The Gun Subsidy

I have been working with a student co-author on an article that formalizes and improves upon a proposal I have made in the past to begin to solve our gun violence crisis. We have a ways to go. But the essence of this proposal is what we frame as "the gun subsidy." Its twin functions are (a) to make explicit what is now implicit: that the costs of gun production are subsidized by victims of gun violence and (b) to shift a very small portion of those costs to gun manufacturers (moderately reducing their subsidy) in order to achieve a more sane political economy on this issue. We want those who know guns best to use that knowledge to help solve the problem.

I include below a portion covering the major points of the proposal. Some details may change, and I do not include what we have been working on with respect to implementation.

The Gun Subsidy

Guns are used to kill about 40,000 Americans each year. They are instruments of suicide, of domestic and workplace rage, of robbery, and of spectacular acts of domestic terrorism. This American carnage, as the president put it on the occasion of his inauguration, can indeed stop. While it is unrealistic, in a country of over 300 million people, to believe we can eliminate all interpersonal violence, it is equally absurd to insist that mass shootings and thousands of gun suicides are as inseparable from our landscape as oxygen.

The gun violence problem is not one of human nature but of social organization. The minds and experience that could best be directed to reducing gun deaths are instead consumed with fending off any and all gun regulation. This dynamic has caused extensive damage not only to victims of violence but also to our body politic. Indeed, the gun debate has become so caricatured and at the same time so stagnant that it has fostered in too many the insidious belief that our greatest problems are beyond our ability even to address. From it has grown a cynicism that politics cannot ever be responsive to social problems. The gun debate is a cancer that has spread to other vital issues. The critical step toward progress is promoting a shared store of facts and a shared effort to minimizing social harm.

We propose a first step that centers directly on the political problem. It is not a list of guns to ban or background checks to be performed. Before all else, we must begin rowing in the same direction, and there is a way to accomplish this critical first step: liability. We do not mean liberalizing ordinary private liability, with the attendant lawsuits, discovery, and punitive damage awards. Rather, we propose an unambiguously required and automatic payment by a gun manufacturer to a special fund after one of its guns causes a death. In particular, subject to some details discussed infra, for each person killed by a gun, the gun’s manufacturer would pay $6 million to a federal fund administered by the Centers for Disease Control.

Calling for liability rules in response to social harms may hardly seem novel or sufficient. This reform, though, would not be the end of our effort to stem gun violence, but a necessary beginning that would unlock further rational policymaking. If a substantial portion of the costs of gun violence fell on gun manufacturers, two things would follow. First, and more conventionally, manufacturers’ cost-benefit calculations would drive them to manufacture guns less likely to cause deaths that would lead to payment obligations. But we do not advance this proposal as a means to achieve some sort of law and economics ideal of an “efficient” amount of violence. Rather, the second and more important effect would be a political economic one, turning gun manufacturers from the fiercest opponents into advocates for effective regulations concerning background checks, gun attachments and ammunition, retail sales, and other potentially violence-reducing targets.

There is a bit more to our proposal than this, though. Billing the gun industry for even a modest portion of the social harms it creates would almost surely bankrupt it entirely. A Pigouvian tax would be, as things now stand, a death sentence. Even with the discounting we will propose, the total liability at current levels of gun violence would amount to well over $120 billion on an industry whose domestic private sales revenues are probably less than $20 billion. It is doubtful gun manufacturers could raise prices and alter designs and sales to achieve a reduction in liability sufficient to survive in the short term.

The obvious and normal response to this concern is that imposing liability only reveals a basic economic truth that has existed all along. The industry is not worth its costs. If its customers would refuse to pay prices sufficient to cover all the costs of manufacture, including the cost of violent deaths, then the market in its aggregate voice is telling us not to manufacture guns. One of us favors listening to this voice, but we live in a country in which many do not and in which they cite a Second Amendment they strongly believe requires private gun availability in fact and not only in theory.

