You remember that game where you ask your friends which of two unbearable acts they would rather endure? The more incomparably unspeakable the acts the more torturous it is to decide. The game gets its irresistable charm from the way it tests our ability to decide beween alternatives we would never admit to being able to tolerate.
But that ability is the essence of compromise. You have your preferred policy but policy-making requires negotiation and your preferred policy just isn’t in the feasible set. You’ve got to take stock of all the worst-best policies that your negotiating partners would agree to and decide which one is the least worst.
Admitting which one you would settle for is psychologically and strategically hard. Because rhetorically it amounts to approval. Your constituents will ask you how you possibly could have proposed that. In the future your approval will tend to cement this compromise into place. Bargaining frequently reaches impasse just because people have not had enough practice ranking alternatives that are far below their favorites.
That’s what I was thinking about when Courtney Conklin Knapp (guest-blogging this week for Megan Mcardle) wrote about the new death-images to be printed on cigarette packs. The images are revolting. It seems wrong in some basic way to be forcing people to look at those. But in practice we are faced with two choices.
Suppose you had a choice between only two policies: A) grotesque pictures or B) increased per-pack taxes calculated to generate exactly the same reduction in demand. Which do you prefer?
I think I favor the pictures. But look at the 220 comments to Courtney’s post where she asked her readers to choose. They are the roots of gridlock text-onified. Almost nobody actually answers the question. Its like when your friend forgets the rules of the game. You have to pick one.
Cheap Talk 
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June 24, 2011 at 1:28 pm
Anonymous
Why do you favor pictures? It seems that unless you have some pretty convoluted underlying assumptions, taxes are clearly better: if the effect on demand is the same, the effect on the overall consumer surplus is also roughly the same (this may not be quite right, but should be a decent approximation). At the same time, taxes generate a lot of revenue (the standard rectangle in the Econ 1 picture), while pictures simply destroy it. I guess there could be some distributional considerations in favor of pictures, but they have to be quite large to offset the huge overall welfare destruction from pictures.
June 24, 2011 at 3:47 pm
jeff
the two policies have equal effects on the marginal guy but what matters for overall consumer surplus is not just the marginal guy but everyone who continues to buy. the tax is a uniform burden on all of them. it could be that those who continue to buy cigarettes are less affected by the pictures than those who stop buying. (it could be the other way too) so i don’t see any clear comparison.
in general i would guess that a mix of taxes and pictures would be optimal.
as for the revenue i am not sure that’s a benefit. i don’t want a casino in chicago and there might be one precisely because of tax revenue. moreover, once it is there then the city has an incentive to promote gambling.
June 30, 2011 at 6:25 am
vivi
My country (Brazil) has had the pictures since 2001. After the initial shock and the hype of the first few months people stop paying attention to them.
It is like the sign they put on the door to the changing room at the gym: you read it once, read it twice, the third time you don’t even look at it because you know what is there. Two months later they change the words to give a new notice but don’t change the colours or the general look of the sign, what do you think will happen? No one will read it. And then people like me wait for 5 minutes for the water to warm up, try other showers, and then finally get dressed again to ask the reception lady, only to be told that there was a sign *right* at the door saying that there is no hot water.
I still think it is worth it, because it creates more awareness of the harms, and I think it is especially effective in the case of people who are not yet smokers but are flirting with the idea. For those who are already smokers and will ignore the pictures, I think the tax is more effective, because it can’t be ignored.
October 17, 2011 at 2:16 pm
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