Eliot O.

How does the political enviroment and the evolution of legislation affect the supply, demand and innovation in the firearm industry?

Today the firearm industry is huge in the United States and continues to grow in size. This contrasts with almost every other country in which guns are heavily restricted or banned. Despite the size of this industry, it has sparked great debate which has fueled many to protest in support or in opposition to it. I have noticed that different factors seem to cause huge surges in sales. For example, whenever, the gun control debate receives national attention the demand for guns skyrockets. The same thing happens during election season. I have also seen how implementing new restrictions and regulations, such as in places like California, have led to new innovations that keep the industry alive. These massive shifts have led me to wonder how the political environment influences the firearm industry in different places around the country.

Demand Influences Supply

The first economic principle is that supply and demand influence each other. This is very prevalent in the firearm industry do to the constant shifts in demand from consumers. In the above graph you can see that while Obama was in office there was a constant increase in the firearms produced. In fact from 2008 to 2016 "U.S. companies...manufactured more than 70 million firearms..." (Paletta). This increase in sales is due to many gun owners fearing that new regulations will prevent them from buying certain firearms since they know that "any suggestion of taking away guns that are already privately held is a political nonstarter" (Paletta). It is for this reason that there are spikes in gun sales whenever there is fear of a democratic candidate being elected. Another factor that has been shown to increase the demand for firearms is the threat of new legislation that could restrict purchases of various firearms. In the graph it can be seen that the height of firearm production occurred in 2013. This was do to initiatives in congress to "ban assault weapons and high-capacity magazines and expand background checks on gun sales" (Time). This push for gun control was enough to cause demand to skyrocket which subsequently cause production to increase from over 8 million to over 10 million. In conclusion, any perceived political threat causes a huge surge in demand which increases the supply.

Competition Lowers Price:

With the huge increase in the production of guns in America there has also been a huge increase in the number of Federal Firearm License holders in the united states. In the ten year period between 2006 and 2016 the number of licensed firearm manufacturers in the United states rose from 2,411 to 11,083. With all of these new firearm manufacturers there was a huge increase in the competition between companies. This has led to many companies producing budget friendly rifles at extremely low prices.

Government Regulation Determines the Products that businesses can produce and sell

This economic principle most apparent in California which has some of the strictest firearm regulation nationwide. In California you can still own an "assault weapon" defined by California as "

1. A semiautomatic, centerfire rifle that has the capacity to accept a detachable magazine and any one of the following:
   1. A pistol grip that protrudes conspicuously beneath the action of the weapon.
   2. A thumbhole stock.
   3. A folding or telescoping stock.
   4. A grenade launcher or flare launcher.
   5. A flash suppressor.
   6. A forward pistol grip."

These regulations have led to the creation of so called "featureless" or "compliant" rifles. Compliant rifles have various features removed from them so that they no longer deemed "assault weapons" which has opened up a whole new market for gun manufacturers which have begun creating new "California compliant products." These products include compliant grips, stocks, angled fore grips and hand stops, muzzle devices and magazine release assemblies. Another example of regulations leading to the creation of new products are bump-fire stocks. These stocks were created to simulate fully automatic fire due to the extremely regulated nature of true fully automatic rifles and are legal due to a the definition of a rifle requiring that "only a single projectile through a rifled bore for each single pull of the trigger." Since with bump fire stocks the trigger must be pulled each time a round is fired they are legal. For this reason, along with the fact that many legislators are trying to regulate them, there has been a huge increase in the size and scope of the market for bump-fire stocks. There is also the case of 80% lower receivers. To give some background, whenever someone purchases a firearm and gets a background check they are actually getting a background check for the firearms receiver. However, it is legal for individuals to manufacture firearms for personal use. This fact has led companies to produce "80% lower receivers." These are basically incomplete receivers that do not have the fire control area milled out and therefore are not considered firearms by the Bureau of Alcohol, Tobacco and Firearms(A.T.F.). For this reason companies, which do not need to have a Federal Firearm License, can sell 80% lowers with no background checks to consumers that can then complete the lower with only a drill press. The 80% lower market has expanded greatly because of this now there are entire firearm companies that don't need to have an FFL because rather than selling complete lowers they sell 80% lowers. Even companies with their FFL sell 80% lowers. This is yet another example of how government regulations lead to the creation of new products.

Source 1

Source 2

Source 3

Source 4

Source 5

Source 6

Source 7