This, then, is the second part of our proposal: a Gun Subsidy. From the base, per-death liability payment following a gun death, the CDC would discount at a rate calculated at regular intervals to permit the continuing manufacture of weapons adequate for self-defense within the meaning of Heller v. District of Columbia, while continuing to apply adequate pressure on manufacturers to reduce gun mortality. The amount of the subsidy should represent that portion of our collective valuation of the availability of the Heller right that is not reflected in individual acquisitive preferences.

The combined effect of these provisions, manufacturers’ strict liability to a fund and the Gun Subsidy, is to make at least somewhat explicit what is now entirely implicit and, in fact, invisible in its budgetary implications. Guns cause pain and death even as they bring pleasure to those who enjoy them. We now count that pain and death as no cost at all when collectively deciding through the market how many and what kinds of guns to manufacture and to whom to distribute them. Just as a particular gun cannot be made without acquiring and charging for metal and labor, so too its manufacture and sale cannot be severed from the deaths it will cause or from the collective enjoyment of the constitutional right its availability has been deemed to protect. And yet neither of these latter two values is priced, considered, or widely known.

In the first Part, we describe the mechanics of fund liability. In the second, we summarize its main justifications, averting to standard tort theory (and the additional benefits of this proposal over private tort suits) and to liability’s political economy consequences. In the third Part, we discuss some implementation details. And in the fourth, we argue that the fund would not violate the Second Amendment, as it was understood in Heller, or other constitutional provisions

The Proposal

Guns are the means by which almost 40,000 Americans die each year. 40,000 is a useful number as a yardstick of risk in the United States. It’s roughly the number of people who die annually in car accidents. It’s a little less than the number of people who died from opioid overdoses in 2016. It is about the number of suicides. It’s a little more than the total of all pre- and post-natal infant deaths. It’s roughly a quarter of all deaths from all accidents. And it’s between one and two percent of all deaths. These figures are approximate, but 40,000 deaths seems to mark the cost of one social problem after another.

It seems an understatement to note that Americans have widely varying intuitions about the costs and benefits of gun ownership. The best evidence is that keeping guns is, all things considered, somewhat risky. That said, we all do lots of risky things, and if the worst risks guns imposed was a heightened risk of suicide and accidental death, then maybe gun ownership would fall in the same category as smoking or motorcycle riding: things most people believe adults should be able to do if their eyes are open to the dangers.

But guns impose enormous costs that are not born entirely by gun owners and not at all by gun manufacturers. These costs are measured in medical bills, death, and grief. The one thing everyone can agree on is that this level of suffering is horrible and that it would be good to eliminate it.

What we tend not to agree on is how to measure the benefits of gun ownership. One of us would, if he had no humility about the importance others might attach to guns, would ban them entirely and even confiscate the existing stock without compensation. He believes guns are not even close to being worth their cost, that they make safety-obsessed owners much less safe, and that the fantasies they engender of fending off either bad guys or (even more ludicrously) a tyrannical government are unhealthy. But he does understand that have important and unknown-to-him meanings for others and that more careful analysis of the “how maintained” and “what kinds of guns” questions could, possibly, point toward an acceptable regime of private gun ownership.

It is precisely in such a circumstance–large but uncontroversial costs offset by controversial and pluralistically understood benefits–that a tax of some form can decentralize the production and distribution questions in a manner less injurious to the public good. Asymmetrical uncertainty is not an obstacle to good public policy. We need not know “the one right solution” to optimal gun production and distribution to make a boring suggestion that will help us all: If gun manufacturers had to pay the costs of gun deaths, then many good things would begin to happen.

Our proposal:

  1. Automatic Liability to the Gun Safety Fund: Gun manufacturers are required to pay $6 million for a death caused by a firearm they manufacture. The manufacturer would be liable not to a private party but to a federal fund, which could be called the Gun Safety Fund and be administered by the Centers for Disease Control and Prevention. Liability would be automatic and avoided only when the death is the result of a legitimate use of force by a law enforcement officer or an exercise of justifiable self-defense. Such defenses to payment could be raised in an administrative hearing before the CDC (and appealed from there as any other administrative adjudication). There would be no private plaintiffs’ attorneys, no fights over punitive or compensatory damages, comparative negligence, discovery, or any of the usual but often necessary sources of inefficiency in litigation. The form of liability would be closer to a death tax than a tort judgment.

