External Effects and Motivated Reasoning in Public Policy
When it comes to addressing externalities such as air pollution through public policy, two key factors often come into play, leading to a possible overemphasis on regulations:
- Transactions costs
- Motivated reasoning
In a thought-provoking article by Geoffrey Kabat, the issues of motivated reasoning and externalities are brought to light through a case study on secondhand smoke. Kabat, alongside James Enstrom, conducted a study in 2003 that surprisingly found no statistically significant impact of secondhand smoke on mortality. The reception of their findings highlighted a classic example of motivated reasoning in the public health community:
The conventional wisdom on secondhand smoke, which led to widespread bans on smoking in public places, clashed with the results of our study. This clash sparked intense controversy and criticism from those who were quick to dismiss our findings without providing concrete evidence of flaws in our research. It exemplifies how policy preferences can override rational scientific debate.
Motivated reasoning is also evident when individuals blame smokers for higher taxes without considering that smokers tend to have shorter lives and, therefore, lower pension payouts. While smoking may be a nuisance for various reasons, fiscal costs should not be the primary concern.
Moreover, recent studies, such as one from the American Cancer Society, echoed Kabat’s findings on the negligible cancer risk posed by secondhand smoke. Yet, the reluctance of anti-smoking activists and public health officials to revisit the debate suggests an unwillingness to challenge established beliefs.
However, overlooking the issue of transactions costs is another pitfall in secondhand smoke legislation. Ronald Coase’s work underscores that public policies are only necessary when negotiating private resolutions incurs substantial costs. Since secondhand smoke is predominantly an indoor issue, property owners are in a prime position to regulate smoking on their premises. Government intervention in privately-owned settings may lack a clear rationale, as property owners already have an incentive to address secondhand smoke when benefits outweigh costs.
While there are genuine externalities that warrant government intervention, such as in the case of global warming, even in these instances, motivated reasoning can cloud the debate. Advocates for “degrowth” may use concerns about climate change to push for a return to a simpler society, viewing carbon taxes as an impediment to this agenda.
In conclusion, an awareness of the pitfalls of motivated reasoning and transactions costs can lead to more effective and rational public policy decisions. By considering these factors, policymakers can navigate the complexities of external effects and ensure that regulations are truly in the public interest.
