From: ichudov@Algebra.COM (Igor Chudov @ home)
Date: Tue, 10 Jun 1997 12:20:18 +0800
To: tcmay@got.net (Tim May)
Subject: Re: Thoughtcrime   (Re: My War)
In-Reply-To: <v03102810afc276b6f608@[207.167.93.63]>
Message-ID: <199706100411.XAA03021@manifold.algebra.com>
MIME-Version: 1.0
Content-Type: text



Tim May wrote:
> At 7:52 PM -0700 6/9/97, Igor Chudov @ home wrote:
> >Lucky Green wrote:
> 
> >> The answer is clearly no. By limiting the distribution of an individual
> >> picture, you increase the total number of pictures required to satisfy
> >> market demand. That means more children will be required to meet demand.
> >
> >How do you justify that "clearly"?
> >
> >I think that your analysis is incorrect.
> >
> >This is a supply and demand situation. It is very simple to show (as any
> >microeconomics textbook does) that a tax on the product reduces the amount
> >of product sold and produced.
> 
> Your economics education must have some gaps. Look into "price elasticity."
> Look also at the markets for illegal drugs: despite severe "taxation" (in
> the form of price increases of some drugs, increased prison terms, etc.),
> some markets have increased even as prices have increased.
> 
> Closer to home, analyze gas consumption as gas taxes in American have risen
> nearly 400% in the past 25 years (roughly following the OPEC shock in ;73).

An interesting point, Tim.

Your examples show that over time, demand and supply curves change. For
example, despite taxation, there are more people driving and they have
to drive farther because more people live in suburbs.

I would not be surprised if, when a certain product is taxed, its
consumption would increase over the long run due to many other factors
besides taxes.

The question that is more relevant is, what is the incremental impact
of the tax, that is, what would happen if the tax changed and all
things remained equal? (this may be called a short term impact of the tax)

An example to look at is online [adult] porn. It is, for all practical
purposes, not regulated. We see a humongous number of pornographic
images being created, not surprisingly, even though Lucky's argument
would suggest that there should not be such a variety if anyone can
freely copy them.

> With drugs, knocking out distributors has in many cases increased the
> selling price of the drug, making it actually more lucrative for street
> dealers to enter the market.

Yes, of course the price rises if a tax is imposed. The same econ 101
shows that if the demand is inelastic (as it is the case for drugs), the
buyers pay the bulk of the tax. So of course, the punitive laws
increased prices and made the business more lucrative. But the same laws
have also made drug trade more dangerous, because drug dealers risk to
go to jail and be shot by other dealers.

I would not be surprised to see that when the drug tax diminishes, the
drug use would go up. As a drug-free person, I do not care much about it
as, since drugs would be cheap, drug addicts will not have to kill
people to get a dose. And in the longer run, greater availability of the
images of drug addicts would probably have a good deterrent effect.

The cost of the drug tax to the society is all the inefficiencies
created by it: for example, when thousands of hard working business
people are locked up in expensive jails, it is a cost with little
offsetting benefit. The shootouts between gangs is also a cost insofar
as bystanders are involved.

Also, in an efficient system where people could buy crack at a Walgreens
counter, there would be less people involved in the whole business,
because Walgreens is more efficient at distribution than the inner city
drug dealers. As a result, these former drug dealers would be out of
business and be gainfully employed in some more productive trade.

> A complicated system, no doubt, but arguments based on "Econ 101" are
> usually flawed when dealing with complex systems (something Samuelson would
> almost certainly agree with me on).

Samuelson himself has "proven" some quite funny theorems.

> >Since a unit of product is probably one picture of a child, there are
> >less units produced if they are taxed.
> 
> This is not at all clear. If the crackdown on child porn, or porn in
> general, causes the street price to rise to $10 a picture, say, then many
> folks not producing child porn now might be tempted to get into the market.

Tim, let's compare child porn (with images of persons below 18 years
of age) with adult porn.

In other words, 

	1) there is little difference, in terms of consumer utility,
	   between pictures of 17 year olds and pictures of 21 year 
	   olds
	2) The costs of producing these images, EXCLUDING TAX, are 
	   essentially equal.

That should lead us to expect that without taxes, the number of 16 year
old pictures would be about the same as the number of 21 year old
pictures, give or take 50%.

However,

	3) There is a tax imposed on "child" porn.

And we indeed observe that 

	4) the number of 16 year old images that is available
	   is much, much lower.

> If you look at your Econ 101 text again, read up on cycles of pork bellies
> and suchlike agricultural products. Every shortage is followed by a period
> of "overproduction," and vice versa.

The problem with cyclical products is high fixed costs and high exit costs.

Agricultural products are very specific because their production cannot
be easily changed when the future supply becomes certain. After all, you
can't kill all the little pigs or raze the corn crop and plant potatoes
in June, even  if you know that due to the weather there will be a lot
of it in the market.

> What this all means for the porn trade is unclear, but looking at the drug
> trade is pretty revealing.

Could not agree more.

> There's something wrong when I'm a felon under an increasing number of laws.
> Only one response to the key grabbers is warranted: "Death to Tyrants!"
> ---------:---------:---------:---------:---------:---------:---------:----
> Timothy C. May              | Crypto Anarchy: encryption, digital money,
> tcmay@got.net  408-728-0152 | anonymous networks, digital pseudonyms, zero
> W.A.S.T.E.: Corralitos, CA  | knowledge, reputations, information markets,
> Higher Power: 2^1398269     | black markets, collapse of governments.
> "National borders aren't even speed bumps on the information superhighway."
> 
> 
> 
> 



	- Igor.