Wednesday, September 23, 2009

More on the Price Elasticities of Morals

. Wednesday, September 23, 2009

Remember when I posted about the price elasticity of demand for public morals (see here and here for refreshers)? Nate Silver is following the same drift.

The problem, if it is one, is that sins also have high price elasticities:

But desperate state governments looking to casinos to bail them out of their budget nightmares are likely to be disappointed. The same may be the case with trying to tap other "sins" for revenue. Nationally, sales of alcohol for off-premises consumption were down significantly last year, an unprecedented 9.3 percent in the fourth quarter, according to the Commerce Department. The largest previous drop had been just 3.7 percent, between the third and fourth quarters of 1991.

Those lost sales also mean lost sales tax receipts. Even if those expenditures are replaced dollar-for-dollar with other expenditures, sin taxes are much higher than other taxes, so tax revenues go down. For states already feeling the crunch, this is bad news.


More on the Price Elasticities of Morals




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