The True Cost of Gun Ownership

The gun industry generates a total economic loss of $15B per year in the United States.

Guns are a part of American culture, and guns are also a part of the economy in the US. While not a large industry, the small arms and hunting industries contribute roughly $29B annually to the US economy [1]. While many industries have externalities (think pollution), the gun industry’s externalities are particularly damaging: 31,000 deaths and 70,000 injuries per year [2].  From an economic standpoint, the cost-benefit of US gun ownership and the gun industry can be measured by weighing the economic benefit of the gun industry against the economic loss caused by premature deaths and injuries.

What is the annual economic loss associated with 31,000 deaths and 70,000 injuries? By looking at loss of income alone, each gun death can be valued at roughly $1.4M, or $43 Billion in total lost income [3]. A 1994 study published in JAMA concluded that medical costs from gun injuries cost another $2.3B, or $4B today including inflation [4]. The total economic costs of $47 Billion per year from gun industry externalities thus greatly exceed the economic benefit of the industry!

Perhaps this is not surprising. Guns were invented as military weapons, and while hunting and recreation are part of today’s industry, guns’ primary use remains human combat. In the 20th century, the arms industry split into two industries: a hugely profitable defense industry which sells only to the government, and a tiny small arms industry accessible to ordinary American citizens. Despite causing a $15B loss every year to the American economy, the American small arms industry exists because it is protected from its liabilities by the Second Amendment and its political allies.

Can this situation can be improved? The gun industry has thus far successfully resisted efforts at further regulation, and the NRA and other organizations have created a potent political alliance to prevent a change in the status quo. Eventually, an industry with huge negative externalities has to improve its behavior as attitudes shift, or public sentiment and politicians will force the issue (the oil and tobacco industries come to mind). The gun industry would do well to cooperate with reasonable regulations that decrease its negative side effects, or it risks harsher regulations down the road.

[1] The gun industry’s estimated total value in 1999 was $24B, or $29B today when adjusted for inflation.

[2] According to the CDC, there were roughly 31,000 deaths involving firearms (including homicides, suicides, and accidents), and  70,000 non-fatal injuries related to guns annually.

[3] Gun death rates peek in the 18-24 age range, and fall sharply after 30, according to the CDC (select Age under Output Group). Assume that the average person killed by a gun loses 35 years of productive life (from 35-70) . 35 years * US per capita income of roughly $40,000 equals $1.4 Million per person. No NPV adjustment is needed, because gun deaths are cumulative over time – last year’s gun deaths contribute to this year’s losses as well.

[4] This study concludes that the medical costs associated with firearms injuries were roughly $2.3B per year in 1994. Assuming a health care rate of inflation of 4% over the last 15 years (lower than the real rate!), this $2.3B equals $4B in 2009 dollars.

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22 Comments

  1. What about the positive impact of guns and their use in self-defense? Unfortunately, the statistics on gun use in self-defense are based mainly on self-reporting surveys, and have a number of accuracy issues.

    In addition, if we attempt to estimate this benefit, we must also count the negative impact of guns and their role in potentially increasing crime in general, which is also hotly disputed.

    Since these two effects are difficult to count, and solid statistics are hard to come by, the basic analysis above stands on a simple measurement of the cost of the externality created by the gun industry.

  2. bogwood said

    You lose credibility with this type of specious argument. There is an offsetting huge gain in lowering the total population,even marginally. There may be reasons to oppose guns, but the economic loss due to fatalities is not one of them.

  3. Bogwood, do you have any numbers to back up your statement that there is an economic gain when lives are lost? I have shown my calculations, that GDP is lost on average when individuals are killed through the (mis)use of guns. Are you implying that the average victim of gun violence is not a productive member of society? Victims of gun violence span the income range, particularly when suicides and accidents are taken into account. I can’t see how your argument makes any sense – at the logical extreme you are implying that the more people die, the more economic growth will rise. Strange.

  4. Mandi said

    My two cents, and compared to your thoughts, mine really are worth only two… Victims of gun violence would be victims of knife violence, or rope violence, or lawn dart violence, if not for guns. People kill people, not guns kill people. Guns don’t get convicted in a court of law, people do.

