The Market Does(n’t) Produce Non-Smoking Bars

Pulling again from the month-old-but-still-interesting Internet archives, Megan McArdle w;rote about smoking bans and the apparent market failure to produce the desired outcome commonly professed

Henry Farrell’s interesting post on smoking bans reminds me of an ongoing question that I have never heard a libertarian answer satisfactorily. Smoking in bars and so forth is dangerous to bystanders who have pulmonary disease (the dangers of secondhand smoke to those who are not already breathing-impaired seem to be largely mythical). It’s noxious to some other number of people who do not smoke. The libertarian rejoinder to the smoking bans is that bars could choose not to smoke if people wanted it. But in practice, despite the fact that smokers are a minority, and most people hate it, almost no establishment went non-smoking without government fiat.

I don’t see the flaw. People profess to want a lot of things. They don’t always back those claims with corresponding actions.

Here, the libertarian rejoinder should be that those who have pulmonary disease are not entitled to a smoke-free bar environment provided by another person. The same applies to healthy people (like me) who find cigarette smoke abhorrent. When bars were filled with smoke and I didn’t want to inhale smoke, I didn’t give smoke-filled bars my business. Since they survived, I assume enough people didn’t mind the smoke as they said or valued the overall bar experience more.

Lest I give you the impression that I’m trying to educate Ms. McArdle, she mostly gets to the same place in her next paragraph.

This seems like a market failure. You can explain it through preference asymmetry and the profitability of various customer classes: heavy drinkers are more likely to also be heavy smokers, and they are the most profitable customers. Bar owners don’t want big groups of people who are going to take up three tables for an hour and a half while nursing one white wine spritzer apiece. They want people who are there to drink. In a competitive equilibrium, they couldn’t afford to go non-smoking because they’d lose their most profitable customers to all the other bars.

Like I said, I don’t see the flaw. This is the free market responding. Want a smoke-free bar but none exist? Open a smoke-free bar. If there’s a market for it, it will survive without the force of a ban.

Again, Ms. McArdle understands this. But her last paragraph adds an incorrect assumption that allows her to get the idea that there is a flaw in libertarian thinking (emphasis added):

You can explain it, but this doesn’t seem like a good market outcome by any measure. Let me be clear, I’m still against the smoking ban, even though I personally vastly prefer smoke-free environments; I think interfering with property rights like this has even heavier costs. But I also recognize that I’m in a minority. And I think that politically, if not intellectually, the success of smoking bans is a heavy blow to libertarian credibility.

There are only market outcomes here. Good is a subjective evaluation, a declaration that what one expects to occur should occur. But why should it? People who like to smoke and drink in bars probably wouldn’t deem voluntary smoking bans a good outcome. Why don’t their opinions factor into good? I conclude that, while smokers are a minority, people who will tolerate smoking while having (or serving) a beer are not.