The economics of gun control

After the school massacre in Newtown, everyone has been putting out proposals for how to reduce gun violence. President Obama created an inter-agency task force. The NRA asked for armed guards in every school. And now economists are weighing in with their own, number-heavy approaches.

Now tally up the costs and benefits.

First, here's a recent paper (pdf) by Duke's Philip Cook and Georgetown's Jens Ludwig trying to quantify the "external cost" of gun ownership. The two economists wanted to figure out precisely what sorts of costs gun owners impose on the rest of society.

That's not an easy question to answer. For starters, there aren't even airtight estimates of how many people actually own guns in the United States. So Cook and Ludwig created a data set that used the number of suicides by firearm in a county as a proxy for gun ownership — and checked it against a variety of existing survey data.

The next step was to figure out the "social cost" of owning a gun. The two economists determined that a greater prevalence of guns in an area was associated with an increase in the murder rate, but not other types of violent crimes (guns, the authors argue, lead to "an intensification of criminal violence"). Why does this happen? One possibility: The two economists found evidence that if there are more legal guns in an area, it's more likely that those guns will be transferred to "illegal" owners.

When the two economists added up the costs of gun ownership—more injuries and more homicides—and weighed them against various benefits, they concluded that the average household acquiring a gun imposed a net cost on the rest of society of somewhere between $100 to $1,800 per year. (The range depends on the assumptions used—and note that they are not including the increased risk of suicide that comes with owning a gun.)

Now, normally when economists come across a product that has a negative externality—like cigarettes or coal-fired plants—they recommend taxing or regulating it, so that the user of the product internalizes the costs that he or she is imposing on everyone else. In this case, an economist might suggest slapping a steeper tax on guns or bullets.

Others might object that this isn't fair. There are responsible gun owners and irresponsible gun owners. Not everyone with a gun imposes the same costs on society. Why should the tax be uniform? And that brings us to John Wasik's recent essay at Forbes. Instead of a tax on guns, he recommends that gun owners be required to purchase liability insurance. Different gun owners would pay different rates, depending on the risks involved:

When you buy a car, your insurer underwrites the risk according to your age, driving/arrest/ticket record, type of car, amount of use and other factors. A teenage driver behind the wheel of a Porsche is going to pay a lot more than a 50-year-old house wife. A driver with DUI convictions may not get insurance at all. Like vehicles, you should be required to have a policy before you even applied for a gun permit.  Every seller would have to follow this rule before making a transaction.

This is where social economics goes beyond theory. Those most at risk to commit a gun crime would be known to the actuaries doing the research for insurers. They would be underwritten according to age, mental health, place of residence, credit/bankruptcy record and marital status. Keep in mind that insurance companies have mountains of data and know how to use it to price policies, or in industry parlance, to reduce the risk/loss ratio.

Who pays the least for gun insurance would be least likely to commit a crime with it. An 80-year-old married woman in Fort Lauderdale would get a great rate. A 20-year-old in inner-city Chicago wouldn’t be able to afford it.

Gun insurance for gun owners does exist right now, but it isn't required — as Wasik notes, only 22 cities even require gun dealers to carry liability insurance. And, yes, under this proposal, people would no doubt still acquire guns illegally and evade the insurance requirements. 

Granted, this proposal isn't likely to garner much political support — even the Illinois state legislature, which has often looked favorably on gun-control laws, swatted a gun-insurance bill down pretty quickly in 2009. It might not get past the Supreme Court. And over at the Daily Beast, Megan McArdle outlines a number of other possible problems with having states require individual gun insurance. Still, it's another way of thinking about the costs of gun ownership.

Further reading:

--Cook and Ludwig's paper is hardly the last word on the social costs of gun ownership. There are some good discussions (and criticisms) of their study by Tyler Cowen and Don Taylor. See the comments especially. 

--What gun control can and can't accomplish.

--Everything you need to know about a potential assault-weapons ban, which remains the preferred approach among many Democrats to dealing with gun violence.

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