    Yes, I own guns. My husband is military. We have them in the house for self defense. Are you telling me that if someone breaks into my house tonight to kill, harm, or otherwise maim me, I should just let him/her have their way? Or should I stop them from committing those crimes on me, my family, and possibly other people they decide to visit in the future? What about the economic impact of criminals who will have access to guns no matter what government says? Kind of like not taxing illegal drugs and prostitution – the biggest moneymakers in our society and they contribute NOTHING to the social security system or to FICA. There are law-abiding citizens who own guns and keep them tucked away, “just in case.” I am one of them.

    I’m not trying to be God or the executioner, just defending myself.

  5. Mandi,

    Hypothetically, let’s say there’s a product, and if misused, it’s deadly. Let’s say that somebody invented a pest control device that just plain vaporized all the bugs in your house. Unfortunately, if you change the settings on this device just a little bit, it vaporizes the people in the house too. So people start using the device not just to vaporize bugs, but to vaporize themselves (suicide) and others (homicide). The first time that happened, the government would pull the device off the market, and the makers would end up in endless lawsuits in court!

    What’s this got to do with guns? Guns are sold legally in the US for two purposes: hunting and self defense. Unfortunately, guns are used for criminal violence and suicide almost as much as they are used for their legal purposes. The only reason guns are different from other dangerous products no longer sold is the existence of the 2nd Amendment. Of course, the Second Amendment is part of American history and culture, and that’s not about to change.

    The question I pose is this: are there reasonable ways to make this consumer product, the firearm, cause less negative impact on society? I think that there are. I think that gun owners should join the debate, and propose reasonable ideas to help keep guns out of the wrong hands. If you don’t, then eventually more constrictive rules are likely to be passed.

    I’d offer this analogy to the health care industry: insurers, drug companies, doctors, etc all have known that cost and access problems exist in their industry for decades, but none have shown leadership on the issue. Now, it looks like they may be steamrolled by health care reform.

    • Mandi said

      Interesting analogy with the pest control device! I’m going to take that one further here…

      What is the financial toll of caring for cancer? Pesticides (like how I tied that one in?) on our food supply cause cancer. It’s not a “maybe,” it’s a fact. I may own a gun, but I am plenty green, too. Yes cancer is hereditary, but it needs a trigger. That trigger is all the pesticides with which we poison our food. And not just the crops, but the animals as well. Giving meat-yielding animals growth hormones and antibiotics as a standard practice is criminal in my book. And that financial toll, I’m willing to bet, is a lot larger than guns.

      Guns are not going to stay out of the wrong hands. Even when our *lovely* President takes away our ammunition (like he’s already doing), criminals are going to get it elsewhere. The only way to stop criminals is to ACTUALLY TREAT THEM LIKE CRIMINALS. You break the law, YOU GO TO JAIL.. FOR A LONG TIME. Not this mamby pamby crap of, “well, he’s been good in jail, so we’ll let him out.” It’s not a vacation to be given freedoms like money for hours worked or job training or even time to earn your degree. Make jail more like what it’s in tended to be – devoid of niceties – and criminals will be less likely to commit crimes if they know they are going to pay for it later!

      • Another way to think about this issue: completely forget about gun homicides for a minute.

        There are still 17,000 suicides and 70,000 accidental injuries associated with guns in the US annually – this actually has far more impact than the rate of gun homicide!

        Perhaps the NRA should focus on its original mission – training gun owners to safely use their firearms. Instead it has become a lobbying organization, often lobbying on conservative issues that have nothing to do with guns at all.

        Regarding the argument that guns cannot be kept out of the wrong hands: when was the last time you heard about grenades or fully automatic weapons used in crime in the US? These weapons are available to the military (along with much, much more), but are kept out of private hands. So to me, the question is not whether guns can be kept out of criminal hands, but whether the political will exists to do so.

  6. Steve said

    There will always be a debate about the second amendment to the Constitution. Personally I don’t understand all the hoopla about personal responsibility, either you have it or you don’t. There are over 40,000 deaths every year involving automobiles, yet nobody advocates doing away with them or even controlling them. Well, other than SUVs that is.

    With every freedom comes responsibility, some handle it better than others. There are sufficient numbers of laws on the books presently to deal with gun ownership.

    It’s too bad we can’t make laws against stupidity.

