Date: Thu, 28 Sep 95 02:08:55 CST From: "jim blair" To: alt-politics-economics@cs.utexas.edu, alt-politics-libertarian@cs.utexas.edu, gregor@nrlfs.nrl.navy.mil,ckrantz@redshift.com, winklerj@cadvision.com,gary@inquest.net,kaz@news.cais.com, tick@tamu.edu,dlindsey@netcom.com Cc: BCc: Subject: The Cost of Tobacco: + or - ?? The Cost of Tobacco There has been a long thread on the topic of US tobacco subsidies and the cost of smoking. It started when someone asked how much money the government spends on tobacco subsidies. The discussion ranged over almost everything except the question asked. The legitimacy of taxes and the nature of democracy were discussed. Smoking was denounced as vile and defended as a basic right, and some figures were given about the medical cost of smoking. Even racism and sexism entered the discussion. It was the assumption of many of the posters that there is a free market in tobacco in the US. That if a farmer wants to grow it he can, and that the market determines the supply. This is not the case. But the "cost of smoking" offers a good example of how "facts and figures" can be used to "prove" contradictory propositions, depending on the assumptions you make. I will repost my CREATION of FACTS article soon for those of you who want more examples of this. WHO CAN GROW TOBACCO? The policy of the government towards tobacco is clearly pointed in two opposite directions. They want to protect the farmer who grows it while discouraging people from smoking or chewing it. It is the Department of Agriculture vs. the Surgeon General. Since a direct payment from the treasury to tobacco farmers could be the target of budget cutters, a scheme has evolved which insures income to the growers without an outlay from the general public (at least DIRECTLY-more on indirect costs later). The system is based on restricting the supply. A farmer must have a permit to grow tobacco. If you think it is a profitable crop (it is!) and want to grow it, how do you get a permit? You can't. They are only for families who have been growing it for generations. It is this restricted supply which keeps the price up. You might be able to buy the permit from a current tobacco farmer. Since farmers (with permits!) are encouraged to grow it, but people are encouraged to stop using it, where does the government want it to go? It is a big and growing EXPORT product. Sell it, especially to the people of the third world. This helps our "balance of trade", and THEIR health problems are not OUR concern. WHY NOT COKE? Of course this does raise some interesting possibilities. Suppose some other country (Columbia or Turkey for example) legalized cocaine or opium and treated it the way we treat tobacco? This could lead to some amusing policy statements by the US State Department, which would have to denounce THEIR policy of exporting THEIR crop while defending OUR policy of exporting tobacco. MEDICAL COSTS: + or - ?? But I want to deal with the medical/cost issue of tobacco. You have all seen figures on the adverse health effects of smoking (from lung cancer to increased risk of heart disease) and the billions of dollars of medical expenses caused by smoking. Some have claimed that cigarettes would have to be taxed at $2-3 per pack to cover the increased medical cost society pays for smokers. Are these figures accurate? Let me reveal my bias on this issue (everyone has one). I don't smoke (never started) and consider it stupid to do so. But I am "libertarian" enough to think that people should be able to live their own lives and make their own choices, so long as they don't harm OTHERS. I support work place and other such "second hand smoke" bans. But life is to be enjoyed rather than extended, and some of MY pleasures may shorten my life. While some dispute the adverse health effects of tobacco, I think the data are convincing. It is true that controlled experiments (as we would require on rats) are not done on people, and there is the possibility that smoking does not CAUSE the health problems, but rather people with problems are drawn to smoking. But I just don't believe it. So I think smoking CAUSES health problems. Does this mean it adds a dollar value COST to society? NO, I don't think so. Quite the opposite, from a strictly monetary view, I think smoking SAVES society money. How can this be, you ask with astonishment? What about all those medical bills from treating smokers? What about all those "smoking related deaths"? How can I make such a claim? Saves money indeed!? Statistics are tricky to interpret. And depending on the ASSUMPTIONS made, the same data can be used to "prove" many different things. The "cost of smoking" is another excellent example. Anyway, those who put out the figures on how much smoking costs society use smoking related deaths, and the associated medical