The silence of the lambs
Public choice theory teaches us that small, well-organized special interest groups can often enact legislation that benefits them at the expense of the broader public. The examples are endless; teachers unions, farmers, bankers, taxi companies, auto dealers, lawyers, doctors, etc.
Even the poor have some clout, although less than other groups. The poor benefit from programs like food stamps, Medicaid etc. But there is one very important special interest group that is actually quite powerless: smokers.
There are still tens of millions of smokers in America, and they pay absurd tax rates on cigarettes. I live in Massachusetts, where a one pack a day smoker would pay over $1600/year in taxes. (My dad used to smoke 1.5 packs per day.) Most states are lower, but New York is considerably higher. There is an externality argument for cigarette taxes, but it only justifies a small tax rate that is a tiny faction of actual tax rates. This is simply a punitive tax on a politically weak group of voters.
Even though smokers are in the minority, I am a bit surprised that the tax was pushed this high:
1. Smokers tend to be low income, so this places a real burden on poor families. You’d think they’d lobby hard against the tax—threaten to vote against politicians who support it. But all I hear from their camp is silence. Why?
2. Inequality is the hot issue of the day. Here’s one of our biggest inequalities, and one of the easiest to fix. Cut the cigarette tax by 90% and raises sales taxes enough to offset the revenue loss. I’d support that, and I think most other free market types would at least go along with the idea. If the Piketty fans would direct their energy in that direction, we could make real progress against inequality. But again, all I hear from the left is silence. Why? Where’s the outrage?
My second example is the kidney shortage:
Thirty years ago this week, President Reagan signed the National Organ Transplant Act (NOTA), which established the federal legal framework for the procurement, donation and transplantation of organs needed by desperately ill Americans. The law’s advocates hoped that it would end organ shortages, but today over 120,000 Americans are on waiting lists. With the need for organs – especially kidneys — projected to outstrip supply even more in coming years, intense debate has broken out over whether NOTA should be amended to allow funding of incentives for donors.
The interests at stake are colossal. About 30 Americans a day either die on the waiting list or are removed from it because they have become too ill to receive a transplant. Taxpayers also bear a significant burden in the case of kidneys because of the special status of renal dialysis within the Medicare program. In 1972, Congress mandated that Medicare cover the costs of care for end stage renal disease regardless of patient age. In 2011, over 500,000 people took advantage of this benefit at a cost of over $34 billion, which is more than 6% of Medicare’s entire budget.
. . .
Keith Humphreys: What kind of incentives would you envision being tested and who would provide them?
Sally Satel: Donor enrichment would need to begin as a pilot trial. No one is talking about a traditional free market or private contract system. No organ “sales.” And no large lump sum of cash to donors. Those of us who want to test the power of incentives to increase the number of people receiving kidney transplants – and it is a rich network of transplant surgeons, nephrologists, legal scholars, economists, and bioethicists – envision a system where every needy patient, not just the financially well-off, can benefit.
No one? I’m advocating cash sales.
Think about how America has freaked out about the nonexistent threat from Ebola. Now imagine that a Boeing jet carry 210 passengers crashed once a week as a result of terrorism. How much money would we spend beefing up airport security?
At this point people tell me that I’m just an unimaginative utilitarian. There are other issues at stake; human dignity, natural rights, etc., etc. OK, let’s return to the one Boeing a week crashes hypothesis. What sort of indignities would Americans meekly put up with at airports in that case? How many “natural rights” would they give up in a heartbeat? The truth is that human dignity and natural rights don’t explain our lack of a kidney market, it’s ignorance on the part of the public. If they understood the gains they’d accept the market immediately, even if they had to accept these costs. Just as they’d accept tighter airport security, at a cost of freedom and dignity, if terrorism got that bad.
Another problem is “cognitive illusions.” People are hardwired (or taught?) to think that money taints certain types of transactions, but not others. Other bloggers have explained this problem much better than I can. My point here is that these cognitive illusions (smokers deserve to pay for their sins, drug users deserve to be put in prison, money taints transactions, etc) are not costless. Indeed they create some of the very worst evils in our society.
BTW, I don’t favor tighter airport security, as I don’t think the gains would justify the costs—even on utilitarian grounds, abstracting from dignity and natural rights. And isn’t “dignity” a part of utility?