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.

A trailer is not a gun show!

I grew up on a country road outside the small town of Leesville, LA. At the entrance to the road was a trailer where a friend of mine used to live. Some time after he moved away, the trailer became “Bunn & Sons Gun Shop,” with a red arrow painted to indicate the “gun show” around back. Why was a gun show in continuous operation behind a trailer on my road?

I didn’t know it at the time, but it turns out that the “gun show” was a response to the Brady Bill, enabling Bunn & Sons to use a loophole in the bill to sell handguns without a mandatory background check. Now, since this was the rural south, folks would always complain about how somebody was trying to take away their 2nd amendment rights. What is the actual text of the 2nd amendment?

A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed. – Bill of Rights, Amendment II

Reading these words, and interpreting them literally, it seems that the second amendment protects the right of the people to bear arms as part of a well-regulated militia. While the NRA would like to delete the first clause of the Amendment, it defines the right in the context of a militia, as noted in this summary at Thomson Findlaw.

The courts have clearly decided that the right to own a tank, rocket-propelled grenade launcher, or even a sawed-off shotgun is not necessarily protected under the 2nd Amendment. In the US v Miller, 1939, the Supreme Court Justice McReynolds wrote,

“In the absence of any evidence tending to show that possession or use of a ‘shotgun having a barrel of less than eighteen inches in length’ at this time has some reasonable relationship to the preservation or efficiency of a well regulated militia, we cannot say that the Second Amendment guarantees the right to keep and bear such an instrument.”

Federal firearms regulations also regulate the sale and transfer of firearms through the aforementioned Brady Bill and other legislation. Until recently, they also banned an entire class of semi-automatic weapons known as assault weapons.

Back to Bunn & Sons, and their “gun show”: all Bunn may have been trying to do was increase his business by removing the hurdle of an electronic background check from the sales process. In a larger context, the NRA has fought to keep the private-sale loophole available, in order to eliminate the background check process where possible. But why is the NRA so afraid of background checks? They argue that the overwhelming majority of American gun owners are law abiding citizens; then why not subject gun sales to the same level of scrutiny placed on prescription drug sales? For better or worse, guns are a part of American culture, and European-style gun restrictions will not and should not take place here. But with the advent of instant background checks, is it too much to ask that we control gun sales at least as much as we control sales of heart medication?