A post by Harry Clarke bemoans the fact that policies regulating alcohol often fail to apply simple benefit-cost analysis. This got me thinking about some of the other issues upon which I’d like to see a little more rigorous benefit-cost thinking, and a little less off-the-cuff moralising.
- Road safety. At many Canberra intersections, a red turn arrow prevents right turns when the road is clear. My guess is that if we weighed up the cost (thousands of hours of lost time per year) against the benefits (fewer accidents), we would probably find that that former exceeded the latter. In other words, I thinkÂ Canberra has a sub-optimal number of traffic accidents.Â
- Pornography in Indigenous communities. A bipartisan movement has pushed to reduce the amount of porn available in remote NT communities. But this will only help reduce sexual violence if pornography is a complement for violence rather than a substitute. What little evidence existsÂ seems to favour the substitute theory rather than the complement theory. In other words, perhaps the costs of this policy outweigh the benefits (and I’m ignoring any benefits to the porn buyer).
- Regulation of prediction markets. Since most policy regulation is concerned about the cost of problem gambling, the information benefits of prediction markets are often ignored. So we end up with a situation where Australian betting agencies cannot run markets on (for example) the unemployment rate a year from now. Justin Wolfers and I highlightedÂ this issue last year, and a team of 22 economistsÂ has just done the same in a recent issue of Science magazine.
Of course, there’s an easy alternative to weighing costs and benefits. As usual Stephen ColbertÂ puts the case best:
ladies and gentlemen of the press corps, Madame First Lady, Mr. President, my name is Stephen Colbert and tonight it’s my privilege to celebrate this president. We’re not so different, he and I. We get it. We’re not brainiacs on the nerd patrol. We’re not members of the factinista. We go straight from the gut, right sir? That’s where the truth lies, right down here in the gut. Do you know you have more nerve endings in your gut than you have in your head? You can look it up.