WE NEED MARKET SOLUTIONS FOR RESPONSIBLE GUN CONTROL IN THE UNITED STATES
by Arvind VenkataramanFebruary 22, 2018 - 12:10 pm
A Tragedy in Florida
On February 14th, Valentines Day, and Ash Wednesday, students at Douglas High School in Florida were devastated by a nightmare situation as Nikolas Cruz ruthlessly murdered 17 people in yet another mass shooting.
The latest shooting was not the first mass shooting of 2018, nor do I anticipate it to be the last of the year. It seems every year we have tragic occurrences like this, thoughts and prayers go out, and the gun control advocates, and gun rights advocates go at each other’s throats.
Gun control advocates: Agree with us or you don't care.
Gun rights advocates: We do care.
Gun control advocates: You don't. You're monsters who don't value children. GFY. And give us your guns.
Explain how this exchange betters the country or brings us closer to solutions, media.
10:37 PM - Feb 21, 201831.9K
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My goal in this article is to articulate that we have a gun problem in the United States, and that if the government is not willing to act, we should implement market solutions ranging from corporate decisions to individual actions that rekindle the discourse on this issue including requiring mandatory insurance for firearm owners, prohibiting the use of credit cards and online payment processors to buy firearms, taking a moral stance to divest from investment vehicles that profit from the war economy.
Individuals, corporations, insurance firms, and financial institutions can all do their part to implement gun control in the market.
THE GUN AESTHETIC
Before jumping into some of the logic on the state of gun violence I want to point out that I am no stranger to using guns, because this helps to frame my viewpoint as someone who understands the use case of the product, and not someone who is advocating for gun control to “take people’s guns” because this is a false claim.
While I am not a gun owner, and do not plan on owning a gun in the near future, the first time I shot a gun was at my friends’ family ranch in high school and since then I have had the opportunity to fire various guns ranging from revolvers, handguns, rifles, shotguns, and even fully-automatic “assault weapons” .
From my experience using a fully-automatic weapon, there is a reasonable amount of firepower, and there is an unreasonable amount. There’s no civilian use case where you would need a machine gun for self-defense or hunt an animal.
I think it is important to note this, and for people to have experiences with firearms to learn about responsible usage. The overwhelming majority of gun use in the United States is responsible but we also have major issues with access to firearms and improper vetting of firearm users.
It is the black swan cases that result in tangible loss of life and necessitates action on this issue to limit further violence and provide adequate recourse to those impacted by gun violence.
THE STATE OF MASS SHOOTINGS IN THE US
The study uses instances where three or more victims were killed as a mass shooting from 1982 to 2012, and then cases with four or more victims from 2012 onwards, but does not include killings related to robberies or gang violence. For more info on the joint study, check out the BBC’s analysis on the state of gun violence in the US.
In the United States, gun-related killings count for 64% of homicides. Of total gun deaths, While around 61% of gun deaths in 2014 were attributed to suicide, 30% were attributed to homicide in 2014.
While mass shootings represent a small proportion of gun homicides, we cannot ignore that mass shootings have become more dangerous every year and that they are becoming more frequent. Three of the shootings with the highest numbers of casualties have all occurred in the last 10 years.
MOBILIZING YOUTH IN DISCOURSE ON GUN CONTROL
One solution to gun control is the continued discussion of the issue at the grassroots, which is largely driven by youth movements. The Parkland students who survived the incident have begun a campaign called #NeverAgain to call attention to the continued mass shootings.
Students have organized walkouts at various campuses such as the March for Our Lives, the April 20th Columbine Anniversary Walkouts. A general uneasiness has enveloped many school campuses. Even at my alma mater, a high school in a relatively affluent Fort Worth suburb, students are anxious every time the PA makes an announcement, or someone knocks at their teacher’s door. The whole mindset of going to school has changed, and there is an atmosphere of fear permeating from school shootings.
First, is the idea that historically it is young people who are behind movements of social change.
“Whenever we have had a movement with widespread mobilization through history, young people are at the forefront,” says Costanza-Chock, author of a paper entitled, “You and Social Movements: Key Lessons for Allies.”
Second, is the idea that it is younger segments of the population that pay for the societal costs of adults’ policies. According to the report,
“We understand that we are going to inherit this Earth and its government and its laws,so it’s up to us to forge our own path in the future and be proud of it.”
Youth pay the price for adult inaction in other ways. Constanza-Chock, the MIT professor, says there is a “war on youth” that pushes many of them to become impassioned activists.
Third, is the passion for social action that young people have despite not having the fundraising backing them like special interest groups like the NRA Have. “Young people can have an advantage over someone working full time because they have time to mobilize and to engage in sustained mobilization,” a gun control advocate exclaims.
Fourth, is how protest tactics have evolved with the use of social media. With the evolution of social media, it has become easier for groups to network with each other and spread the word mobilizing people who support similar causes.
