Yesterday’s post on the problem with novels was initially badly garbled due to an html coding error. It’s fixed now, but since the original version managed to confuse some people, let me offer an example (which you can also find in the comments on the original post).
Light in August, which has already been written, is available for about $8. It’s worth $9 to me. If I download a copy, $9 worth of social gain is created (a $1 gain for me, and an $8 gain for the estate of William Faulkner).
Now a contemporary novelist, say Sara Gruen (to pick a very good one) comes along and realizes that with $8.50 worth of effort, she can write a book for which I’m willing to pay $10. By offering it at $8.99, she induces me to read her book instead of Faulkner’s, and clears a 49 cent profit. Total gain: $1.01 for me, and $.49 for Sara, or $1.50.
(Of course Sara Gruen does not write books just for me, but she might well expend $8500 worth of effort to write a book for 1000 people like me, whereupon all the numbers scale up.)
In other words, by writing a very good novel, Ms. Gruen reduces the social gain from my reading habits from $8 down to $1.50.
That’s exactly the sort of thing that economists generally believe should be taxed. In fact, a perfectly analogous argument constitutes the entire case for taxing polluters.
So I repeat my question: If we want to tax polluters to discourage the production of, say, socially inefficient aerosols, why shouldn’t we tax Sara Gruen to discourage the production of socially inefficient novels?