Economists Gone Wild

Libertarian Girl's call for a tax on breast implants has already generated much condemnation from the usual suspects. But before we revoke her libertarian credentials, it's worth discussing the idea at face value to see what's right and wrong with it from an economic point of view.

Libertarian Girl identifies a potential collective action problem. She suggests that women get breasts implants to make themselves more attractive to men. But by doing so, they make the remaining women who don't get implants marginally less attractive in comparison.

If every woman got breast augmentation surgery, it would not change the overall female attractiveness of society (because men would quickly become desensitized to seeing bigger breasts), but would have negative health effects because large numbers of women would suffer from post-surgery complications.

This is a familiar problem in economics and in everyday life. It happens everytime we go to a concert or a sports arena. Inevitably, someone stands up to get a better view. But this blocks the view of the people in the row behind, so they stand up as well. Pretty soon, the entire stadium is standing to get a better view, even though we would be better off if we all sat down instead. (Same view, less leg strain)

Or consider advertising. Part of advertizing is education - informing consumers of a product that they did not already know existed, or convincing them of the benefits of a product they would not otherwise use. This is a positive-sum game because it expands the size of the pie. It creates exchanges that would not otherwise take place. Another part of advertising does not create these benefits, but merely shifts them around - what economists call rent-seeking. People who already consume a different brand of the same product may switch brands because of advertising. When advertising’s main effect is brand switching, the dominant strategy for each firm is to advertise heavily in order to counteract the competitor's advertisements. But all of the competitors would be better off if they could agree to not spend this extra money on advertising and instead just keep it for themselves.

Does this mean that advertising should be taxed, as Libertarian Girl suggests we do for breast implants? It's not clear why. True, advertisers are less well off than they would be if they could agree to a ceasefire. But ad agencies and media outlets -- magazines, newspapers, Google, television Networks -- are better off. Some argue that advertising creates negative externalities -- we have to look at ugly billboards, pop-up ads, and boring commericials on television. On the other hand, advertising creates many positive externalities. Ads make television shows free (or at least cheaper) for all viewers, only a fraction of which are people who go out and buy the product advertised. Indie newspapers like Atlanta's own Creative Loafing are completely free for readers, funded entirely with ad revenue.

So back to breasts. Should we tax implants? Libertarian Girl ignores some important benefits of breast implants and makes some questionable assumptions. Women get breast implants not merely to attract men, although that may partially explain some women's motivation. Rather, most women say that they get implants to increase their own self-esteem. Admittedly, this is closely tied to societal notions of female attractiveness, but it not clear how or if we could change these views. It is doubtful that a tax on implants would suddenly make society change its ways. The number of men who want their girlfriends to look like Playboy Centerfolds will not decrease if implants are taxed.

Given that these conceptions of beauty exist, women who wish to enlarge their breasts do so not only to attract men but to make themselves feel better about their self-image. This benefit is largely internalized, although it does create some externalities by reinforcing the social conception of beauty, thereby making some other women who were not born with large breasts and have not yet undergone surgery feel worse about their self-image. The same is true for all social norms. People conform in order to be accepted, and by doing so, make some of those who don't conform feel worse about themselves. That is simply the nature of social mechanisms. Taxing implants reduces the supply side of this social mechanism, but it does nothing to reduce the demand side. (Unless you believe in a Say's Law of breast preference)

We must also recognize that these social conceptions, while widely shared, are not universal. Many women have no desire to conform to the Barbie Doll physique, and feel just fine about their self-image. Many men, including myself, feel the same way.

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I know I was relieved to

I know I was relieved to learn you feel fine about not having a Barbie Doll physique, though you seem to have given the prospect a lot more thought than most guys...

Yeah, I realized before

Yeah, I realized before posting that the last sentence is ambiguous. I couldn't think of a less awkward way to put it.

Micha, I'm sure that you

Micha,
I'm sure that you know that Say's Law doesn't apply to individual products, but I worry that you might confuse less economically knowledgeable readers with your suggestion. I apologize for my lack of a sense of humor:

In its crude and colloquial form, Say's Law is frequently understood as "supply creates its own demand," as if the simple act of supplying some good or service on the market was sufficient to call forth demand for that product. It is certainly true that producers can undertake expenses, such as advertising, to persuade people to purchase a good they have already chosen to supply, but that is not the same thing as saying that an act of supply necessarily creates demand for the good in question. This understanding of the law is obviously nonsensical as numerous business and product failures can attest to. If Say's Law were true in this colloquial sense, then we could all get very rich just by producing whatever we wanted...