    I also don’t understand what part of “shall not be infringed.” isn’t clear. A cursory look at nra.org will show that the NRA offers all sorts of programs on firearm safety, in addition to lobbying. The need to lobby would not be so critical if our rights weren’t being threatened at every turn by politicians who can’t seem to understand the term, “shall not be infringed.”

  7. Steve, thanks for the comments. A few points:

    1) Automobile usage does result in many thousands of deaths annually. But using the same analysis I used above, the automobile industry contributes significantly to the economy, even when accounting for the loss caused by deaths from using the product. Auto sales alone contribute $200B+ to the economy annually, while gasoline sales add another 300B+ per year, compared to economic losses from death rates around $60B. I haven’t even included used-car sales, or auto servicing and parts in these numbers.

    2) The auto industry is heavily regulated in the US. You have to buy insurance to operate an automobile, you have to register your automobile, you have to pass a test to drive an automobile, and you have to follow many rules on how you drive your automobile (including wearing a seat belt in most states). Moreover, automakers have to follow a huge number of safety-related rules when making cars, including required anti-lock brakes, airbags, seat belts, etc. Gun control advocates can only dream of a fraction of these requirements for gun makers and gun owners!

    I’m actually rather ambivalent on the overall issue of gun control and gun rights, but my original article points out a great weakness for the gun industry – it’s not economically sustainable, and relies solely on the Second Amendment to stay alive. This differs from the US defense industry, which is the immensely profitable part of the overall weapons industry in the US (but it can’t sell to individuals).

    I think there are reasonable trade-offs that could be made to make guns safer in the US, while protecting owners’ rights. Why not loosen the laws around rifles, shotguns, so-called assault rifles, and ammunition, while tightening restrictions on handguns? Handguns are the source of almost all gun-related crime – so gun laws could be loosened for larger weapons, and tightened for handguns. That’s not to say handguns should be banned in any way – but I’m sure responsible compromise is possible.

  8. This is complete propaganda. As others have stated the economic benefit of crimes that have not been successful and the peace of mind of those who have weapons for self defense have been totally disregarded. Then, and this is most likely the biggest argument against armed citizen, is that they are not quite as compliant as unarmed citizens. It has been said that the second amendment is the one that insures all the others… and you cannot put a price tag on that.

  9. Larry, I have based my argument in fact. Yes, there is an economic benefit to crimes averted due to gun ownership, but there is also an economic cost due to crimes committed because of gun ownership.

    Let’s leave those out of the calculation for a moment. As I calculated in my original post, the cost of suicides and accidental injuries alone outweighs the entire economic benefit of the gun industry! So even if there were no homicides in America at all, the gun industry would still be a drag on the economy. It’s easy to see why this is the case. The real gun industry is the American defense industry, and it has annual revenues of $700 Billion. The tiny part of that industry that’s available to we the citizens is not even 1/25th of that number, so its costs dwarf its benefits.

    I don’t really agree that the Second Amendment insures all of the others, simply because a populace armed with small arms can’t turn back tanks and jets. If you don’t believe me, ask any of the insurgents in countries that the US military has defeated in the past 50 years.

    As I’ve said before, I’m not arguing that gun rights be significantly limited – that was done almost a hundred years ago when Americans’ right to buy a tank was denied. What I am arguing is that the gun industry and owners community should lead the way with common sense policies on gun safety, before those policies are decided by others.

  10. http://www.fbi.gov/ucr/cius2007/offenses/expanded_information/data/shrtable_14.html

    Many commenters to this post have noted that the benefits of self-defense with guns outweigh the net economic loss I’ve outlined. According to the FBI, private citizens commit around 200 justifiable homicides per year. This is less than 1% of all deaths related to guns, so it doesn’t significantly change the cost-benefit analysis. Assume for a moment that each justifiable homicide deterred 10 other would-be criminals from attempting a crime. Even then, 2000 crimes (not all homicides) would be deterred, as compared to 31,000 other deaths from firearms use.

    Thus the analysis stands the same – the net economic cost of the small arms industry is large.

  11. Angantyr said

    Your thesis is utterly wrong. For starters, the effectiveness of firearms used in self defense is not measured by the numbers of bodies piled up on your doorstep like cordwood. If the mere *display* of a firearm causes a perp to surrender or run, it has served its purpose. And your premise that a mere “10” other perps would be deterred for every one killed is absurd – while you may (conveniently) dismiss the peer reviewed studies proving millions of crimes deterred, the rest of the serious adults out here do not. (btw, did you bother to include perps wounded and captured in your figures? No, of course not).

