Published in the Western Standard, May 2, 2005, p. 39. (Also available in a pdf scan.)

Outlawing Preferences
by
Pierre Lemieux

On Feb. 21, Judge Pierre Jasmin of the Quebec Superior Court rendered a 40-page decision certifying two major class actions against large tobacco companies. The following day, the U.S. Supreme Court started hearing Kelo vs. City of New London, in which an elderly resident of this Connecticut town is fighting eviction from her house. From an economic viewpoint, these two important cases are closely related. Jasmin wrote that “cigarettes are not only totally useless, but also dangerous”—that is, cigarettes confer no benefit to smokers and only impose costs (in terms of health risks) on them. Even if the learned judge only meant that cigarettes have lower benefits than costs for smokers, he showed his dangerous ignorance of economics. A smoker who purchases cigarettes considers that the pleasure he gets from them is higher than the pleasure he loses by not buying something else plus his expected loss of pleasure if he ever gets ill from smoking. Otherwise, he would not consume cigarettes. Thus, in the net, cigarettes bring “utility” (pleasure, satisfaction) to smokers: this is called “revealed preference.” An individual’s utility is subjective and cannot be measured by an external observer; it can only be revealed in the individual’s actions. In the same way, somebody who buys a small car or a ski resort ticket or a bottle of wine shows that his expected benefits are higher than his expected costs—the good or service has a net positive utility for him. This consumer may or may not later discover that he made a mistake, but nobody else is better placed to take the risk. Follow the implicit reasoning in the public health approach. Smokers don’t know what brings them utility. Certain elite know better. Therefore, the smokers’ preferences must be overruled and their choices prevented. One way to do this is to bankrupt the smokers’ suppliers, which is what the class actions under consideration could do. Another way is to prohibit smoking restaurants and bars (or rather, mixed restaurants and bars, since nonsmokers aren’t discriminated against in venues that allow smoking) in order to make room for nonsmoking ones. The utility of smokers is coercively reduced in order that the utility of nonsmokers and, especially, of anti-smokers be increased. Now, consider Kelo vs. City of New London (see The Economist, Feb. 19, 2005). The city of New London, Conn., wants to expropriate private homes in order to build a biotech industrial park that would create 1,000 jobs and bring US$1.3 million in annual municipal taxes. Against the city stand seven homeowners who think that the compensation offered is lower than the subjective utility they derive from their homes. The homeowners are supported by a few civil rights groups. The American planning establishment has closed ranks behind the city. The implicit reasoning of the planners is the same as Jasmin’s. In the planners’ minds, the compensation offered is worth as much as the homeowners’ subjective utility from their homes. It is as if the homeowners were badly informed and irrationally addicted to their homes. Their homes are not useful, would say Judge Jasmin. In fact, they are positively harmful, since the benefits that would accrue to the beneficiaries of the industrial project are higher than the homeowners’ lost utility. Or so do the social engineers think. This sort of reasoning violates all canons of economic analysis. Outside of voluntary exchange—or non-exchange—between the actual property owners and the would-be occupiers, there is no way to know what the optimal use of the desired property is. There is not much difference between standard assaults on private property and the anti-smoking jihad—or, for that matter, other attacks on minorities, like gun owners. In all these cases, the steamroller of the state crushes some individual preferences in order to benefit other individuals’ preferences. Whether the coercion is waged out of paternalism, elitism or simple love of material advantages or power does not change the nature of the beast.