying that one has no “right” to possess a gun is not the same thing as saying one can’t possess a gun lawfully.

          I don’t deny that you can interpret the Second Amendment as you do. The problem I see with it is that 1) it requires stretching the term “Militia” to mean today’s “federal armed forces and national guard” and 2) ignores that the “well regulated Militia” is the means “necessary to the security of a free State.” It doesn’t say “in order to maintain the security of a free state” it is “necessary to regulate the Militia”! Nor does it say” the right of the people to keep and bear Arms are necessary to the security of a free State” . Your interpretation requires eliminating key language.

          If anything is fanciful, it is that a “well armed public” presents anything but a threat to the security of a free State. If the well armed public presented such a security and a regulation of the “Militia” as you define it, how is it that we have arrived at the “actual circumstances that exist”? Or is it that security is only attained by equating a “free State” with having a “well armed public”? If so, I have a few examples of “free States” where that does not happen.

          The truth is that none of the Constitutional liberties mentioned in the Bill of Rights is absolute. All private liberty must at some point yield to public necessity, public purpose and public opinion.

  3. Submitted by Ken Davis on 12/20/2012 - 11:23 am.

    “Taxes on ammunition could vary with the size of clips so that small clips would be cheaper on a per-bullet basis than larger clips”

    The lack of knowledge on how ammunition is purchased leads one to wonder how much the author of the article really understands everything else that is being written about.

  4. Submitted by Gerald Abrahamson on 12/20/2012 - 11:25 am.

    Liability insurance for gun owners.

    Require all gun owners to carry minimum liability insurance of (say) $1-million. The idea is similar to auto insurance–and it does not infringe anything. If there is an absolute right to own/have a gun, then the govt would be required to give everyone a gun free of charge–because if you can’t afford to buy one then your rights are violated *because* you can’t afford one (hence, the govt MUST give you one IF it is a “right”). On the contrary, the actual law is simply stated: People have the right to BUY a gun if they choose to do so. We now have proof the person *must* have the economic ability to legally BUY a gun (because there is no “free guns for the public” govt program). Because we now know a gun must be *earned*, that means other barriers/restrictions may also be placed–as long as they are in the form of an economic barrier. Protecting others from improper or unauthorized use or accidental injury (etc) is long-established and judicially-recognized valid public policy. So, requiring gun owners to carry liability insurance specifically for their guns does two things: First, it reduces the cost of liability to everyone for NON-gun liabilities. Second, it shifts the entire cost of gun liability to gun owners.

  5. Submitted by Kenneth Kjer on 12/20/2012 - 11:53 am.

    Taxing guns

    Taxing these types of guns and ammunition will not work, simply because the people who buy these guns already know that 1. these guns are 3 – 5 times expensive as a an ordinary hunting rifle, and they buy them to go to the range and shoot tons of ammo. For many of the gun buyers of these types of guns, this is there expensive hobby and they are willing to pay for it. I have seen some guns sell for as much as 8-9000 dollars, with and average price of 2000.00 dollars by the time one gets it set up the way they want it. You can pay up to 3 or 4000 dollars just for optics on one of these guns. I think that blows the theory that taxes will stop the sale. 2. Why would you want to stop the sale of these guns. Only a fool would think that banning the sale of guns would stop any type of crime. Banning guns is like banning drugs, tell me how no one can buy drugs and how much violence those laws have stopped. There are places right here in the Twin Cities where you take your life in your hands if you go there, because of drug sales and violence. I don’t know what the answer is, but creating another black market is not the answer.

  6. Submitted by Neal Rovick on 12/20/2012 - 11:57 am.

    The issues I have with these sorts of taxes:

    First, they really don’t eliminate the activity, they just add to the cost of the activity (see proposed carbon taxes and gas taxes).

    Second, while ideally the taxes are used to ameliorate the effects of the activity, the proceeds often go to other uses (see cigarette taxes and alcohol taxes).

    Third, they are only really effective on the lower end of the economic spectrum (see gas taxes, liquor taxes).

    And with respect to this specific issue, would $0.05 cents per round tax have made the shooter say, “I guess I’ll just stay home today”? Economic rationality doesn’t enter into the calculation, especially when a shooter is driven by irrationality. Why does a smoker smoke? Why does a teenager drive aimlessly? The actual dollars and cents of the activity do not enter into the evaluation of the satisfaction gained by the activity. And, in many of the shootings, expensive weapons were used by middle class people–no realistic economic limit there.

    In essence this is the same issue as drug-legalization and legalized gambling. Most people can handle the activity or presence of the activity with little or no negative effect. With some others, they harm themselves and others. While the taxation of the activity provides new revenue flows for the state, there is really no evidence that we are a better society for those activities.

    And that is the issue at hand.

