Here's a comment I posted on an interesting blog called The Catholic Atheist:

A little off topic but your post inspired me:

I've never been of faith but I've always thought of God as an imaginary number (the ones that engineers and mathematicians study). An imaginary number is basically the square root of a negative number which, after all my years of math, I still don't understand. But, some people do. Some people live in imaginary numbers, creating complex systems based on them, theorizing proofs and conjectures that assume their existence.

As an economist I only study what is real, or rather what is tangible (kinda). We don't study imaginary numbers but we do study "the invisible hand" which is just saying that there exists an unseen mechanism that allows markets to be self-regulating. So what sounds more crazy, telling someone you believe in a supreme being or that you believe in this detached hand that goes around telling us what price we should buy something at. I would say the latter sounds a great deal crazier.

Mathematicians get to represent their imaginary numbers with a small i, us economists get to represent our detached hand with arrows on a demand and supply diagram (kinda lame) and Catholics get to represent Christ with something to eat and drink. Not a shabby deal on the Catholic side.

Basically what I'm saying is that though iconoclasm is banned from most religions, it is human nature to represent what we cannot see; whether it's in math, economics, or religion.

Economic Costs of Banning Books

Banning books is nearly a universal wrong, though many countries revel in the practice. These countries generally cannot be persuaded by the current arguments against banning books such as "It's just wrong" and "It inhibits freedom of choice." So I am going to try another route: what are the economic costs and benefits to banning books. I will first focus on the benefits of banning books and their economic rewards and then move on to the easier and more accurate analysis of what happens in the economy when books are banned.

Arguments for banning books are as follows

1. Reduce externalities caused by radical thought
   
2. True paternalism

To analyze the effect of externalities on a market we can refer to the graph below. The conventional example is a factory that has a negative externality of polution. The private cost is the cost structure that the firm faces without internalizing the societal harm caused by pollution. The social cost is the cost structure that the firm would face if the firm was made responsible for the fixing, reducing, or simply compensating the harm done to society. The difference between the social cost and the private cost is the cost of the externality.

Theoretically, countries that ban books would assume that the externality caused by such books would be so large as to push the cost curve (also known as supply) high enough so as to no longer have an intersection between demand and supply as shown below.

The second argument is true paternalism which is essentially the thought that the government knows better what is good for a person than does that person. This occurs in the US in the form of inalienable rights. A popular example is the market for human kidneys. It is illegal in the US to sell your kidney even though it belongs to you. It is a form of true paternalism in which the government believes that you will be better off keeping both of your kidneys than selling one of them. In the case of banning books, the government believes that the harm you will be caused by reading certain books is too high to risk and therefore, the government bans those books to prevent any harm.

The costs of banning books are much greater and varied.

1. Increased risk of book creation (private)
   
2. Restraint of trade (social)
   
3. Reduced potential surplus value from knowledge (social)
   

There is a certain risk involved when deciding to write a book. Economists call it the costs of creativity and they are partially determined by the expected profits of the book once it is published. Expected profits are a function of the payment schedule and a the probability of attaining each payment. If a government is banning books then they are essentially reducing expected profits by the probability that the book will be banned.

Example:

Assume that to write a book there is only one cost which is fixed at $20,000 and that there is only one profit outcome at $50,000. Therefore expected revenue = (1)(50,000) = $50,000. Multiplying by 1 stands for the probability that this outcome will occur which in this case is 100%. Expected costs is fixed at $20,000 so the writer will have positive profits of $30,000 and will write the book.

Now suppose the government starts banning books and the probability that a book will be banned is 75%. Therefore, the new expected revenue = (.35)(50,000)+(.75)(0) = $17,500. In this case the writer will not pursue writing the book because the expected revenue is less than expected costs.

The second cost of banning books is restraining trade by prohibiting voluntary transactions. This is simple to analyze; when voluntary transactions are quashed the market becomes inefficient because an excess is created, in this case, we would see an excess in demand.

Books are not like other commodities in that they can foster surplus value by aiding in the creation of ideas. When books are banned, we essentially take away potential surplus value that could have otherwise existed. This reduces social welfare. It is also seen that when opportunities for surplus value to be created is taken away from society, the economy is not able to grow at an optimal level.