In Alabama it is illegal to sell “any device designed or marketed as useful primarily for the stimulation of human genital organs for anything of pecuniary value.” You can’t legally sell a vibrator. This is an extreme example of morality legislation, laws against activities some people consider immoral merely because some people consider them immoral. Why are such laws on the books and how can we get rid of them?
Banning sex toys appears to be policy gone mad. The purchaser benefits, the seller benefits, no one else is directly harmed or helped, so preventing the transaction apparently harms some people and helps no one. How do such laws get passed in the first place? One answer is discussed by Phil Curry and Steeve Mongrain in this 2008 CJE paper (ungated version here): such laws are passed because there is actually an externality generated by the transaction, of sorts. Some people may be offended by the very idea of selling, buying, and using sex toys. These people suffer a “psychic externality” from the transaction.
How to address such psychic externalities in economic theory is difficult. If A is willing to pay $50 for a vibrator but B is willing to pay $75 for A to not own a vibrator, it is inefficient for A to buy a vibrator. Both parties would gain if B bribed A, say, $60 to not buy the vibrator. If transactions costs prevent the parties from such bargaining, regulation banning vibrators may be efficient. But this sort of reasoning is problematic. Consider the psychic externality inflicted on racists by allowing anyone to sit at whichever end of the bus they prefer. Arguing that we should enact policy to internalize this sort of externality is dubious. But people suffering psychic externalities vote, so we should expect to observe morality laws regardless of whether we think policy should attempt to internalize this sort of external effect.
Curry and Mongrain imagine a world in which (following the example here) some people would like to own vibrators and others are disturbed by vibrators. Vibrator owners can exert effort to hide their vibrators. The more effort spent hiding, the less harm is felt by victims. The idea here is that people disturbed by the fact that others use vibrators will be less harmed if vibrators are not brought to their attention. The externality is that the victim is aware of the vibrator, not the vibrator per se. A storefront proudly displaying a wide array of colorful sex toys causes more harm than an unadvertised mail-order vendor.
In such a world, Curry and Mongrain show that if the government cannot directly regulate discretion, the government may find it desirable to ban vibrators. People who want to use vibrators are harmed, but they purchase fewer vibrators and take more effort to be discreet, which in turn reduces the externality, and the net effect is to increase welfare. Prohibition causes discretion, and it is lack of discretion which causes the problem in this world.
The insight here helps to explain morality laws more generally. Laws against gambling, drugs, and prostitution often take the form of prohibiting various transactions or activities in public rather than outright prohibitions, and enforcement is often targeted at the open display of these behaviors. People commonly violate morality laws, but they also exhibit discretion in doing so, as the model predicts. And in times and places where puritan ethics are more prevalent, there are more and stronger laws against private behaviors which violate puritanical norms.
These insights also suggest ways in which reforms of morality laws might be politically feasible. First, laws which attempt to enforce discretion rather than prohibit use may be acceptable to people who experience psychic externalities from others’ use. Make vibrators legal, but prohibit billboards advertising vibrators. Make drugs legal, but only to be sold in plain packaging from government outlets. Generally, permit the behavior which causes the psychic externality, but to whatever extent possible make it illegal not to be discreet when engaging in that behavior.
A second way to reform policy in the long run is to attempt to change preferences. Puritan preferences are anti-social: The puritan benefits when others are harmed by laws reducing behaviors the puritan considers immoral. Everyone becomes better off when anti-social preferences become less prevalent, just as everyone is better off when more people have pro-social preferences. In papers such as Dixit (2008), pro-social norms endogenously evolve through education. In the long run, reducing anti-social norms, through education or through other mechanisms, may be the only feasible way of reforming morality laws.