    If guns were simply seen as tools of war for soldiers, hunting equipment or competitive sports, that would make the issue easier.

    But no, we have people preparing for war in the places they live (Google “urban survival rifle” if you want to see evidence of this). The gun manufacturers, gun sellers, ammunition manufacturers, gun organizations and various media-ranters assist this preparation and amplify and profit from the atmosphere of paranoia. That is what is pushing the increasing gun problems–the idea that your security and way of life are dependent upon the use of guns to kill other people.

    It is the growing culture of “power through guns” that is the real problem. And I don’t really see that taxation addresses that fundamental understanding. It’s true, dreadfully true in the worst way. Some may want to see themselves as the “good sheriff”, some want to see themselves as the “avenging demon”.

    How do you tax delusion?

  7. Submitted by Virginia Martin on 12/20/2012 - 12:45 pm.

    Doesn’t need nuance

    I think these are brilliant proposals. We have reduced cigarette smoking and second-hand smoke with taxes and other measures. The overall idea of taxing noxious items is a good way to put some limits. Such a law could also outlaw completely high-powered assault guns.

  8. Submitted by Joel Fischer on 12/20/2012 - 02:45 pm.

    The preamble…

    “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

    I’m very curious about the phrase, “insure domestic Tranquility,” as it relates to our current proliferation of gun violence. Does the preamble hold any sway?

  9. Submitted by Alan Ingram on 12/20/2012 - 04:03 pm.

    Economic Strategies to Combat Noxious Products

    Very creative thinking, everyone. That’s exactly what we need. This isn’t an easy problem – there are no easy answers. Of course, there are downsides to every potential stragegy. Prohibition doesn’t eliminate transactions that create “negative externalities”. However, reasonable restrictions on individual rights are legitimate and do have a positive effect on our collective behavior. There is also value in putting our values out for all to see. Turning the gun juggernaut to a new course is a long term project.

    Economic/tax policy is a legitimate tool for managing “noxious products”. For example, it’s an important part of the argument for the legalization of addictive drugs. True, it doesn’t solve everything. Some consumers are more sensitive to tax policy than others. I would settle for reducing the prevalence of guns among any significant segment of the population – as a beginning step.

    As we have been reminded in a recent MinnPost article (by Eric Black?), our own former Chief Justice Warren Burger wrote that the gun lobby has perpetrated a fraud with its self-serving interpretation of the framers’ intent when they added the Second Amendment. How much longer must we live with that wrong-headedness? The first clause of that amendment makes the purpose of the amendment very clear, as well as it’s context. A well-regulated militia…if a larger more general purpose had been intended, the last clause was all they needed: the right of the people to keep and bear arms shall not be infringed.

    Target shooters who use military grade weapons designed for war may need to make a sacrifice for the good of our greater community. The founding fathers would have embraced this limitation on personal freedom if they could have imagined the power of these weapons in the hands of the masses (whom they did not even entrust to directly elect the country’s chief executive).

    Our strategies must also address earlier and more effective intervention in mental illness – but that’s another post for a very big subject.

    • Submitted by Neal Krasnoff on 12/20/2012 - 06:56 pm.

      So you say.

      “Target shooters who use military grade weapons designed for war may need to make a sacrifice for the good of our greater community.”

      Television networks, movie producers, artists, and computer game manufacturers will have to accept heavy taxes and restrictions on their noxious products – a sacrifice for the good of the greater community. They will be licensed and their tools of their trade registered – all for the good of the greater community. The founding fathers didn’t imagine there would be television, movies, the internet or single person shooter games, let alone semi-automatic rifles.

      “The founding fathers would have embraced this limitation on personal freedom if they could have imagined the power of these weapons in the hands of the masses (whom they did not even entrust to directly elect the country’s chief executive).”

      The militia was considered to be the whole body of the people capable of bearing arms to be a check against a standing army and to prevent government from engaging in tyranny.

  10. Submitted by Dale Wickizer on 12/27/2012 - 12:21 am.

    Loss of Perspective or Intellectual Hypocrisy (More Likely)

    If the stated purpose of this article is leverage economic sanctions/tools to curtail episodes of mass murder, with the assumption that certain “rights” ought to be regulated, then please riddle me this, O Intelligencia…

    What types of economic sanctions need to be put into place to stop the senseless slaughter of more than 3,600 babies EACH AND EVERY DAY in the US? When are we going curtail the “right to choose” (as abortion is euphemistically called)? When are we going to defund Planned Parenthood (you know, the old Eugenics folks who sought to sterilize minorities) and stop using our tax dollars for state sponsored genocide?

    If we are not going to address infanticide in the US (53+ million since 1973), then it strikes me that getting all worked up over the deaths of 20 kids killed in some school wreaks of intellectual hypocrisy of the worse kind!

    Each life is worth saving!

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