Sunday, July 04, 2004

Should we regulate fireworks?

Glen Whitman of Agoraphilia reluctantly says:
I hate to admit it, but I think regulating fireworks, and even implementing an outright ban in especially fire-prone areas, is probably a good idea. Will people flout the regulations, leading to smuggling and black markets? Yes, but I still suspect the gains exceed the losses (though I’m open to evidence showing that my concerns are out of proportion to the problem). We can’t eliminate the risk entirely, but we can at least reduce it substantially.
How could we measure the benefit of fully-unrestricted fireworks? The benefit consists of vast numbers of happy people enjoying entertainment. Note that fireworks have a positive externalities as well as negative ones --that guy on your block who spends $300 putting on a big show benefits everybody who sees and enjoys it. The benefit to /him/ has to exceed $300 or he wouldn't spend that much, so the amount people in a state cumulatively spend on fireworks is a lower bound to the benefit to the state as a whole; you'd need to inflate that number a fair bit to account for the benefits to non-paying observers.

On the cost side of the ledger, we'd mostly have to look at whether banning fireworks actually reduces fires. The argument to the contrary would be similar to the argument that banning drugs leads to more dangerous drug use. In this case: if people are violating the law to set off any fireworks at all, they're likely to set off bigger ones in more remote areas when they do so.

My guess is that fireworks laws do more harm than good in most states, but this seems like the sort of problem you could get actual numbers for and figure out. You'd have to use a John Lott sort of approach, comparing changes in the laws to trends in your "social cost" metric.

If you did find fireworks have significantly more negative than positive externality, wouldn't the efficient thing be to /tax/ them proportionate to the excess social cost rather than have an outright ban? And base the tax on the propensity of that type of firework to cause externalities - the "safe and sane" type should still be pretty cheap.


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