Smokonomics

Hayek goes barcrawling

(Page 2 of 2)

Yet the same holds for jobs lost to regulation. A smoker who spends less of her time and money at the local caf� because she can't puff a clove with her latte isn't just going to use the cash for toilet paper: She'll spend it somewhere else. There are significant deadweight losses and transaction costs while the economy adapts, of course, but it remains the case that less spending at the bar will mean more spending elsewhere.

The obvious rejoinder is that tampering with the natural market outcome makes the reallocation of spending inefficient. But "efficient" here isn't used in the colloquial sense of putting out more widgets per pound of aluminum. Efficiency in the economic sense is about using resources in the way that maximizes the satisfaction of subjective preferences. The problem with regulation isn't that it decreases the net amount of money floating around the economy—it doesn't. Rather, the problem is that it forces that money to be channeled suboptimally, into sectors less productive of customer satisfaction.

Economic arguments, arguments that look at the flow of cold hard cash, have a comfortingly scientific ring to them. You can appeal to objective-looking graphs and figures. That's why restrictions on, say, the color you're permitted to paint your house, are typically justified by an appeal to preserving "property values," rather than the simple majoritarian argument that most of your neighbors think that fuchsia with a puce trim is ugly. But, of course, all it means to say that such a color scheme would lower property values is that one expects a majority of potential buyers would find it ugly.

A smoking ban may or may not reduce revenue at D.C. bars relative to the status quo—that will depend in part on the willingness of smokers to leave the district for smoke-friendlier parts, an easier task than abandoning LA for a bar in Nevada. It will almost certainly be worse, economically, than the mix that the market would eventually achieve. But all that is just shorthand for saying that if we leave owners and customers to make their own choices, everyone can have the kind of experience that they most prefer. And while that's not the kind of argument that translates well to a PowerPoint slide, it has the virtue of being true.

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