  2. The Gun Subsidy: The CDC will be charged initially with determining an amount that will be refunded to the manufacturer following payment to the fund that is necessary to preserve the practical availability of guns to be kept for purposes identified in Heller as protected by the Second Amendment, erring on the side of over-subsidizing. Every two years, the amount of the subsidy paid as a refund will be reduced by 2%, unless the CDC determines there is a reasonable likelihood that production would fall below the Heller baseline described above. The upshot is that after a century the subsidy would be a little more than 1/3 of its initial amount. The CDC will annually publish and publicize statistics gathered on gun violence and highlight the amount of the year’s Gun Subsidy.

The details, of course, matter. For example, we would make the findings of responsible medical examiners concerning which gun caused a death (and whether it did) conclusive for these purposes, and it would be a federal offense for any agent of a firearms manufacturer to attempt to influence such an examiner. We would also discount the payment owed for gun suicides, not because such lives are less valuable but to require payment only for the excess number of successful suicides caused by guns. That is, the payment would reflect the number of suicides over and above what that number would have been if only alternative methods of suicide were available. We would also require a quadrennial determination by the CDC of this figure through the normal informal rulemaking process. These and other details are covered more fully in Part II.

Fund liability is not intended to be a perfect Pigouvian tax. At each point, we have chosen to calculate the liability using lower bounds. The total amount of the payments we propose would be dramatically less, in aggregate, than the cost of actual harms flowing from the use of guns. For one, it would only require payment for deaths and not for injuries, which number more than twice the number of deaths. And $6 million is less than what most agencies identify as the monetary value of a human life for cost-benefit analysis purposes. But perfect internalization of externalities, a theoretically dubious proposition for reasons well-trodden by Ronald Coase, is not the point. Any significant tax on manufacturers that scales with death will lead manufacturers to take some steps to reduce the tax, both manufacturing and political. It is the direction of social effort that concerns us most, not accounting.

Even this heavily discounted cost internalization, however, is likely too large for the gun industry to absorb. Gun manufacturers’ total revenues from private sales in the United States are probably around $15 billion and almost surely less than $20 billion, with profits of just a billion or two. Even if we assume a total discounting of suicide deaths and that payments would be owed for only half of other deaths, say 6,000 of the 40,000 gun deaths, the aggregate payment would be $36 billion. Despite low-balling the harms again and again, the industry does not come close to being able to cover the costs it imposes. The Gun Subsidy must, therefore, initially be massive if the industry is to be kept afloat. Reducing the subsidy over time, with some degree of certainty, will enable the industry to plan, redesign, alter marketing, work with state governments to implement better laws, and perhaps to participate in gun buy-backs. The responses are difficult to predict as non-experts, and that is the very point.


A. Standard Tort Theory

First, the obvious: If manufacturers must pay for deaths caused by guns they manufacture, at least some of the costs of gun violence, accidents, and excess suicides would be spread over all gun owners rather than born primarily by victims and secondarily by society at large. That seems both fair and an appealing political argument in favor of shifting costs. Why should victims pay for the downsides of gun ownership? Why should we subsidize gun manufacturers who stand alone in reaping all the profits of their activities but not a very substantial portion of their costs? Higher retail gun prices would result from the automatic payment regime, and these higher prices would reduce the rate of gun ownership, but only rationally so. Of course, if you can manufacture a safer gun, it will incur less liability and so can be made cheaper. People will therefore be more likely to purchase safer guns.

All this is a traditional sort of argument for strict liability. Put the costs of injury on the entity that could most cheaply avoid or minimize them and you wind up with a system that more optimally balances costs and benefits. And so, on this ground, we might be inclined to repeal the Protection of Lawful Commerce in Arms Act, which, with some exceptions, shields gun manufacturers and dealers from liability for injuries arising from crimes committed with their products. We do not favor that and believe that the automatic CDC payment should be the exclusive form of liability.

