Home > Government, healthcare, politics > On the Activity-Inactivity distinction, Will SCOTUS outlaw Pigouvian taxes?

On the Activity-Inactivity distinction, Will SCOTUS outlaw Pigouvian taxes?

It seems that yesterday was a really bad day for “Obamacare”. With the problem seeming to be the “limiting principle” for the government’s claim of authority.

As I said yesterday, this is just silly. Of course there is a limit to this claim of authority; healthcare really is a special industry. Ken Arrow wrote in a famous paper that a free market in healthcare would be impossible. The reason being that healthcare requires the use of insurance for funding, and insurance often implies perverse incentives for market participants. This is critically important, although I suppose “practicality” can easily not be a criterion the Supreme Court puts any weight on–fine.

A better point is just to note that very human being will eventually buy healthcare as a part of being human. I can not buy insurance, but I’ll still get sick and die (eventually) with probability one. I can sign a paper saying not to use any means whatsoever to keep me healthy, in the event of a crisis, but when the crisis eventually comes and I’m unconscious will my next-of-kin hold to that agreement? If I am treated, then who exactly is paying for that? The answer, of course, is society. Despite my best attempts to not be treated, chances are that I will be and when I am, it is you that pay for it (whoever you are, so long as you pay taxes). In short, the decision (and it is a decision) to go without care induces an externality on the rest of society. The efficient way to deal with an externality is to tax it–that is the individual mandate.

If the individual mandate gets struck down, then how do you defend, say, a clean air regulation? After all, that can be said to be taxing inactivity, too. The status quo is that pollutants are being released into the atmosphere; the tax is “forcing” private citizens (in none of these examples is anyone actually forced to do anything) to buy goods from private companies (i.e. mitigation equipment) when those individuals had the option to do “nothing”. So the Clean Air Act is unconstitutional, right? Except its not. Is the distinction here only that spewing poisons into the air is an “activity” even though it is only a by-product (what you really want to do is produce, say… electricity)? After all, our Galtian Overlords/Champions of Industry didn’t just decide one day to spew poison into the atmosphere, but they do it because it is a consequence of producing electricity. But if that is the distinction–and really you have to twist yourself into knots to see it that way–then how is it that forcing you to pay for my ER visit anything but a by-product and therefore an activity?

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