Applying the System Asset Pricing Model to the U.S. Civilian Firearms Market: Estimating System Welfare Costs Under Current Institutional Constraints

Each dollar of civilian firearms revenue destroys $49 in system welfare

The paper applies the System Asset Pricing Model to the U.S. civilian firearms market and estimates a system welfare cost of 491.5 billion per year against 23.2 billion in revenue, yielding β_W = 21.98.

• 48,204 firearm deaths in 2022 (CDC finalized count) drive the mortality channel alone to 482 billion at 10M VSL per death.
• The published-anchor floor—mortality, work loss, criminal justice, and medical spending—already reaches $491.5B before adding bridge terms.
• The result is not sensitive to denominator choice: even a broader revenue boundary keeps β_W above 20.

Industry impact reports ignore the system-welfare ledger

Industry reports state jobs, wages, and tax receipts but do not net out mortality risk, injury treatment, criminal-justice costs, or community spillovers.

• NSSF 2024 report: 383,000 jobs and $10.97B in tax revenue—but no system-cost denominator.
• The Missing System Theorem (MST) formalizes this: buyer and seller both gain while the system absorbs $491.5B in welfare destruction (Hollow Win outcome).
• The paper's β_W = 21.98 is the empirical depth-reading of that C=0 outcome.

Civilian firearms revenue is $23.2B per year, counted once at production

The denominator isolates direct civilian firearms-and-ammunition receipts, excluding military procurement, induced activity, and multiplier effects.

• Included: manufacturer receipts on civilian long guns, handguns, and ammunition; directly billed compliance revenue.
• Excluded: military/LE procurement, international arms exports, induced employment multipliers, downstream double counting.
• Broader denominator choices (e.g., $91.7B economic-impact figure) would be methodologically invalid and still yield β_W ≈ 5.7.

48,204 deaths per year cost 482 billion at 10M VSL

The mortality channel alone—before morbidity, criminal justice, or lost productivity—exceeds the entire GDP of Denmark.

• Suicides account for 56–61% of deaths (27,000–29,200), homicides 30–35% (14,500–17,000).
• Attribution fraction λ₁ = 0.90 based on U.S. firearm death rate 11.4× peer-nation average; 90% of deaths are 'excess'.
• Channel-specific β_W = 43.4—the highest of any continuously operating domain in the paper's 61-domain comparison set.

Nonfatal injuries add $8.7B in attributed costs

172,000 nonfatal firearm injuries per year generate hospital costs, first-year excess spending (402% increase), and catastrophic long-term care for spinal cord and TBI survivors.

• Initial hospital costs: 1.28B/year annualized from Gani et al. (2023) six-year total of 7.7B.
• First-year excess medical spending: $2,500 per survivor on average.
• Catastrophic-care tail: lifetime costs for spinal cord injury exceed 1M per case; TBI lifetime costs 3M–$5M per case.

Criminal justice costs 8.8B; lost productivity adds 45.7B

Police, courts, incarceration, and ATF enforcement total 11.01B (Everytown/PIRE), scaled by λ₃ = 0.80. Work-loss costs from Song/Everytown are 53.8B, scaled by λ₄ = 0.85.

• Criminal-justice attribution: 80% of costs are firearm-related under current institutional constraints.
• Productivity losses include premature death, disability, and caregiver burden; Lemaire (2005) estimates firearms shorten average life expectancy by 104 days.
• Combined attributed burden from these two channels: $54.5B.

Community spillovers and regime-maintenance costs add $12B

Property-value declines, insurance distortions, school-security spending, and governance failure (PLCAA, lobbying, preemption) are the two bridge-heavy channels.

• Community/property floor: 4.9B in excess life-insurance premiums (Lemaire) + 3.1B in school-security procurement = $8.0B observed annual floor.
• Governance floor: $0.03B in federal lobbying and campaign contributions; the rest is an indicator reserve for regime-maintenance mechanisms.
• The Remington settlement ($73M after Soto) and preemption laws show the institutional architecture that keeps system costs off the ledger.

β_W = 21.98 with 90% CI [17.5, 27.7]

The six-channel Monte Carlo simulation (100,000 draws) yields a median system-welfare cost of 509.9B against 23.2B revenue. The published-anchor floor alone is $491.5B.

• Mortality dominates: 85% of total burden comes from Channel 1.
• Π^SA = Π − κS_W is strongly negative: at κ = 0.02, Π^SA = −$487B.
• P(β_W < 1) = 0.0000%—no draw in 100,000 simulations falls below welfare neutrality.

Industry revenue barely changes under welfare optimization

Even under strict regulation (permit-to-purchase, PLCAA reform, universal background checks), revenue remains 86–96% of baseline, at $9.1B midpoint.

• Australian Paradox: after the 1996 NFA, total firearms in circulation increased from 3.2M to 3.9M; market concentration sustained revenue.
• California and Massachusetts maintain multi-billion-dollar firearms economies under strict rules.
• The welfare gap is driven by the numerator, not an artificially thin denominator.

The U.S. firearms market is an institutional-constraint domain

The measured welfare burden is large, and current constitutional, liability, and political architecture limits the set of interventions capable of moving β_W toward 1.

• PLCAA sharply limits tort pressure; Heller–Bruen narrows regulatory design space; preemption laws block local experimentation.
• Comparative evidence (Australia, UK, Japan) shows large mortality reductions are feasible under different legal regimes.
• The General Game-Change Conjecture guarantees that a rule change R exists—but political-economy constraints make it inaccessible under current U.S. rules.

The paper provides a single welfare ratio for evaluating the market as a whole

It links public-health, legal, and governance literatures to a common metric, and shows that partial reforms—permit-to-purchase, PLCAA reform, safe-storage laws—can reduce harm even if full internalization is politically infeasible.

• The break-even calculation (μ* = 0.980) quantifies how far the current architecture sits from the Win-Win-Win outcome.
• Even partial structural correction yields large welfare payoffs because β_W is so far above 1.
• The framework can be applied to other domains where private transactions coexist with large system-welfare destruction.