If we want to get a more accurate understanding of Say's Law, perhaps we should consult what Say himself had to say about his supposed law. In the passage where he gets at the insight behind the notion that supply creates its own demand, Say writes: "it is production which opens a demand for products.... Thus the mere circumstance of the creation of one product immediately opens a vent for other products." Put another way, Say was making the claim that production is the source of demand. One's ability to demand goods and services from others derives from the income produced by one's own acts of production, Wealth is created by production not by consumption. [Steven Horwitz]

Cheers
Jonathan Dingel

Hey Ghertner: "Great minds

Hey Ghertner: "Great minds think alike!"

Personally, I question the

Personally, I question the assumption that men would become sensitized to larger breasts. Certainly, in modern times, men have more and more access to viewing larger breasts--pornography, Baywatch, television in general (that may simply be repeating the same thing three times). But big breasts still have quite a bit of power, even to those who have seen enough to, assumedly, be desensitized.

I'm still a fan.

i've often wondered why

i've often wondered why women with large breasts don't sell advertising on them. most guys i know look at that area far more than most billboards, and are in a susceptable mental state as well!:smitten:

Well, those wearing T-shirts

Well, those wearing T-shirts bearing logos of various companies & organizations kind of do. If they got it for free, anyway.

This is a great idea.

This is a great idea. Cosmetic surgery is largely gotten by people who can afford without insurance. That's not fair! We can tax breast implants heavily, and use the money to fund implants for less fortunate women who were doubly unlucky in life's lottery- not only did they get naturally small breasts, they can't afford implants! This will not only make society as a whole more just, we're one step closer to the socialist paradise.:lol:

Micha, It's pretty clear

Micha,

It's pretty clear you're attempting to hit on this ditz by pretending to take her seriously and reassuring her that you'll appreciate her unenhanced breasts.

Good luck.

I agree with your comments

I agree with your comments in general, except for this section:

It’s not clear why. True, advertisers are less well off than they would be if they could agree to a ceasefire. But ad agencies and media outlets – magazines, newspapers, Google, television Networks – are better off. Some argue that advertising creates negative externalities – we have to look at ugly billboards, pop-up ads, and boring commericials on television. On the other hand, advertising creates many positive externalities. Ads make television shows free (or at least cheaper) for all viewers, only a fraction of which are people who go out and buy the product advertised.

When money is wasted on rent seeking, pointing out that the people who sell the rent seeking devices (who enable money to be transformed into something which is used up in a zero-sum game) are better off is not a defense. In fact, I think it may be equivalent to the broken window fallacy. The money that is spent on zero-sum advertising, if it didn't feed Madison Avenue, would feed some other industries.

As for whether free TV is a substantial positive externality, I don't think that's so clear. Look at it this way - if the average user derives a substantially positive benefit from TV, shouldn't the station insert more advertising? It is only competition for viewers that pushes things the other way. I'm not sure exactly what governs the equilibrium point, but it seems reasonable to think that most of the value to the viewer is used up by having to watch advertising.

Christ, Patri, you're

Christ, Patri, you're clever.

My question--don't advertisements, true ones at least, create a positive externality in that they make information available to people?

Speaking as someone who has

Speaking as someone who has examined hundreds of pairs of breasts - palpated them, augmented them, reduced them, reshaped them, and other things - I strongly disagree with the idea that pervasive breast implantation makes natural breasts less attractive. I think it's more of a Nash Equilibrium / Evolutionarily Stable Strategy type of thing. The widespread presence of large, spherical, gravity-defying, outward-pointing breasts in the popular media has made me more appreciative of the indigenous bust. Breasts that surrender graciously to nature's machinations and indulge playfully in gravity's pull are much more appealing than saline supertankers.

Libertarian Girl’s call

Libertarian Girl’s call for a tax on breast implants has already generated much condemnation from the usual suspects. But before we revoke her libertarian credentials, it’s worth discussing the idea at face value to see what’s right and wrong with it from an economic point of view

Listen, Micha: If you think balancing externalities is a worthy use of government coercion - that is to say, if you think it is okay to put a gun to another human's head and say to them "give the governement extra money for your elective cosmetic augmentation or I will shoot you," then fine. That is certainly a more worthy cause than tsunami aid or the UN Millenium Project. At least you have that going for you.

But don't claim that this act is unobjectionable. I can think of thousands of other worthy causes too -- Indian casinos, food, free drinkies, firearms giveaways -- the list goes on and on. There is already a word for people who think that it is unobjectionable for the government to try to solve these problems, and that word is not "libertarian."

