I believe in free markets. I believe in and respect the legality of the 2nd amendment as long as it exists. But as we all know, there is a gun problem in the United States. The problem is not the loose availability of guns. I believe the problem is the externalities of guns.

So, what are externalities? In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit1https://en.wikipedia.org/wiki/Externality. So, let’s talk about the positive and negative externalities of guns. Yes, there are both positive and negative externalities.

People on both sides of the argument on guns can come up with a long list of benefits of their position and the cost of the opposing side. But what they have not done is to put a price tag on the cost and benefits of guns in our society. In fact, NRA and their minion politicians have curtailed the ability of citizens to sue gun manufacturers.

I believe it’s time to change. The price of every gun and bullet sold should include, not only the cost of manufacturing and profits but also the societal cost as well. What that means is, the economic cost of deaths in mass shootings, other gun-related deaths and injuries that the community bears should be included.

For example, let’s say market price of an AR-15 is around $1,000, without internalizing the externalities. Once we internalize the cost and benefits of an AR-15 to the society, that number will look very different. Right now, there are roughly about 5 million AR-15s in the population2https://www.cnbc.com/2016/06/13/owned-by-5-million-americans-ar-15-under-renewed-fire-after-orlando-massacre.html, since it went on sale in 19633https://en.wikipedia.org/wiki/Colt_AR-15. Since I can’t easily find stats on how many people AR-15 has killed, let’s arbitrarily use some numbers for the purpose of this example.

Let’s assume that 200 people die and 400 people are injured each year from AR-15. And let’s assume that a human life is worth $6 million and that injuries are worth $3 million each. And that there are no other externalities of AR-15. I am not going to include other property damages or other damages for the sake of simplicity. So, here’s the calculation.

\(\frac{\left ( 200 \ killed \ per \ year \times \$6,000,000 \right ) + \left ( 400 \ injured \ per \ year \times \$3,000,000 \right ) \times 55 \ years}{5,000,000 \ guns} = \$26,400\)

What that means is that AR-15 should be sold at the price of $27,400 instead of the current market price of $1,000. Would the price of $27,400 make a difference in mass shootings? I have no idea. But it would go some ways in internalizing the cost of AR-15 from an economic perspective.

References   [ + ]

1. https://en.wikipedia.org/wiki/Externality
2. https://www.cnbc.com/2016/06/13/owned-by-5-million-americans-ar-15-under-renewed-fire-after-orlando-massacre.html
3. https://en.wikipedia.org/wiki/Colt_AR-15