[Reasons include the benefits of regularized expectations for manufacturers, more immediate cost imposition, reduction of transaction costs, the fact that compensation is a possible use of the Fund, additional certainty may breed more stable changes in manufacturer political behavior, etc. More to come here. ]

This novel form of liability is not designed to achieve the most “economically efficient number of gun deaths.” We both believe the right number of such deaths is zero. But while there are many possible solutions to reducing gun violence, our nation has eschewed all of them. For this reason, we would settle for less than optimal. Our problem is getting anything at all done in the face of powerful incentives to do nothing. To do so, we could try to get the gun manufacturer to think differently about its social role. And that, rather than mere cost-consciousness in its role as vendor, is the most important virtue of this proposal.

B. Political Economy

The payment regime’s most important effect, and one that we hope would have positive spillover effects on other political issues, would be to make gun manufacturers willing participants in social efforts to stem gun violence. When you are the one who will pay the cost of a bad outcome, you become directly concerned with preventing that outcome. Liability gives us a chance to flip the prevailing political script and to get those who know these weapons best to think hard about how to stop their being used to kill in large numbers.

Yes, manufacturers would seek to manufacture safer guns and to advertise and market in ways that minimize the risk of death. These are the vendor-specific effects of a tax. But they would also be far more likely to advocate for state and federal legal restrictions on gun ownership and sales, background checks, enforcement, and public health research. For the riskiest guns, manufacturers might support or even engage in gun buy-backs.

Because it is uncertain, especially from the perspective of those of us unfamiliar with guns and their manufacture, what the most effective mix of regulation and prohibition might be, we should align incentives so that those who do have expertise reveal it. To be clear, we shouldn’t tax gun deaths because we think that the amount of the tax is what life is worth. Nor is the purpose of a payment requirement to suggest that a manufacturer’s moral duty to the killed and maimed has been discharged with a financial transaction. Rather, the goal is to alter the organization of social forces in such a way that we, both gun violence prevention advocates and gun enthusiasts, begin to strive for the same goal, even if we continue to disagree about means. By putting some of the costs of guns back on their manufacturers, there might even arise a new National Rifle Association that is committed to researching and identifying effective regulations. After all, manufacturer lobbies lobby for manufacturers.

There is, we believe, potentially a further benefit of this proposal, though it is harder to quantify. While many of us may not be able to imagine making a living manufacturing assault rifles, people are different. We cannot ignore that people do in fact make these weapons for reasons that others may not completely understand and that they do in fact pay nothing for the deaths that result from their work. Internalizing these costs could change the way gunmakers understand their work, perhaps, helping them break free of the ideologically pure and oppositional politics that have corrupted their relationship to the community. Forcing a change in conceiving of the social effects of one’s business from “not my concern” to “my job is making sure that never happens” is a laudable goal on virtue ethics grounds. And while forcing payment will in the first instance change incentives, it just might, in the second instance, change minds and attitudes.

[Administrative implementation details and analysis of Heller will follow.]

A civilization cannot long exist that fails to respond deliberatively to urgent social problems. It is a damning indictment of ours and a great challenge to our existence as a great democracy that we did not respond to the mass-murder of twenty first-grade students in their classroom and six teachers and school workers. And the murders have continued. Democracy is hard work, and ours must find a way to ensure that social problems are perceived, that deliberation is had, and that efforts to solve them are implemented. The process of perceiving, considering, and responding, after all, is what distinguishes the actions of an intelligent being from the mechanics of a clod of earth.

The proposal here is optimistic. It posits that we can be better collectively if only our decision-making were organized in such a way that we engage the proper facts and lacked incentives to treat others as valueless. Perhaps we are wrong, and our worst instincts resist the moderating influence of political structures engineered to bring out our best. But it is worth trying to become better.