costs to arrive at their figures. But they neglect the fact that all those people would die of something ELSE if they didn't die from smoking. The "death rate" is not effected by smoking: it is one per person. On average, a person's medical costs increase with age. And their contribution to society decreases with retirement. (Of course there are individual exceptions, but in aggregate this is true). Smoking related deaths (cancer and heart disease) kill people mostly late in their productive life or early in retirement. And those who don't smoke tend to live longer in retirement where they run up more medical bills before they die. (remember medical costs, because of ever newer technology, rise much faster than the general inflation rate). The hard fact is that smokers die younger, and thus save the rest of us money. Maybe a tobacco subsidy does make economic sense. It could even help rescue Social Security. . ,,,,,,, _______________ooo___( O O )___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) For a good time call http://www.geocities.com/capitolhill/4834 There is an article in USA TODAY (Tuesday, April 24, 1997. Sectoin D, p1) which adds another dimension to this situation. The title is "Smokers are in Greater Danger", but the subtitle is more interesting: "With Less Nicotine, Consumption Grows." The National Cancer Institute released a report based on a study of 2.7 million smokers over a period of from 6 to 26 years. One of the conclusions is that the MORE nicotine in a cigarette the SAFER it is! The reason being that if cigarettes have LESS nicotine, people smoke more of them. The assumption made to explain this result is that the smoker wants/needs a certain amount of nicotine; the less in each cigarette, the more they smoke. And it is the CO, smoke and tar in the cigarette that is the most hazardous. The low and high nicotine cigarettes are about equal in those. So when all this business came up about how the tobacco companies were adjusting/boosting the nicotine level of their cigaretts (what really should be described as quality control--just like the distillers do to the alcohol level in rum), the reply could have been: "Yes, we are just trying to make our cigarettes safer!" STUDY "PROVES" ME RIGHT!! USA TODAY Wednesday November 19,'97 reported the results of a study published in the NEW ENGLAND JOURNAL of MEDICINE. A group from Erasmus University in the Netherlands studied lifetime health care costs of smokers and non-smokers, and concluded that the non-smokers spend about 30% more on health care. The main reason is that the non-smokers live an average of 7 years longer. ,,,,,,, _______________ooo___( O O )___ooo_______________ (_) HISTORY: After the U.S. Surgeon General publicly announced the dangers of tobacco use in 1965, the U.S. became the first country to impose mandatory health warning labels on all cigarette packs. This one label was located on the side panel of the cigarette pack and read, "Caution: Cigarette smoking may be hazardous to your health." In 1984, the U.S. replaced that label with a system of four rotating warning labels that appear on a quarterly basis. These warning labels, which are still in effect, are shown below: Current U.S. Cigarette Warning Labels U.S. Surgeon General's Warning: Smoking causes lung cancer, heart disease, emphysema, and may complicate pregnancy Quitting smoking now greatly reduces serious risks to your health Smoking by pregnant women may result in fetal injury, premature birth, and low birth weight Cigarette smoke contains carbon monoxide In over 40 years of antismoking litigation, no tobacco company has yet paid any money to a smoker. The first case that they lost was a $400,000 award to the family of Rose Cipollone of New Jersey in 1988. That award was overturned on appeal and the case was later dropped. The second case was a $750,000 award to Florida former smoker Grady Carter against Brown & Williamson Tobacco Corporation. That decision was overturned by a Florida appeals court, but in November 2000 the Florida Supreme Court reversed the appeals court decision and reinstated the award. Brown & Williamson plan to appeal to the US Supreme Court claiming that the Florida decision was in direct conflict with the US Supreme Court decision in the Cipollone case. Last summer, a class-action lawsuit in Miami produced a $145 billion verdict, which a judge upheld in early November 2000. The case still faces appeals in state courts by Brown & Williamson and four other large tobacco companies. There is an extensive history of tabacco at: http://www.tobacco.org/History/Tobacco_History.html Also, for an opposing view of tobacco costs, see: http://econ-www.mit.edu/faculty/gruberj/papers.htm ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) For a good time call http://www.geocities.com/capitolhill/4834