Published in The National Post, January 20, 1999, p. C7 [Available in an Italian translation]

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.

Buy Smoking and Liberty by Pierre Lemieux at Amazon.com. Original French version also available.