For those earnestly interested in addressing issues surrounding firearms in the United States (and not just aligning with a political coalition), this working paper from Moshary, Shapiro, and Drango (MSD from here on) is an absolute must read. The technical moves are an interesting overlap of industrial organization economics and marketing analytics, but the punchlines all hit on the same topic: how do current and possible future firearms owners respond to prices for different products? When MSD estimate the price elasticities for different firearms, they are in effect asking one of those deep questions in economics that is always lying below the surface: are these goods substitutes?
It’s uncanny how much of the disputes within economic policy and regulation come down to how one defines substitutes. Is Coca-Cola a monopoly? Well, that depends on whether or not you think Pepsi or water is a close enough substitute. Should vapes be banned? That depends on how much demand you think will shift over to traditional cigarrettes. No matter your thoughts on marijuana legalization, I promise you the marketing and lobbying wings of the largest alcohol distributors have invested a lot in determining if cannabis is a substitute for their products (spoiler: it is).
Should assault weapons be banned? I am on the record as saying they should be, but the results in MSD give me pause. The bulk of firearms deaths are from handguns, and the bulk of people in the market for an assault rifle point to a handgun as their next-best alternative if an assault rifle is not an option. Would an assault rifle ban have the unintended consequence of pulling more handguns into the market and, in turn, create more firearms deaths?
This is not an easy question to answer because we haven’t actually taken the time to define the good. And by define the good, I mean define the bundle of attributes actually being purchased. The most obvious attribute of a firearm is the ability to point it at a living creature and take away its entire future. That it is such a chilling capacity that we sometimes fail to fill in the rest of the ledger. Firearms are a source of personal security, no small detail for isolated individuals. They are a means of pest control, an absolute necessity for anyone farming or raising smaller livestock. They are a way of signaling your group identity to others. Of affirming your idependence and strength. They are collectable, both as historical vintages and customizable baubles. They are highly effective at hunting game. They are fun to shoot at targets.
All of that means that when we consider banning, regulating, or taxing a specific class of firearm, we have to think really hard about the bundle of attributes being purchased and consumed, and what the next best alternative is for each customer shifted to a different product on the margin. The outcomes are perhaps more unpredictable than is often considered. Who is the marginal customer and what exactly is it that they want?
Consider a ban on assault rifles. Some will shift their demand to the black market. Despite the obvious danger in a group of individuals who illegally purchase high power firearms, we can actually ignore them at this stage because there’s no option where they don’t acquire assault weapons. What about the rest? Some are desperate to protect their homes. Hopefully they will be easier to persuade now that a shotgun is their best option (pro tip: it always was). Some want to maximize their capacity to do harm: absent maximal power, they may now opt for concealability and mobility i.e. a handgun. This seems like a particularly viable story in states that allow for the carrying of concealed weapons in public with or without a license.
Some, however, might view their $1200-$3000 might be better spent putting a snorkel on their jeep engine ($700), a bowie knife on their hip ($250), and bottle of Michters Single Barrel Whiskey on their shelf ($500*). Maybe they’ll blow it all at once on a lift kit for their truck. We can rest assured that the marketplace will offer no shortage of goods that offer little value save for people to impress their friends with what they just bought, which is a blessing. Substitution to tactical sunglasses and raunchy mudflaps is unequivicably preferable to more Glock 19s.
What about a ban on handguns? Here MSD identifiy an important asymmtry: customers in the market for a handgun don’t consider long guns, while would be purchasers of long guns frequently explicitly consider a handgun on their 2nd choice. From the point of view of minimizing firearms deaths, a ban on handguns may be optimal, but it is hard to predict what the substitutes will be. Based on their measured elasticities of demand for different types of guns, MSD estimate that a 10% tax on all firearms would have the same net effect on total firearms in the market. Perhaps most importantly, it is highly unlikely to backfire into a shift in market composition towards assault weapons, something that can’t be ruled out by a handgun ban. Combined with current political realities, a tax on firearm would appear more feasible than any broad class bans.
For a large, but not unanimous, share of social scientists studying firearms, the outcome desired is 1) a smaller fraction Americans with access to firearms, and 2) reduced capacity to commit large scale acts of violence with high powered firearms. Putting aside any disagreement on the desired outcomes, the policy steps forward still allow for meaningful uncertainty. Yes, I know that heavily restricting firearms in Australia has been wildly successful. It’s hard to argue with a total homicide rate roughly a tenth of the US rate. But we can only consider the policy options that are actually on the table and the voter status quo. Current options are likely limited to either a narrow ban on a subset firearms or a modest tax on them all. The status quo is one where a third of all Americans own a gun, 81% of whom feel safer because they have one.
Given these unavoidable constraints, good firearms policy (not optimal, merely good) requires knowing what it is that people are buying so we can tilt the playing field in the right way. We live in a world where politicians are sending AR-15 toting Christmas cards and pantomime tough guys are ordering their Subway Chicken Teriyakis while armed to the gills. There’s no policy prescription that’s going to magically create earnest politicians and emotionally secure men, but everyone responds to prices.
*I apologize to fans of Michters, I just don’t like their bourbon very much relative to the price. If you want to impress your friends, track down a bottle of William Larue Weller. It’s expensive, but it might be the best bourbon in the world, and that includes all of the Pappys.**
**Okay, its not as good as the Stitzel-Weller Pappy 20 I first tried in 2011. That’s still the greatest thing I’ve ever consumed. But that doesn’t exist anymore as far as I know or could hope to afford. My advice is to let it all go and just buy a bottle of Four Roses Single Barrel. Always less than $50, always fantastic.
Economist Writing Every Day 