Unbiased Analysis of Today's Healthcare Issues

De gustibus non est disputandum

Written By: Jason Shafrin - Apr• 07•08

Eric Crampton argues against the paternalistic view some economists have taken in a recent editorial in Health Economics. Here’s an excerpt:

“Of course, most economists would disagree vehemently [that taxing unhealthy behaviors is a good thing]. Raising taxes does tend to reduce consumption and, where consumption generates large negative externalities (costs borne by uninvolved parties) can even be efficient: Pigovean taxes (taxes proportionate to those external costs) can push us closer to socially-optimal outcomes. But, there is no inefficiency caused by people choosing to live lifestyles they view as preferable despite the health costs.

If I decide to enjoy a shorter life rather than eek out a miserable existence without wonderfully-marbled steaks, a beer or several, or even the occasional cigar, zero inefficiency is induced thereby.

…what evidence there is suggests that to the extent smoking induces a “fiscal externality,” the sign of the effect is wrong: smokers pay more in cigarette taxes than they ever cost the public purse. They die earlier of cheaper diseases and collect less in superannuation than do non-smokers. And, as a 10% increase in cigarette taxes correlates with a 2% increase in obesity, one wonders whether increased cigarette taxes consequently require further increases in taxes on fatty foods.

Crampton supports the idea of “De gustibus non est disputandum,” we should not criticize individuals’ preferences.

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One Comment

  1. The notion that a tax, or any tax for that matter, is paternalistic by motive is much more gracious than I or candid experience allows. If municipalities were paternalistic in their taxing behaviors, than why tax income, or the rewards from capital investment, do we want less of these as well?

    If the tax laws feel the urge to apply themselves in healthcare, than how about accelerating depreciation on healthcare capital investments which improve the efficiency of those providing care?