Wednesday, December 05, 2007
Robust to What?
One of the participants in the George Mason workshop yesterday asked why I focused on policies that are robust to the amount of rationality or self-control shortcomings among vice participants, when there are many other dimensions along which we might want robustness. For instance, we might want regulations that are robust to potential capture attempts by the regulated, or are robust to government empire-building. Once again, I did not have much in the way of ready response. Now, I think, I would mention that these other sorts of robustness, which may well be important, apply to essentially all areas of regulation. Self-control problems are central to the "traditional vices" -- a phrase itself that rightly came under some scrutiny -- and so it makes sense to reflect this centrality in thinking about desirable vice policies. One and one-third of the standard three and one-third vice concerns are addiction and "internalities," and these are largely missing from most other policy areas, such as antitrust or environmental policy. The robustness principle is aimed directly at these one and one-third concerns.
What I did mention is that while I am confident that attention to "robustness to rationality shortfalls" is essential to desirable vice policies, I often find myself less certain about the importance of some of the other purported problems. For instance, some people argue against a special sin tax on alcohol because once you start taxing alcohol in an exceptional manner, you will pave the way for higher and higher taxes and eventually serve a neo-prohibitionist agenda. But other people worry about a nearly opposite problem, that any special regulations will be undermined by moneyed alcohol interests. Which way do these political economy arguments cut, that sin taxes tend to rise, or to fall?