    Why don’t you try a more honest comparison between areas of this country that have limited firearms restrictions vs those states and cities that have very strict laws? Why is it that the latter WITHOUT ANY EXCEPTION WHATSOEVER have so much higher crime rates, while the former have very little crime?

    Indeed, what makes you think that private gun ownership has anything to do with rate of criminal activity at all? Back in the 1950’s this nation was awash in guns, which could be had by anyone (yes, even FELONS) cash and carry. And yet our violent crime rates were vanishingly low compared to today. If guns were the problem, how then are the above facts possible? Obviously, guns are not nor were ever the cause of crime. The one thing that has changed is the level of severity of punishment for crime, which has decreased quite a bit overall. Given that virtually all violent crime is caused by repeat offenders, maybe a focus on harsher punishment for really dangerous or potentially dangerous folks (longer jail terms, death penalty, etc.) would achieve your goals? Though you blame guns and, by extension, gun owners for America’s crime, it is obvious you haven’t thought rationally about this subject at all. Tell me, are gun owners opposed to or in favor of harsh punishment for criminals? Obviously, the latter. Therefore, if gun owners were REALLY in charge would we truly have all that much crime? Executed criminals commit no further crimes. This is really not hard to understand. Also, rope is much cheaper than lengthy prison accomodations, let alone repeat crimes.

    You also fail to add in the cost of law enforcement that is dedicated merely to policing firearms, and only incidently capturing actual violent criminals (as opposed to harassing folks who made a clerical error on a form) – nor do you consider how much higher those costs will be if you try to pass more restrictive laws. The massive police state needed to enforce the very UN-reasonable laws you support (btw, do you even KNOW what the current laws are and their provisions? Doubt it…) will be both expensive and result in a murderous tyranny identical to that of the Soviet Union.

    Suicides. It has been irrefutably shown that guns of any kind are a mere arbitrary convenience, not a neccesity. In Canada and elsewhere when guns became unavailable people who wished to end their lives simply used another method (jumping from buildings, poison, etc.) There was NO CHANGE AT ALL in the overall suicide rate. Indeed, Japan, with a total ban on all WEAPONS (even swords) has one of the highest suicide rates in the first world – care to explain that one?

    Of course, the single most glaring omission from your facetious number crunching propaganda is *genocide* You see, the purpose of the 2nd Amendment was to prevent a tyrannical government from gaining power – you know, the kind that round people up and gas them for any reason or no reason at all. You fail to note that by having an armed citzenry keeping government (sort of) in check you easily save more lives than are allegedly lost to guns each year. Some 100-200 MILLION in the last century alone. And don’t think it can’t happen here! In some sense it already has. Some incidents from the Indian Wars in the last century can be argued to fall into this category, and the mass internment of Japanese Americans came close – indeed, I shudder to think about what might have happened had Japan racked up a few more victories in the Pacific, and presented a far more clear and present danger to our shores.

    Judging from the simplisitic analysis based upon incredibly biased assumptions you make (along with some of your “sources” that have been irrefutably discredited for some time now) it is plain that no amount of facts will change your mind.

  12. Angantyr,

    On this site I use facts with verified sources to analyze a variety of issues, and I come up with conclusions that cross the spectrum, from a political and economic standpoint.

    You offered not one source for your logic, so I can’t really debate it. You’re entitled to your opinion, but that doesn’t make it fact. I will note that I am familiar with Lott’s work. One major issue in that and similar work is that the number of purported self-defense uses of firearms (2 million+) exceeds the number of crimes committed, which is highly unlikely. See here:

    http://www.fbi.gov/ucr/cius2007/offenses/violent_crime/index.html

    I’d love to see a carefully reasoned refutation of my work. You have not provided it. I am considering submitting my analysis to Lott and others, as I am interested in reasoned analysis from another point of view.

  13. I have a question for those interested in the topic:

    Where do you believe 2nd Amendment rights end? Should you be allowed to buy a tank? An F-22? If hand-held laser or energy weapons are invented and become effective, should you be allowed to buy those? Or does a 2nd Amendment-protected firearm have to use gunpowder? Does it have to bear any relation to the types of weapons the founders imagined when writing it?

