Why Not Just Raise the Price of Sin?

Habit forming:

A few weeks ago, we noted that Economics of Smoking were such that raising prices reduced the amount people smoked. While many other factors may have also contributed to the decline, the simple fact
may be basic economics of cost has been the prime mover.

The NYT takes this a step further. They look at a variety of teen vices, and conclude that:

"There is in fact a surefire way
to get teenagers to consume less beer, tobacco and drugs, according to one study
after another: raise the cost, in terms of either dollars or potential

In just about every state that increased beer taxes in recent years, teenage
drinking soon dropped. The same happened in the early 1990’s when Arizona,
Maryland, New Jersey and a handful of other states passed zero-tolerance laws,
which suspend the licenses of under-21 drivers who have any trace of alcohol in
their blood. In states that waited until the late 90’s to adopt zero tolerance,
like Colorado, Indiana and South Carolina, the decline generally did not happen
until after the law was in place.

Teenagers, it turns out, are highly rational creatures in some ways.
Budweisers and Marlboros are discretionary items, and their customers treat them
as such. Gasoline consumption, by contrast, changes only marginally when the
price of a gallon does."

Fascinating stuff . . .

Our streak of beating the NYT continues


To Reduce the Cost of Teenage Temptation, Why Not Just Raise the Price of Sin?
All Consuming
NYT, July 25, 2005

What's been said:

Discussions found on the web:
  1. Dave commented on Jul 27

    John Marshsall said, “The Power to tax is the power to destroy”, by this thinking we should replace to payroll tax with a carbon-fuel tax. Both are regressive and it would seem we want to encourage the increase of jobs and decrease the use of fuel….

    Tax “bad” things not good things…

    (Then higher fuel prices would be a tax on the economy…)

  2. james commented on Jul 27

    you cant dispute the facts stated above, and i certainly am not. i’d just like to ask when the folly of normative economic reasoning ends?

  3. Barry Ritholtz commented on Jul 27

    Dudes —

    what are on earth are you guys talkin about?

  4. james commented on Jul 27

    what’s the greater risk to teens barry? binge drinking, smoking, fast food, unsafe sex, automobiles, motorcylces, football, or soda pop? i’m sure we could conjure up an array of supply demand schedules that prove that if we raise the barriers to entry into these activities we could curb the fatalities/diseases in all of these activities. however, could we quantify the loss of our freedoms with such neat and handy graphs? and if we could – what would be the cost?

  5. james commented on Jul 27

    clarification – in my original post – i was refering to your post – not the comment made by dave – sorry

  6. Barry Ritholtz commented on Jul 28

    The point of the graph is to show that if we, as a society, want to curb a behavior, an effective strategy is to make it more expensive.

    The alternatives — massive PR campaigns, social pressure, etc., — aren’t nearly as effective.

    As to the “freedom” aspect — your every person’s freedom ends where someone else’s begins. Teens who drink often drive, and endanger others as well as themselves. Teens who use tobaco and become lifetime smokers impart a societal cost (second hand smoke, medical costs, productivity losses).

    As much as I believe in the free market, I do not have a problem with enlightened collective self interest, and appropriate legislation. If that means making it cost more for teens to drink or smoke, than so be it.

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