Publication of the week:

PROFESSOR MARTIN RICKETTS AND PROFESSOR GEOFFREY WOOD

Monday 26 May 2008

Martin Ricketts & Geoffrey Wood, "Prohibitions and economics: an overview", in J. Meadowcroft (ed.), Prohibitions (London: IEA, 2008), 37-53. ISBN: 978-0-255-36585-7.

Prohibitions seem to be popular with politicians and voters. This new book sets out to be "a corrective to the prevailing sympathy for paternalistic authoritarianism" (p.18). Well-known contributors from the fields of economics, history, law and philosophy look at prohibitions in areas such as firearms, advertising, pornography and drugs.

In their chapter, Professors Ricketts and Wood ask how prohibitions can be justified by the rules of economics, which are primarily individualistic and utilitarian. Markets rely on prohibitions of infringing rules about, for example, property rights - which may be enforced by internalised guilt as well as external prohibition. State-enforced prohibitions in potentially addictive areas such as drugs, alcohol and gambling can be justified economically by valuing the gains for the addicted above the losses for the non-addicted. Paternalism, rather than economics, is used to justify prohibitions in areas such as child labour where people are seen as needing protection or lacking rationality. In some cases economics would prefer the dissemination of information to the use of prohibitions.

Prohibitions against pollution can occasionally work better than other economic deterrents, e.g. the Clean Air Act of 1956 was more effective in eliminating smog than taxing people who burned coal or treating clean air as a property right to be protected by private legal action. However, there is always a danger that such government intervention is based on inadequate information. The enforcement of prohibitions can also be a great drain on state resources, and works more efficiently when helped by peer pressure.

The whole book can be downloaded in PDF format from the IEA website (external link).

Martin Ricketts is Professor of Economic Organisation and Dean of Humanities at Buckingham. Geoffrey Wood is Professor of Economics at Cass Business School and Professor of Monetary Economics at Buckingham.