Healthy Economy
Government intervention in the economy has increasingly been one of the thorniest issues in the contemporary economic framework. Free market economists argue that regulation, as well as management of economic activities by the government, should be strictly limited as such intervention tends to cause inefficient allocation of resources in the economy (Gaye & Viscusi, 2015). They further argue that government intervention curtails personal freedom by taking away an individual’s ability to make decisions on how to act and spend in the economy. However, others advocate for government intervention in different areas of the economy with implications for when and how government intervention is justifiable (Gaye & Viscusi, 2015). One such case is the role of the government to intervene in personal decisions that involve engagement in risky behaviors such as smoking to mitigate the harm such individuals can cause themselves and to others as a result of the irrational conduct (Koopman & Ghei, 2013). Therefore in cases of such irrationality, government intervention is not only justified to ‘nudge’ such individuals towards ‘better’ choices but also to improve the ‘welfare’ of the individual (Camerer, Issacharoff, Loewenstein, O'Donoghue, & Rabin, 2003; Koopman & Ghei, 2013). In most cases, such restriction and government involvement in personal decision making have been economically efficient, morally justifiable, and socially warranted as it sounds.
While government intervention in a person’s decision to engage in risky behaviors – such as smoking, skydiving, drinking, and not wearing a seatbelt while driving – treads on the sovereignty of the consumer, such actions do not lack economic justification. Consider for instance the economic cost of smoking. Studies show that smoking leads to the loss of workplace productivity and an increase of sick days of smokers that have detrimentally cumulative effects on the overall economy (Gruber, 2002). The annoyance of non-smokers from smoking especially in public places can also result in far-reaching impacts on the economy and unwarranted costs to the society such as medical expenses to secondary smokers (Gruber, 2002). Therefore, government intervention that creates larger benefits to those who make own errors that impose harm to self and to those entirely rational is economically advantageous (Camerer et al., 2013). Such intervention is particularly weighty when the regulatory measures are focused on situations rather than persons. In the defense of government involvement in personal decisions, Camerer et al. (2013) assert that these measures are in most cases designed to protect peoples even of a sound mind to act in their long-term self-interest in all situations. For example, government intervention through legislations on usury and other laws against selling oneself into servitude protect consumers in desperate economic situations from the acquiescent of employment contracts with potentially devastating long-term consequences (Camerer et al., 2013). Similarly, government involvement in the regulation of alcohol, cigarettes, and other drugs such as narcotics stem from the socio-economic concern that personal decision to indulge in these substances have the capacity of turning normal functioning people into the equivalent of ‘idiots’ with zero economic benefits.
Therefore, to the extent that government involvement in personal decision-making ‘anomalies’- individual judgments and choice-making inconsistent with economic maximization of utility – lead individuals not to behave in their best interest, economic arguments justify government regulation of such behaviors.
References
Camerer, C., Issacharoff, S., Loewenstein, G., O'Donoghue, T., & Rabin, M. (2003). Regulation for Conservatives: Behavioral Economics and the Case for "Asymmetric Paternalism". University of Pennsylvania Law Review, 151(3), 101-144. doi: 10.2307/3312889
Gaye, T., & Viscusi, W. K. (2015, July 9). Behavioral public choice: The behavioral paradox of government policy. Retrieved March 1, 2016, from http://www.brookings.edu/research/papers/2015/07/09-behavioral-govenment-politics-economic-gayer
Gruber, J. (2002). The Economics Of Tobacco Regulation. Health Affairs, 21(2), 146-162. doi:10.1377/hlthaff.21.2.146
Koopman, C., & Ghei, N. (2013, August 27). Behavioral Economics, Consumer Choice, and Regulatory Agencies | Mercatus. Retrieved March 1, 2016, from http://mercatus.org/publication/behavioral-economics-consumer-choice-and-regulatory-agencies
