Social Costs of Tobacco: All Smoke, No Fire
Economic
studies say smoking actually benefits society
by
Pierre
Lemieux
More and more, proposals to increase tobacco taxes and regulate
smoking are based on the "social cost" argument. For example, World Bank
economist Howard Barnum claims that "the world tobacco market produces
an annual global loss of US$200 billion." It is a foregone conclusion
that there is a net social cost of smoking, right?
Not exactly. The public health literature has been notoriously inept
at producing serious studies on the social cost of smoking. As
economists Anil Markandya and David Pearce wrote in the British
Journal of Addiction, "the various estimates produced are generally
without foundation in any adequate theory of social cost." This
indictment also applies to the government’s cost estimates, which it
reiterated yesterday.
Virtually all major economic studies (i.e., studies realized by
academic economists and published in established economic journals) over
the last 20 years show that tobacco, far from imposing a net social
cost, carry net social benefits, a near-unanimity that public health
researchers acknowledge. On balance, the net transfer goes from smokers
to nonsmokers.
Two different issues are at stake: Do nonsmokers as a group subsidize
smokers, and does smoking cause net social costs to society as
a whole?
On the first issue, economists now widely accept that nonsmokers do
not subsidize smokers, if calculated over both groups’ lifetimes. While
smokers only partly pay to have their smoking-related diseases treated,
they more than compensate in tobacco taxes and by collecting much less
in old-age pensions, health care and other public benefits because they
die younger.
The second issue – the balance between social benefits and social
costs for "society as a whole" – is trickier. Despite the many
philosophical, methodological and measurement problems involved in
summing up costs and benefits over all individuals in society, economic
theory shows that a good freely bought and sold on the market generally
brings more benefits than costs. In their March, 1998 Yale Law
Journal article, Professors Jon Hanson and Kyle D. Logue disagree in
what may be the first attempt to answer the economists.
The disagreement concerns the question: "To whom does this body
belong to?" The antismoking camp considers the smoker’s personal loss in
revenues or medical costs from tobacco-related illnesses as a loss "to
society." In its calculations, typically 80% of what they calculate as a
cost that smokers "externalize" to others is made of the smokers’ own
losses. Economists, on the contrary, assume that an individual’s body
belongs to himself, and exclude privately-assumed risks and costs from
social costs.
The two camps also disagree over whether or not an individual can
decide for himself whether the pleasure of smoking outweighs the costs –
including its future risk. The anti-smoking camp believes that smokers,
being addicted, cannot make this choice. Without the addiction argument
– upon which the World Bank’s US$200-billion estimate of smoking’s net
social cost depends – there is basically no economic case against
smoking. Applying standard economic analysis to Barnum’s
back-of-envelope calculations, world tobacco consumption brings a net
social benefit (to consumers and producers) of US$26 billion per
year.
There are a number of potent objections to the addiction argument. In
a recent book, U.S. journalist Jacob Sullum contrasts the concept of
addiction as a "pattern of behavior" with the "voodoo pharmacology" idea
that a drug – be it caffeine or tobacco – completely takes over the free
will of its impotent victim. Many former smokers resume smoking months
or even years after their last withdrawal symptom; and smokers prefer
cigarettes to nicotine gum or patches. The truth, writes Sullum, "is
that smokers are addicted (i.e., have difficulty giving up the habit)
because they like smoking."
An argument of another sort can be borrowed from British economist
Anthony de Jasay. The paternalistic state is addictive like a drug, and
history suggests that this addiction is more dangerous than any herb one
can think of. Who will bring a class action against the public health
movement for having addicted us to Nanny State?
The Yale Law Journal article promotes a compulsory, "cigarette
card ... based on the same magnetic strip (or computer chip) technology
used for credit cards and ATM cards." The card "would … have to be
presented by the smoker each time she [sic] purchased cigarettes [and
it] would keep track of a variety of potentially relevant risk factors,
such as the number of packs purchased by the smoker, which brands the
smoker purchased, and the smoker’s age at time of purchase."
As for the fear of Big Brother, the authors argue, "it may be too
late to worry about the sort of privacy concerns that this proposal
raises." In other words, don’t worry about Big Brother, because he (or
should I say she?) is already with us.