Fiscal Externalities and Meddlesome Preferences

I’ll continue some discussion from the comments at TVHE here because it’s getting significantly off the topic of the original post.

I said:

I’ve come across quite a few people advocating breeding licenses in casual conversation, it doesn’t seem that much more repugnant to add a genetic element.

Some parents are bad, therefore we should stop them being parents. The unstated premise is that we have a wise and benevolent government capable of doing this. I don’t think eugenic thought is as anachronistic as you suggest. I’m guessing most people think eugenics was largely confined to Nazi Germany, and are unaware of the nastiness that happened in the States and elsewhere under liberal democratic governments. We’re not racist like those Nazis: we have nothing to worry about.

Eric Crampton replied:

Brad, I think we’ve got another example here of fiscal externalities generating meddlesome preferences – here of some of the most repugnant sort. How many folks talking this way take this tack because the costs of other folks’ childrearing decisions fall on the public purse?

I’ve discussed this with Eric before. It’s an interesting question, and I’m not completely sure of the answer. My thoughts:

Fiscal externalities (i.e. increased cost to public healthcare system, welfare, etc from an activity) are likely part of the story. People use fiscal externality arguments to justify health promotion policies all the time, but I don’t think the externalities really make much of a difference to whether or not they support such policies. Giving more (or even comparable) weight to fiscal externalities than purely expressive moral concerns treats political behaviour too rationally. Fiscal externalities presumably have some expressive component (it’s almost like they’re stealing from us!), but my guess is that it’s nowhere near as important as simple distaste for how certain people raise their kids or live their life.

It only seems to be behaviour people find distasteful (i.e. demerit goods) that people want to regulate on fiscal externality grounds: nobody begrudges you medical care if you have a skydiving accident, but will if you get drunk and fall down the stairs. It seems to me that plain old bigotry or paternalism is doing all the work here. Eric has suggested that fiscal externalities provide a political hook on which people can hang their meddlesome preferences. I don’t think they need such a hook and see fiscal externalities as largely a post-hoc justification for preferences they already have. Without this justification I think they’d find another and continue to hold their views just as strongly.

The fact that smoking produces huge positive fiscal externalities at current tax rates, but calls for further regulation continue and are often predicated on negative fiscal externalities is surely evidence that the actual externalities don’t really matter. Anecdotally, I think most people realise that the tax on tobacco hugely outweighs any costs on the health system, so I don’t think it’s even perceived fiscal externalities that matter. Once people admit defeat on the fiscal externality argument, they will quickly fall back on another position.