Tag Archives: Sherzod Abdukadirov

Should Regulation Prohibit Self-Penalizing Behavior?

Last weekend, a guy ordered the “Sourtoe Cocktail” at a hotel bar in Dawson City in the Yukon.  The drink is garnished with a real (preserved) human toe. The patron downed the drink, deliberately swallowed the toe, then paid the bar a $500 fine for swallowing the toe.

sour toe

Photo credit: Philippe Morin/CBC

This is the kind of anecdote that would prompt health and safety advocates in that less-civilized country south of the border (the United States) to call for a new regulation — probably one prohibiting the use of human body parts in cocktails. In my humble opinion, the story is a good example of why it’s a waste of government’s time to regulate against behavior that carries its own penalty.

In fact, there’s a double penalty in this case. First is the yuk factor.  I wouldn’t order a drink with a toe in it, much less swallow the garish garnish.  Second is the monetary fine imposed by the bar. And the bar subsequently raised the fine to $2500, since now the establishment has to pull a backup toe out of mothballs. (Presumably that’s the one on the plate of salt in the photo.)

That double-whammy already ensures that swallowing a toe in one’s drink will be a rare occurrence. Yet there is still some risk that it will happen again; a precautionary approach would suggest that a new regulation is indeed needed unless the drink can be proven absolutely safe.

The tale of the Sourtoe Cocktail is a fanciful (but real) example of self-penalizing behavior that is (apparently) not yet prohibited by the Canadian government. The U.S. government, however, has seen fit to enact regulations prohibiting much more mundane behavior that carries its own penalty.

For example, consider energy efficiency standards for appliances used by consumers and businesses. These standards effectively ban the sale of appliances that cost more to operate because they use more electricity or gas. Energy efficiency can have environmental benefits, but in many cases, most of the benefits the government claims for energy efficiency standards come in the form of lower energy bills for the users. In other words, the decision to buy a less-efficient washing machine, furnace, or refrigerator carries its own penalty in the form of higher energy costs.

The Department of Energy’s proferred justification for these regulations is that consumers harm themselves by placing too low a value on the future energy savings. That’s a debatable point that Ted Gayer and Kip Viscusi have amply dealt with in a recent study supported by the Mercatus Cetner and published in the Journal of Regulatory Economics. My colleague Sherzod Abdukadirov listed a bunch of regulations that employ similar logic in his recent post.

Even more questionable is the regulation regarding commercial washing machines that I reviewed for the Mercatus Regulatory Report Card. The Notice of Proposed Rulemaking for this regulation seriously argued that greedy, profit-oriented businesses would leave money on the table by refusing to invest in cost-saving, energy-efficient washing machines that would generate a high rate of return due to the energy savings!

With all the ways people find to harm each other, do we really need regulators to police behavior that carries its own penalty?

Taxing People to Advocate for Taxing People

Back in April I blogged on a CDC program that seemed to be using taxpayer dollars to fund lobbying for more taxes. In his column this week, George Will picks up on the same program and offers a few more details. Here is a snippet:

In Cook County, Ill., according to an official report, recipients using some of a $16 million CDC grant “educated policymakers on link between SSBs [sugar-sweetened beverages] and obesity, economic impact of an SSB tax, and importance of investing revenue into prevention.”

Along the way, Will also highlights some excellent work coauthored by my colleague Sherzod Abdukadirov. Leaving legality aside, Will asks, “is such “nutrition activism” effective?”

Not according to Michael L. Marlow, economics professor at California Polytechnic State University, and Sherzod Abdukadirov of the Mercatus Center at George Mason University. Writing in Regulation (“Can Behavioral Economics Combat Obesity?”), a quarterly publication of the libertarian Cato Institute, they powerfully question the assumptions underlying paternalistic policies such as using taxes to nudge individuals to make consumption choices that serve their real but unrecognized interests — e.g., drinking fewer SSBs.