You will really, really enjoy this book

Tyler's new book is out on 2 August, and I strongly recommend you get a copy - whether you are an economist or not. I will say more in due time, but for now you can pre-order it at Amazon (US), Amazon (UK), Barnes & Noble and Booksense.

And if you would like to see evidence you will love this book, try the most popular economics blog on the net: www.marginalrevolution.com.

Is the smoking ban based on bad economics?

Tim Harford, writing for the FT, thinks so:

England’s smokers are about to be banned from lighting up in pubs, restaurants and offices. [...] The smoking ban is justified using fancy-sounding economic arguments about the ”externalities” of smoking. [...] An ”externality” seems a simple enough concept: it’s a harm suffered or benefit enjoyed by some third party that isn’t reflected in a market transaction. Pollution is the classic example.

Yet the only credible arguments for restricting smoking have nothing to do with economics. The damage caused by second-hand smoke in pubs is not an externality. Neither is the cost to the National Health Service of treating smokers. An ”externality” is not just any old cost or benefit; it has to lie outside a market transaction.

In the case of pubs and restaurants, the market could hardly be more obvious. The landlord wants to attract customers, both smokers and non-smokers, and he’ll do that by giving them the ambience they want. [...] The smoking ban is usually phrased as a ban on smoking in ”enclosed public spaces”. Of course, a restaurant or pub is not a public space: it’s a private space in which the public gather. (If you think a restaurant is a public space, try bringing a picnic along to one.)

Those who argue that smoking should be restricted because of the costs to the National Health Service are on even thinner ice. If I offered to pay for your private medical insurance out of the goodness of my heart, you would be unimpressed, and rightly so, if I then turned round and claimed that your smoking was now costing me money and so I had the right to hide your cigarettes. Similarly, the UK’s decision to fund healthcare from tax revenues does not thereby give the government the right to restrict our freedom to take personal risks. [...] Economic arguments can be double-edged; sometimes they are best not wielded.

Tim has a point when he is saying that 'an ”externality” is not just any old cost or benefit; it has to lie outside a market transaction'. What he misses, however, is the all important concept of property rights and who holds them. Pollution is an externality if the atmosphere is owned by the public; if for some reason the air belongs to the polluting businessman, an externality there is not.

Like Tim, I believe that the smoking ban is a bad policy that rests on dubious economic morality. In fact, I am a smoker with no intention to quit anytime soon, so the ban also harms me directly. Where I disagree with Tim is that, unfortunately, any argument against the smoking ban has to be based on normative (what should be), not positive economics (what is).

The property rights to a pub's air should belong to the landlord, and the property rights to my health should belong to me. In a democratic state with a flexible constitution such as England, however, this is not the case. Property rights are defined by the government as the government sees fit. With the state reserving (or re-claiming) the right to a pub's air or to a citizen's health, the analysis of the smoking ban as correcting an externality stands perfectly well.

That's a shame: the air of my pub should belong to me, and my own body even more so. But don't blame the government for bad economics; blame the morality behind the allocation mechanism of property rights.

Banned in China, banned at your workplace

If you encountered any problems accessing bluematter at your workplace today, it probably had something to do with Saturday's post: 'F***: The economics of coarse language'. Taking this paper as my starting point, I was discussing how coarse language serves a very useful signalling purpose and how, contrary to the author's assertion, word taboo-isation can be perfectly rational.

I have now taken the offending post offline, but if you are interested email me and I will be happy to forward it to you. Also, I would be grateful if anyone who encountered problems and can now access the blog could drop me a line and let me know (I am not sure whether I've been blacklisted temporarily or whether this will have a more lasting effect).

While on the subject of censorship, I also have a nagging suspicion that bluematter is no longer accessible from China: I used to get hits on a daily basis, but in the past 20 days there hasn't been a single visitor from the land of the Great Firewall.

Can't swear, can't talk politics: where's the fun in that?

Humans are cold utility maximisers indeed

At least when it comes to dining out:

When agents are ascribed selfish motives, economic theory points to grave inefficiencies resulting from externalities. In recent years, however, a wealth of laboratory evidence has questioned the descriptive validity of the selfish agent assumption.

We study a restaurant setting in which groups of diners are faced with different ways of paying the bill. The two main manipulations are splitting the bill between the diners and having each pay individually. We find that, in line with the classical model’s prediction, subjects consume more when the cost is split, resulting in a substantial loss of efficiency. Moreover, when asked to choose, diners prefer the individual pay to the inefficient split-bill method.

The paper is here. Economist's View links to an interview with one of the authors at Gelf Magazine.

Laughing along with dead people

I remember reading somewhere that the laugh tracks that they use on most TV shows are sometimes 50 years old, and that [cue spooky music] you're laughing along with dead people. And I was just idly sitting here thinking, really? Is it true? Or is it an urban myth? I just can't believe that laughing then and laughing now are exactly the same.

This is Caterina, via a place I am not at liberty to reveal. The comments to the original post suggest the claim is actually largely true.

Stranded

I am away from London, in a place closely resembling paradise (rural and peaceful, friendly people, constant supply of delicious, free food and alcoholic beverages). IT sucks, however, so I'm reduced to using my mobile phone's browser. The 'price' I have to pay for typing has shot up, so quantity has to fall. I'm back tomorrow afternoon - normal service will resume soon after.

Tim Worstall is spot on

Tim Worstall has excellent commentary on the Insane Sir Salman Rushdie post of the day (courtesy of the UK Daily Pundit). Here's the UKDP:

Maybe someone should set up a petition insisting that supporters of Rushdie pay for his 24 hour police protection. Although I suspect that's one bandwagon Pinko Finko and the chatterati won't be so quick to jump on.

And here's Tim's outstanding reply:

The first duty of the State is to protect its citizens from violence from abroad. You know, keep Johnny Foreigner at bay. The second to protect them from violence at home. 

That's why we have the damned institution, dipstick.

I would not have made the distinction between 'violence from abroad' and 'at home', and I would have probably used somewhat longer words. But any elaboration would have spoiled it. 'That's why we have the damned institution, dipstick' sums up my thoughts perfectly.

Postscript: For those who haven't been following the story, BBC News has the background (here and here)