Sunday, March 1, 2009

Let's keep thinking like this...

According to today's NYT, states are starting to consider legalizing and taxing marijuana, and also taxing porn and prostitution. If we start to face up to how stupid our laws against "sin" are because of this recession, then the economic suffering will be worth it.

Greg Mankiw, whose text books I use in my classes, and briefly worked for w (I imagine he left because he realized the bushies were not interested in doing any real thinking) has formed a "Pigou Club" on his blog. Arthur Pigou was an economist who developed the idea of "externalities" (side effects of economic activity, like pollution), and proposed taxing certain things to account for the cost to society that is not built into the cost of the product. In other words, when you buy gas and burn it to move your car, there is a cost to everyone else in society because you have polluted the air, but that cost is not included in the product.

Pigovian taxes are a far more sane way to deal with things like drugs and prostitution than our current system of making them illegal, then paying a fortune to try to enforce the unenforceable laws. But, since our politicians are afraid of being "soft on drugs", we keep doing more of the same, with a huge price to society, little success in deterring drug use or prostitution, and horrible side effects like the destruction of the Mexican legal system. So, since governments are going broke around the country, maybe the upside will be that they will stop trying to enforce bad law, and wouldn't that be a great gain from a bad situation.

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