Thursday, January 24, 2013

Economics: Welfare Theory, Cars, and Gun Control

Recently, the Sandy Hook Massacre has fueled a lot of political discussion revolving around the concept of gun control. The discussion centers on things such as banning high capacity magazines or outlawing the possession of certain types of firearms.

I'm sure you all know at least a little bit about the different positions in the debate and all that stuff. I'm going to assume this and move on.

This post is going to attempt to take a look at gun control using the tools of welfare theory and a separate good as a comparison - the car.

Now, I'm sure you all know what a car is, and I've assumed you know what gun control is. We are, however, potentially missing information on the third pillar of our discussion - welfare theory.

For the sake of this discussion, welfare theory is a branch of economics that involves the use of utility as a method of gauging the positive and negative benefits of a specific action. Utility is an abstract, ordinal measure of the 'good stuff' you get out of possessing something or taking a specific course of action. For instance, part of the utility of owning a car is that you can drive it, thereby allowing you to obtain items such as groceries.

Of course, utility can be both negative and positive, and as it is an ordinal - not cardinal - measurement, the only real information it provides us is whether or not one thing provides more or less utility than another thing.

You can find some more information here, if you'd like. Not quite as tailored to this particular topic, but still quite informative.

And now we have the essential foundation necessary for this discussion. As such, let's start talking about cars.

Cars are great. They provide a lot of utility. You can drive them, they can act as a status symbol, and they make you feel more safe in case of an emergency - for instance, you would be able to drive a family member to the hospital if necessary. All of these things provide positive utility, and these, among other reasons, are why so many people in American own and operate some type of motor vehicle.

Let's look at the negatives. You have to pay to maintain your car, to maintain your car insurance, and to put fuel into your car. All of these are generally considered to be bad things. Most importantly, at least to the discussion at hand, is this - driving is a dangerous activity. Accidents involving a motor vehicle account for a rather large portion of all deaths in America.

Now, obviously people are worth more than cars. Does this mean we should stop driving because we kill so many people while doing so? No, it does not. We do, however, provide some very strict regulations on who can drive, what they can drive, and how they can drive.

Let's take a look at some of the regulations that are currently in place...

All drivers must be registered, and to be registered, they must pass an examination. This helps to ensure some minimum quality of driving.

All cars must meet some minimum safety requirements, to lower mortality rates in the case of an accident.

All cars must be insured. This prevents people from losing a great deal of money when in an accident where the person at fault has no insurance.

Driving while drunk or, in some states, distracted by your cell phone, is not legal, because these activities greatly raise the incidence of accidents.

There are lots of others. However, let's take a look at some potential regulations that would be considered 'going too far'...

Red cars are more likely to get into accidents than cars of any other color. We should ban the production and driving of red vehicles!

People are more likely to die in an accident when driving a small car than a large one. All cars must be larger than a certain size, with the minimum size being larger than that of a current standard sports car!

These two regulations might seem a little absurd, but the statistics to back them up are actually quite sound. Why is it, then, that these regulations seem silly while the ones listed before them seem quite reasonable? Putting aside the obvious answer of 'because the first ones are in place while the second are not,' it really comes down to something quite simple - choice utility.

Choice utility - and I'm sure there's a phrase for this somewhere, I just can't remember it - is the utility someone gains by being able to get what they want, rather than something similar to what they want. We've all experienced this before. As an example, a hardcore gamer wants a laptop. His preference is for a souped-up Alienware, but he is instead stuck with purchase a laptop of the same price from Apple - whose OS does not support any of his favorite games.

While he still has a laptop, he would have achieved a much greater degree of utility by getting the laptop he wanted, rather than one he didn't want.

For those of you who know a lot of economic theory, this is also the reason that product differentiation happens. While it might seem that you are losing overall social utility via dead-weight loss when moving away from a purely competitive market and towards one with a great deal of product differentiation, this invisible 'choice utility' actually makes it so that the optimal market is often one that provides at least a small amount of differentiation.

But I digress. We now understand why cars are regulated, and also why they are not regulated. Let's take a look at guns.

Guns obviously provide less utility than cars to the average person - they cost less and are owned by a smaller percentage of the population, so this conclusion is quite obvious. However, the same sort of utility is gained by owning them - they can be a symbol of status, might help you feel safer in the case of an emergency, and are often owned simply because the owner enjoys shooting them, either at a range or while hunting.

The negatives are also quite clear - owning a guns are dangerous. You can kill or seriously injure someone with virtually any kind of gun.

It makes sense, then, that you would regulate gun ownership, what sorts of guns could be owned, and where they could be used, right?

The answer is 'kind of.' You see, the dangers associated with guns are inherently different from those associated with cars. Why? Because cars are - at least in the vast majority of cases - only dangerous to those who are, in some way, involved with another car or a road. This means those people, in some way, have accepted the fact that they might get into an accident, and have decided that the benefits of driving a car or walking along a sidewalk outweigh the slight possibility of being hit with a multi-ton, fast-moving metal object.

This is an implicit social contract. You are adopting risk by taking a certain activity.

Risks associated with guns do not follow the same rules. One person waving a gun around endangers everyone in the vicinity, regardless of whether or not they happen to also own a gun, or were in any way cognizant of the possibility of having a gun waved at them.

One might argue that being a part of society at all includes this as a risk. However, I would have to say that it is much simpler to abstain from driving than to abstain from all of society, and that you would be hard-pressed to come up with a common situation in which an individual would gain more utility by being apart from society than being a part of society.

And again, I digress. Obviously, some amount of gun control can only be a good thing. Registration, education, background checks, waiting periods, and all that jazz helps prevent guns from being purchased by the wrong sorts of people.

All of that is well and good, but when is the control too much? When is a restriction on buying guns akin to outlawing red cars?

I honestly don't know. The only way to find out for sure - at least, according to utility theory - would be to put the question up to a referendum and let the people decide, based on their own personal utility curves. You would also have to go to lengths to educate the populace a bit about firearms and the dangers related to them, but that would probably be a good idea, regardless.

Personally, I think this would be a great idea. Not that any politician would ever support it, but it seems appropriate. It's also, more than likely, not practical, but the best theoretical solutions rarely are.

What do you all think?

And done. My conclusion stinks, I agree. Comments can go below, but please try to keep it civil. Hope you enjoyed reading it, even if I did ramble a lot and, probably, was entirely incorrect about at least one thing.

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