Pigouvian Taxes and Porn

Many of my friends have been sharing this petition via social media, which asks the White House to require pornography to be an "opt in" feature with Internet service providers (ISPs), rather than a standard feature. Let me discuss why this is the worst way to a limit porn consumption and make an alternative proposal which would achieve (while skipping over the irony that some of these same people were likely sharing/signing petitions to keep net neutrality not so long ago...).

I'm a fan of gov't interventions
such as contract enforcement.

Background: My first college econ professor had an interesting course schedule: for the first half of the semester, he did everything in his power to prove the efficiency of markets and the inefficiency of government interventions (such as taxes, quotas, etc.).  The second half of the semester was the exact opposite, with the professor teaching how market inefficiencies required government intervention.  What I began to learn is that there are efficient and inefficient ways the government can interfere with markets.

(Note: many students I knew would move right on the political spectrum during the first half of the course, then back left during the last half.  I wonder how many people started the course as libertarians and ended up more moderate.  Too bad he doesn't take political surveys throughout the course to see the marginal effects of basic economic knowledge...)

Sometimes, we find markets in which any government intervention may be financially inefficient, but socially efficient.  For example, interstate highways are not financially profitable to build (and thus there are no major private highways), but provide great payoffs to society, so the government collects taxes (and debt) to build highways for society's benefit. The government decides whether the costs in tax monies are worth the societal benefits, but let's save a discussion on externalities and public goods for another time.

Bad Idea: While shrinking porn consumption may be a good idea for society, the petition to the US government to require porn as an "opt in" feature with ISPs would be an inefficient intervention for several reasons.

1. Net neutrality is lost - this precedent may lead us down a slippery slope.
2. Shrinks a market - there are already heaps of private services to block porn at a device level.
3. Opt in at ISP level - opting in at the ISP level still requires blocking at the device level in households where adults want to consume porn but keep their children from it, etc.
4. No financial offsets - there are no revenues generated by the "opt in" policy to offset the costs to the ISPs or government, so the expenses of implementation are borne by the internet users and the costs of enforcement are borne by the taxpayers (yes, that means most people see increases to internet costs, unless enough bandwidth is saved to cut costs, and everyone sees a tax increase).

+ECON's Alternative Proposal: Tax pornography! If you really want to reduce porn consumption, make porn a taxable good and the following will happen:

1. Payment needed - since a credit card will be needed to view porn, even minors with cards can get caught, even if the tax is low (e.g. $0.01); spouses/partners can also be discovered (unisex word because, contrary the beliefs of many, women are consuming more and more porn).
2. Financial offsets - enforcement costs will be about the same, but now some or all of those costs will be borne by those consuming porn with the remainder paid by taxpayers (hopefully the tax would be higher than my example of $0.01 in #1). Taxes would need to be applied like an extra sales tax and would thus be pushed onto the consumer.
3. ISPs and net neutrality aren't bothered - slippery slope avoided (well, one of them).

Such a tax is called a "Pigouvian", "excise", or even "sin" tax, and is already common (e.g. huge taxes on tobacco).  So tell me, is taxing porn a better idea than the "opt in" strategy?  Or is there something even better?  Let me know in the comments!

Either way, enforcement would be incredibly hard!  We've already know this with the difficulty of enforcing the bans on 'child porn'.

Finally, below is a video with more thoughts on using taxes to create better world:

Top Five Reasons to NOT Vote

"A rational individual should abstain from voting." 

- Patricia Funk, PhD

Of the many things economists on both sides of the political spectrum agree on, the most infamous is telling people it's not worth it to vote.  We just think voting is irrational, so here's five of the most compelling reasons you shouldn't vote:


5) You're not alone - In the video, I falsely state that most voting age Americans don't vote.  Still, over a third of eligible voters in the US don't vote for president (and many more don't bother with the midterm elections), so you'll still find plenty of others who didn't vote as well (you can find all the statistics for the 2012 election here).  Although, it may be hard to identify your fellow non-voters since many lie about voting, including who they voted for or whether they are even registered voters!

I decided this reason may be too weak, so here's a second and perverse incentive to not vote: many states assign jury duty from the voter registry. No vote = no jury duty.

4) You have the right to not vote - You have no duty as a citizen to vote and exercising the right to not vote is patriotic in it's own way.

3) Your vote is worthless! - This is pretty well covered in the video.  Naturally, the objection I always hear is that "if everybody thought like that, no one would vote!" - well, to that I can only say that people are still voting and you still have no effect on the outcome.  Call me to vote when turnout is less than 0.1 percent and I'll start thinking about it.  Another objection I hear is that you need to vote in local elections, but your vote is near worthless there, too.  Only 21 have ever been close enough to be swayed by one vote, but while you may have a better chance of determining the outcome, the stakes are much smaller.

2) Voting causes death - The extra traffic from voting on a presidential election day results in about 24 deaths!  Of course, this could be prevented if we could find a way to reliably vote online...

1) Opportunity costs are too high - Maybe over $1 billion!  All the time and money you spend on voting, which adds nothing to the nation's decision, could have been used on something else more worthwhile.  Don't forget all the time and effort you wasted trying to figure out who to vote for as well.  You may prefer to practice rational ignorance, since the costs of educating yourself on who to vote for outweigh the benefits you get from voting.

Agree? Disagree? Feel free to hash it out in the comments below, on the video, or even on Facebook or Twitter.

Robots and the Economy

I have lots to say on the upcoming singularity and economics. I just thought I'd list a few resources on the topics of artificial intelligence, the "Luddite fallacy", and the accelerating changes technology is creating in today's (and tomorrow's) labor forces. Here's a starter kit for learning about the Economic Robopocalypse:

These androids write music better than most humans.

1. "Robopocalypse: Future of Humans in the Robots' Economy" is a playlist I made about technology, AI, and the economy.  It begins with a 4 minute +ECON video serving as an introduction, followed by four very interesting TED Talks. Click here to watch now.


2. Andrew McAfee and Erik Brynjolfsson are economists whose TED Talks are featured in my playlist above.  Their book is a quick and extremely fascinating read. You can get it on Amazon here: Race Against the Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy
3. Ray Kurzweil is perhaps the most influential futurist today. I recently read (and loved) his book, "The Age of Spiritual Machines" and have heard good things about his more recent books.  I highly recommend reading any if you want to understand whether machine intelligence equal to (or greater than) a human's is possible and the soonest we might expect such artificial intelligence.  Links to his books below:

                
If you watch the playlist or read any of the books, please comment with your thoughts, below or on YouTube, Facebook, or Twitter. Cheers!