February 24, 1999
By Linda Gorman
The claim that a particular behavior imposes costs on “society” is often used to justify government regulation. “Libertarianism or personal freedom cant be justified when it reaches into the pockets of others,” said Representative Dorothy Gotlieb (R-Denver) in support of her bill letting police stop and ticket motorists not wearing seatbelts, “With increased use of seat belts we can expect $80 million in savings in accident health care, insurance and related costs.”
Taking this kind of argument to its logical extreme makes its folly obvious. We know that sexually transmitted diseases increase the likelihood that people will fall ill and consume medical services. People who transmit them raise health insurance rates for everyone. This costs “us” money. Therefore “we” should regulate when, where, and with whom individuals have intercourse.
Two assumptions make this argument fallacious. The first is that “society” can bear costs. The second is that government can declare a cost “too high” without considering the benefits that individuals derive from the activities that cause it.
With a few rare exceptions, individuals bear costs, not “society.” When someone is hurt in an automobile accident, he and his family suffer. Rate payers and stockholders in his insurance companies suffer to the extent that they must pay medical and property damages, but even without laws requiring insurance, many drivers would still buy. They know that even careful drivers have accidents, and are willing to defray the cost of other peoples to get them to defray theirs.
Insurance companies try to distribute costs fairly by charging accident-prone people more. To the extent that the 40% of Coloradoans who do not wear their seatbelts tend to have more accidents than the ones who do, they are already paying higher rates for their behavior. Why penalize the rest of the population by giving police yet another reason to harass them? If lawmakers really want to ensure that those who cause accidents bear their costs, they should stop telling insurance companies what to charge for their policies, how to structure them, and whom they must cover.
As a general rule, efficient public policy ensures that those who benefit from a particular activity bear its costs. The reason, of course, is that people do more of what offers great benefit at little cost and less of what offers little benefit at great cost. But government officials in the U.S. have increasingly ignored this simple principle, preferring instead to asset that all costs are social costs borne by “us,” meaning the government. This assumption gives them license to confiscate resources from unpopular groups. One need only claim that those people increase “costs” while studiously ignoring any benefits arising from their actions.
The most egregious recent example of this phenomenon is the attempt to increase taxes on smokers. Smokers, it is claimed, must pay more because smoking related diseases increase “our” medical bills. In fact, the taxes that smokers pay, and the fact that their earlier deaths reduce nursing home and pension payouts, more than makes up for any additional medical costs. Virginia, the state with the lowest per pack tax on cigarettes, still nets 10 cents per pack sold even after all medical costs have been subtracted.
Gun control laws are another example of a policy that decouples costs and benefits. The laws are promoted with claims that they would reduce accidental firearms deaths. But many accidental shootings are self-inflicted, which means that careless users of firearms incur the costs. To protect the careless from the costs of their behavior, lawmakers would deny guns to those for whom guns are the main defense against criminals. This shifts costs from the careless to those subject to criminal predation. The murdered, raped, and burglarized pay, not “society.”
Left to itself, the private sector generally evolves mechanisms to ensure that people pay the cost of their errant behavior. Employers try not to hire the reckless and unreliable. Landlords try not to rent to people with bad character. During the 150 years that American government allowed people to associate as they saw fit, workplaces and neighborhoods grew steadily safer. Then government started decoupling costs and benefits. Now employers cannot fire psychotics and landlords must house criminals.
By saying “we” bear the costs, Representative Gotlieb confuses individuals with the state. Giving government license to reduce the costs borne by private parties gives it the right to regulate any behavior even though it, unlike private agents, bears none of the costs of its actions. Perhaps that is why, after decades of regulation to reduce “our” costs, taxes consume nearly half of people’s incomes, and violent crime was 240% higher in 1995 than in 1965.
Linda Gorman is a Senior Fellow at the Independence Institute, a free-market think tank in Golden, https://i2i.org.
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