Consolidation of public opinion is a powerful market force because consumer behavior trickles up to buying decisions, and voting decisions which ultimately change policy, and how consumption dollars are allocated.
A Market Solution to Gun Control
We need to come to terms with the fact that we do have a gun problem. And a mental health problem, but we cant be blind to the gun problem.
Gun control is a tough subject because the NRA contributes heavily to stifling discussion about the topic, 276 lawmakers who have received funding from the NRA were recently named, along with the amount in donations they have received, and it is tough to deny the impact that special interest groups have had on stifling discussion on the issue in Washington.
Americans have an existential fear that our 2nd Amendment Rights will be impeded by a rogue government, and that if gun control is passed, guns will be confiscated and people will be put on a watchlist. Gun rights advocates usually point to two policies as examples of rogue gun control- the Australian policy, and the Japanese policy.
Australia responded to a 1996 mass shooting in Port Arthur where 35 people died, and 18 were wounded by passing strict gun control across each of their states and territories where semi-automatic and automatic weapons were banned, imports were prohibited, and lawmakers introduced a national buyback program funded by a Medicare tax to incentivize owners of selective fire weapons to return them.
In Japan, a nation that is largely pacifistic, firearms are nearly universally prohibited outside of special use cases for shotguns, handguns, or pellet rifles. Civilians must go through a class, written test, score 90% accuracy on a gun range test, take a mental health screening, drug screen, and then take a criminal background check with their local police officers. Gun owners must also register their firearm, the specific location, and show that the gun and ammunition are securely stored separately. In Japan, firearms are inspected by the police on an annual basis, and users must re-take the assessment every three years to show their fitness and maintain their certification.
These laws serve as a spectrum to study the two sides of gun control, a spectrum to study a range of possibilities nations have taken to address the problem. Obviously, Japan, a nation with the population around a third of the United States, and Australia, a nation with a population the size of Texas, are not one to one proxies to our nation.
But in both cases, responsible gun usage has been incentivized where firearm homicides have nearly been eliminated. Japan had 11 gun deaths in 2008 compared to 12,000 in the US, and Australia has not had a mass shooting in the last 22 years, and in 2014 there were 32 gun homicides among 24 million people.
We cannot reasonably implement a policy of confiscation or a national gun registry like Australia and implemented exactly, but they serve as models on how to implement vetting procedures.
If Washington won’t fix gun control, we need a market solution to gun control to make it more difficult for those who are prone to committing gun crimes to purchase weapons, review how firearms are purchased, and add a cost to the societal harms from irresponsible gun use, and to take a moral stance against firms that profit off of products that are harmful to human life.
Prohibit the Purchase of Firearms using Credit Cards
Credit card firms and payment processors can block the purchase of firearms from their services and platforms. Andrew Sorkin described in the New York Times that financial firms who claim to have a sense of moral responsibility can confront social challenges if credit card companies like Visa, Mastercard and American Express and credit card processors like First Data; and banks like JPMorgan Chase and Wells Fargo take a stance against disallowing purchases of firearms or assault weapons specifically.
According to Sorkin, “PayPal, Square, Stripe and Apple Pay announced years ago that they would not allow their services to be used for the sale of firearms”.’
There is already a precedent for credit card companies to ban the purchase of certain products, including when JPMorgan Chase, Citigroup and Bank of America banned the use of credit cards to buy Bitcoin and other cryptocurrencies.
Using online payment processors, you can buy a gun relatively easily on Ebay or even from Pinterest.
There are challenges to this policy both from the side of retailers and manufacturers, and consumers who want the freedom to dictate how they spend their money. Yet gun sellers are not a protected class like age, race, gender, religion or political affiliation, so this could be a reasonable policy.
There is also the issue of whether prohibiting credit sales of firearms would push sales into the gray or black market where there is even less regulation.
Require Mandatory Liability Insurance for Firearms
We need to also consider requiring liability insurance like many states do for drivers to price the negative externalities associated with gun use and create a solution for accountability as it pertains to gun usage.
Under such a policy, users would pay a deductible depending on factors like the type of gun, the expected usage of the gun, the number of registered users of the firearm, the state of the firearm’s storage, legal record associated with the gun, and other factors to where the propensity for high-risk behavior is given an explicit cost, and so that if a family member’s firearm is used to commit a crime, the owner is also liable.
This policy is a price for the negative externalities that guns create and is similar in principle to the concept of liability insurance requirements for drivers, and in terms of impact, the magnitude is similar.
Insurance would also provide a means of compensation to victims, survivors, and their families, giving victims of accident or intentional mayhem compensation for injury (and survivors, for loss of life), as well as a way to cover hospital bills and rehabilitation, and as is too often the case, funeral costs.
