Thursday, September 3, 2015

Elasticity

Elasticity: In economic terms, the degree to which one  thing changes in response to change in another input.

The so-called sin taxes, on products such as tobacco and alcohol, are major sources of government revenue.

Economic incentives are far more powerful than moral suasion.

   Banning alcohol didn't work in America during Prohibition, and neither will a total ban on narcotics. Efforts to shut down supply are useless without equal efforts to reduce demand.
   In the case of drug addicts, their demand or need does not change even as supply is cut, thus driving up prices. In econo-speak, their demand is inelastic. It does not change, so the addict is willing to pay any price to satisfy the body's demand. 
   Smugglers know this, so to compensate for the added risk and higher cost of shipping the supply as governments try to shut them down, the price to addicts rises.
   Normally, when a price rises, demand falls. Among other consumer products, coffee for example, when the price rises substantially, users switch to tea or some other beverage. But since addict demand does not change (inelastic), dealers charge higher prices.
   Result: Addicts turn to more desperate measures, including crime, to get money to satisfy their addiction, just as dealers raise prices to compensate for added risk in evading law enforcement. Similarly, law enforcement adds to government expense in trying to cope with the rising crime rate.
   As long as government efforts fail to reduce demand, this economic function of demand inelasticity will lead to greater cost in treating addicts and fighting increased crime and violence.
   Thus, an inelastic demand for alcohol during Prohibition led to smuggling, crime, violence and soaring law enforcement budgets. In addition, there was the added cost of treating those who were sickened by using cheap and dangerous substitutes for alcoholic beverages that previously were subject to government safety regulation.
   In economic terms, the problem of illegal narcotics is little different. Since a full prohibition doesn't work, it may be useful to consider at least a partial decriminalization, accompanied by significant tax revenue, which could be used for addiction treatment and counseling, as well as education to prevent addiction. Some states have already decriminalized marijuana, saving money on law enforcement, and raising revenue through taxes.
   In economic terms, a similar quandary of inelasticity exists for anti-abortionists. The demand for safe, healthy means to terminate pregnancies is there, but efforts to outlaw the procedures can only drive both providers and consumers into shady, dangerous areas. The demand is there, and it will be served by suppliers, legal and otherwise.
   As for the self-appointed guardians of the public morals, they have a right to subscribe to and practice their own moral code, but they have no right to inflict that code on others.

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