    The Supreme Court has denied access to fully automatic machine guns. Do you agree with this? If not, where do you draw the line, if at all?

    I’m not saying that a line should be drawn – I’m just curious as to where you draw it.

  14. Marty Galyean said

    Following this tortured logic we’d consider the water damage caused by fire safety sprinkler systems in building to be a loss caused by the sprinkler industry. As if a fully burnt down building is worth more somehow.

    The problem is that your cost/benefit analysis appears to contains factors of incredible value to the average person that your are artificially holding down to absurdly small levels for political reasons. The value of a person’s life and freedom from being maimed for life is much higher than your equations apparently allow. Also the value of a last defense against tyranny is much higher for most people than you allow in your philosophical wandering.

    Your ‘calculations’ appear to seek to present a unscalable wall of pristine logic, but important factors in any valid cost/benefit calculation and how you decide to under value or ignore them totally biases and poisons the result.

    What right have you to tell someone that they are not allowed to defend against a killer with a tool designed to stop killers?

    You need to understand something that every gun owner I’m familiar with seems to get. Someone who wants to take away others’ right to defend themselves from killers with a tool designed to stop killers is not a whole lot different than the killers themselves with regards to the fact that they seem perfectly comfortable toying with others lives. You need to understand that by telling people that in your opinion they should defer and waive their self defense imperative to pseudo intellectuals with your mindset you are basically beginning to smell a lot like the killers they are trying to keep themselves and their families safe from in the first place.

  15. I’d be happy to discuss an alternate calculation on the true cost/benefit of gun ownership in the US. To date, no one has provided one.

    • Marty Galyean said

      Your argument that gun defenses against crime exceed crimes does not take into the fact what Lott is included in the reporting is crimes prevented, so there is no crime to report by the FBI.

      I know of know where else in science that critics are required to provide their own full blown analysis in order to find flaws in a given analysis. Even a peer review process doesn’t meet your standard. Your requirement that critics come up with their own edifice/contrivance is ridiculous and completely non-standard. I have pointed out the flaws in your analysis. As have many others in these responses, but you are simply entrenching yourself behind your false premises and the fact that you’ve attached numbers to them.

      I’m telling you that your method is flawed because you undervalue the value of a life saved to the person who saves their own life. No individual should be required by law to value their own life, or their family’s lives less than they see fit as long as they commit no crime defending it.

      You are also making the crude error of assuming that justice has no value. If you examine the gun deaths each year by whether those killed were killed as a criminal involved in criminal activity you find that many of those “children” the CDC discusses in the 18-24 y.o. range are actually drug trafficking, extortionist gang members whose removal from society must save quite a bit of money. Where in your analysis do you account for the savings in prison costs for gang members killed by gang members or the crimes they will not commit? Where in your analysis do you account for the any of the crimes a dead criminal will not commit in the future or savings of their incarceration costs? You don’t. And you don’t appear to care to. And if you are unwilling to accept that whether the shooter is justified or whether the person shot was involved in crime and the implications as to their future involvement in crime, then you can hardly call your analysis scientific. Nor have you accounted for the deterrence that guns provide where no shot is fired at all. How could you?

      You appear to be simply posing behind a glittery chain of numbers with several fragile links and are failing to address criticism in a professional manner.

  16. This has been an interesting discussion, although some people have been unable to avoid name-calling at times. It seems that few topics in America bring up more emotion than gun rights and gun control.

    I’m closing comments on this post at this time. There are lots of good related discussions at http://www.opposingviews.com – feel free to continue the discussion there.

    Other commenters pointed out that I should count the following benefits in weighing the cost/benefit of guns in the US:

    1. The value of self defense and deterrence for gun owners
    2. The value of defense from tyranny

    #2 in particular is difficult to value, as good data is hard to come by, but I’ll give it a shot and see how it changes my analysis.

  17. [...] of gun ownership–armed robberies, aggravated assaults with firearms and even suicide.  A full social cost accounting of gun ownership may be quite higher than what I estimated [...]

  18. [...] cost-benefit ratio might eventually become an issue for the pro-gun lobby (the industry generates economy-wide economic losses of over $15B/year) [...]

  19. [...] cost-benefit ratio might eventually become an issue for the pro-gun lobby (the industry generates economy-wide economic losses of over $15B/year) [...]

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