Lynette, I never claimed

Lynette,

I never claimed that taxing breast implants would be morally unobjectionable. My purpose in this post was only to look at the idea from the point of view of economics, not ethics.

It's breathtakingly

It's breathtakingly ludicrous wonkery to suggest that analysis needs to be done to decide whether taxing cosmetic surgery is libertarian. You didn't have any problem telling Chuck what was libertarian and what wasn't a couple of days ago in the thread Lynette linked. Would Chuck's proposals merit more thoughtful consideration if he was a blond chick with a pink web site? Before you revoked Chuck's libertarian credentials shouldn't you have found out if he had any sisters?

Ha! You guys! Don't ever

Ha! You guys! Don't ever change.

Chuck explicitely claimed

Chuck explicitely claimed that forcing people to give to foreign aid is unobjectionable from a libertarian standpoint. That is pretty clearly false. It may be less bad than other forms of coercion, but libertarians certainly do object to it.

Libertarian Girl gave an economic argument for taxing what she claims is an externality of breast implants. Now, it's true, I could have responded to her as you and others did by stomping my foot down and yelling "coercion!" (as I did with Chuck). Besides the fact that the point had already been made repeatedly by others before me, taxing externalities is not as controversial among libertarian minarchists as coerced charity. Also, I think her idea is interesting and worthy of further discussion, regardless of whether or not it is morally objectionable. So instead of jumping straight to the moral arguments, I wanted to see whether her economic arguments are sound, or whether they could be rejected before we even get into the more contentious issues of morality.

Patri, When money is wasted

Patri,

When money is wasted on rent seeking, pointing out that the people who sell the rent seeking devices (who enable money to be transformed into something which is used up in a zero-sum game) are better off is not a defense. In fact, I think it may be equivalent to the broken window fallacy. The money that is spent on zero-sum advertising, if it didn’t feed Madison Avenue, would feed some other industries.

True, in the absense of zero-sum advertising, the money would be spent on more productive uses. However, this doesn't seem to be quite the same as the broken window fallacy, as it doesn't result in any broken window. There is no loss to society other than the lost potential productivity of alternative uses for the advertising money. And as I said, there may be some positive externalities associated with advertising, like free content for the consumer.

As for whether free TV is a substantial positive externality, I don’t think that’s so clear. Look at it this way - if the average user derives a substantially positive benefit from TV, shouldn’t the station insert more advertising? It is only competition for viewers that pushes things the other way. I’m not sure exactly what governs the equilibrium point, but it seems reasonable to think that most of the value to the viewer is used up by having to watch advertising.

I don't know much about the television/radio markets, but it seems like these sorts of markets are very different from other markets because of the indirect, third-party nature of the exchange. There are three parties involved: the advertisers, the stations, and the consumers. The stations are trying to maximize ad revenue (by maximizing the size of the audience) and minimize production costs, the advertisers are trying to maximize the number of potential consumers exposed to their ads and minimize the costs of reaching them (achieving equal reach per dollar on the margin for each separate medium), and the consumers are tring to maximize pleasure from entertainment (and perhaps minimize displeasure from exposure to commercials). Stations and advertisers must bargain over the relative size of the producer and consumer surplus - stations want the highest price possible and advertisers want the lowest price possible. Stations and consumers must (implicitly) bargain over the relative size of the producer and consumer surplus - stations want as much time as possible devoted to commercials, consumers want as little time as possible devoted to commercials. While these two different bargaining processes are ultimately connected, it is not clear to me whether they connect in such a way as to eliminate or minimize the size of the audience's surplus.

Closer to Reality Than They

Closer to Reality Than They Thought?
So, the discussion begun by LibertarianGirl and followed up by Catallarchy might have been a bit more prescient than even they thought. Lawmakers Look to Tax Plastic Surgery Lawmakers trying to plump up the bottom line are considering a "vanity tax" ...

The picture of

The picture of LibertarianGirl is FAKE! The picture is originally form a Russian Bride dating service, from a girl who lives in Kiev, Ukraine:

Victoria

[...] his hoax: I’ve

[...] his hoax: I’ve reserved judgement until now, but something is beginning to smell fishy. Wazoo turned my attention to this personal ad on a mail-order [...]

[...] no experience with

[...] no experience with them, why not start a mail-order groom service? And, how on earth did Wazoo discover that picture in the first place? Go-go-gadget [...]