According to data from the Centers for Disease Control from 2015, guns are now killing as many people as cars in the US for the first time in more than 60 years, partially attributed to falling motor vehicle deaths, and the increase in gun-related deaths both from suicide and homicide.
Mandatory firearm insurance is not a new idea, and was previously suggested in 2015 with the Firearm Risk Protection Act which would have required gun buyers to have liability insurance coverage before being allowed to purchase a weapon, and would impose a fine of $10,000 if an owner is found not to have it. Service members and law enforcement officers, however, would be exempt from the requirement.
The Sponsor of the Bill, House Democrat Carolyn Maloney (D-NY) cited the evidence of gun violence increasing while vehicular deaths have decreased and stated that
“An insurance requirement would allow the free market to encourage cautious behavior and help save lives. Adequate liability coverage would also ensure that the victims of gun violence are fairly compensated when crimes or accidents occur.”
The 2015 bill was met with opposition and did not get passed because some felt the provisions were not strict enough, and also from gun rights advocates who felt it was an unreasonable restriction on access to firearms.
Others claim that the policy would be regressive and disproportionately affect poorer Americans. This may be a valid claim, but is also the logic behind why we need insurance like we have for other dangerous objects like vehicles, heavy machinery, et al. The policy is regressive to create a cost for potentially dangerous behavior.
Another criticism is that the policy would disproportionately benefit insurance industries, the same way that Obamacare led to increased profits for insurance firms. However we must compare the economic impact of insurance innovation with the lack of compensation shooting survivors receive, the societal cost of repeated shootings, and other tangible as well as intangible impacts that not having mandatory insurance creates.
Perhaps the biggest challenge to the policy is the idea that adoption by latent criminals will be low, and that criminals will not fear sanctions for homicide or the penalty for not purchasing insurance.
The answer to this challenge is that we need to implement this policy retroactively to current gun users, and at the point of sale for new gun users to ensure that there is some proof of liability and recourse.
Alternatively, we pass the insurance requirement to gun manufacturers to make firearms firms liable for criminal actions of gun users. This would be tougher to implement but could be one way of grandfathering in the policy since a gun registry is infeasible.
Overall requiring liability insurance is a responsible policy tool to implement gun control from a free market perspective and should strongly be reconsidered by policymakers to take the spirit of the 2015 Bill and reimplement it with a broader scope, especially in face of continued shootings.
Institutional Investors should Divest from Firearms Firms
Financial institutions outside of insurance firms and banks can also do their part to implement gun control. According to an analysis by Jon Hale, the director for sustainable investing research at Morningstar, mutual funds are the largest owners of the four publicly traded gun and ammunition manufacturers in the US, including American Outdoor Brands (AOB), who makes the AR-15 rifle.
The Vanguard Group, a large mutual / exchange traded fund manager, owns 8% of AOB shares and is AOB’s largest institutional shareholder. According to Hale, “Mutual funds own approximately 37% of AOB shares, according to Morningstar estimates based on publicly reported fund portfolios” and Invesco’s Small Cap Value fund on its own owns nearly as much AOB as Vanguard owns across several funds.
Mutual funds and exchange traded funds ought to divest these holdings from gun makers to show a moral imperative in how they generate returns. Some managers say that since they are “required” to replicate a third-party index, their hands are tied, but this seems to be driven more by profits than a commmitment to morality and operational limitations.
Coming from a background in studying alternative asset investments, it is possible to replicate a third-party index by rebalancing the combination of stocks, ETF’s, and derivatives to emulate the riskiness and returns of the index, but without direct exposure to the investments in the firearm firms. This argument seems like a cop-out in the name of additional profits, and fund managers have the required skills and tools to divest without it impacting their returns.
Hale concurs and states that fund managers like Blackrock or Vanguard could notify shareholders about a decision to not invest in gun stocks, rebalance their portfolios by changing the composition of underlying stocks and derivatives, or require their index providers to remove gun stocks.
As more institutional investors, pension funds, and endowments move into passive investment strategies and index funds, fund providers have had to ramp up engagement activities with the firms they invest in to cater to investment preferences.
Yet according to Hale “I’ve seen no evidence that any major mutual-fund company has engaged with the gun makers in their portfolios” which indicates a gap in engagement and activism from fund managers to the firearm industry.
Not a Clear Cut Solution
There is no one solution to gun control, and our nation needs a portfolio of options to consider in order to come to a responsible decision.
Whether it comes from Washington, from financial firms, or individual consumers, we can no longer be blind to the problem of gun culture in the United States and the societal harms that it has.
The fact that we have now become numb to gun violence and mass shootings as a society, when people blame “bad parenting”, “the collapse of family values” to try and deflect the issue should be evidence enough that we are ignoring the issue at hand.
I hope firms, our government, and interest groups take these arguments into mind as they consider policies, and continue the conversation on this issue so that mass shootings are no longer a commonplace part of our society.