More Sex Is Safer Sex (for some) and how to clean up the dating pool with Pigouvian pseudo-taxation

24 Jul

First, consider these statistics.  32% of males reported contracting a non-HIV sexually transmitted infection (STI) in 2005.  Compare that number to a startling 67.7% of females  who reported contracted a non-HIV STI in the same year- that’s over a 100% more cases!  So, Dudes, I think it is fair to say that we are the ones being a little less scrupulous with our partners.

Steven Landsburg hit it big with his 1996 article in Slate Magazine entitled “More Sex is Safer Sex.”  For readers unaware of the argument, it’s fairly straightforward.    We can think of the dating market consisting of two types of men; promiscuous Petes, and (sexually) conservative Carls.  Now, every time Carl decides to spend the night in, he is effectively increasing the riskiness of each sexual encounter made out there on the market (the NC-17 one, to be specific).  That’s because now there are more Pete’s for every Jane, and more chances that an infection will result from any given sexual liaison.  That’s exactly not what we want if we would like a shot at defeating the STD/HIV problem.  What we want is to minimize the chance of infection resulting from any given sexual liaison.

Like everything on the market, there are costs and there are benefits, there are prices and there are profits.   The problem is that saying “Hey, I don’t have HIV or an STD, so you should hook up with me” does not exactly make for a good pick up line or conversation starter.  So, Carl’s services are underpriced.  But that’s not the only problem- promiscuous Pete is generating a negative externality on society every time he makes a date or enters the bar looking to score.  By this I mean the externality is the infection passed on to his unsuspecting (or careless) lover, we’ll call her Jane, and every other girl he hooks up with after that, and every other guy she hooks up with as well.  If only there were a way to clean up the dating pool by incentivizing the Carl’s to go out and the Pete’s stay in (alone).  Well, economics is a wonderful thing, and it has given me an idea.

Now, condoms are already free on college campuses so we’ve already brought the cost of safe sex down to zero dollars.  But that doesn’t mean much when condoms are pretty cheap to begin with, so presumably Pete’s not wearing them for some other reason than the expense.  We want to minimize the likelihood that Jane becomes infected  (who may then go on to infect another).  Thus, I propose we deal with this problem in the same manner in which other negative externalities in the marketplace are dealt with- Pigouvian Taxation.

For those uninitiated, Pigouvian taxation is simple; it’s a policy prescription laid out in A.C. Pigou’s 1920 text The Economics of Welfare, which calls for taxing an amount equal to the marginal environmental damage (MED) of an activity in which the private producer does not account for the external diseconomy in his cost calculations (i.e., the total social costs exceed the total social benefits). [1] This differential between private and social costs is referred to as a market failure, and is sufficient reason for government intervention.  Theoretically, by taxing the amount of the environmental damage will internalize the externality by reducing production to the optimal quantity (i.e. to the point where total social costs are equated with total social benefits, or where private costs equal social costs), thereby remedying the alleged market failure.[2]  Such a policy prescription is particularly attractive in the case of negative externalities resulting from all the promiscuous Petes out there spreading the virus.   To clarify, the private producer is Pete, and the marginal environmental damage is each new woman he infects with an STD or HIV.   The private cost to Pete is nothing, as he already has the virus.  Yet, the social cost is a dirty dating pool (and however many dollars it takes treat those viruses).

Now the questions remain, (a) how do we calculate the marginal environmental damage, and (b) how do we go about implementing the tax?  I would assume that the most accurate MED calculation would include the amount of dollars spent on treatment.  But the problem still remains on how to preemptively tax all the Petes?  One simple way would be to require bi-annual checkups.   At each check up, the doctor will either give you a stamped gold slip if you’re clean, or a stamped red slip if you’re dirty.  Now, all your partner has to do is ask to see the slip, and you’re GOLDEN (assuming you’ve got a winning personality to go with it ;))!  Now, I’m against the government mandating people to do anything, even to go in for a check-up, but I’m all for creating a well-incentivized marketplace.  Now the “tax” is not monetary at all but simply a red slip if you went or a lack of any slip if you didn’t go.  That,  my friends, would be Pigouvian “taxation” at it’s finest.  Now, all the prices of the Petes and Carls are accurately reflecting their services, and everyone has the freedom of choice to go to the check-up or not.   However there is one caveat; when your prospective partner asks for to see your slip (price) and it’s either bad news or no news, I guess you’ll have to come up with a better excuse than “My dog ate it.”

[1] Harvard economist Gregory Mankiw is one of the leading advocates of Pigouvian taxation as a solution to externalities and as a tax reform which would reduce several of the negative incentives associated with the current tax code, for example, the disincentive to the labor force resulting from the income tax, and the disincentive to invest resulting from the capital gains tax.  On his blog he has advocated for a $1.00/gal tax on gasoline, and he has also started an unofficial club, The Pigou Club, advocating an increased use of gas and carbon taxes.  Several noted economists aside from Mankiw are members of the club, such as Alan Greenspan, Christopher Dodd, Paul Krugman, Richard Posner, and Paul Volker, among others.

Although Pigouvian taxation has received most of the attention, it is also Pigou’s original work, in general, that is gaining popularity.   The New Yorker columnist John Cassidy wrote an article appearing in the Wall Street Journal on November 28, 2009, in which he extols Pigou as the economist whose work “best explains financial crises, global warming, and other pressing issues of today.”  The article is entitled “An Economist’s Invisible Hand: Arthur Cecil Pigou, overlooked for decades provides a guide to the financial crisis.”

[2] See Part II of The Economics of Welfare for the original analysis, or for an exceptionally clear and more modern take, see pages 133-135 in Jonathan Gruber’s 2007 textbook entitled Public Finance and Public Policy.

Copyright Nelson R Hoffman


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