Do Anti-Smoking Activists Know the Restaurant Business Better Than Restaurateurs Do?
Jacob Sullum | September 19, 2007, 12:30pm
I've always been puzzled by claims that smoking bans are good for the bar and restaurant industry. If so, why would the people whose livelihoods are a stake stubbornly continue to permit smoking and resist anti-smoking ordinances? It's implausible that anti-smoking activists would know more about a given business's bottom line than the owner does, let alone that bar and restaurant owners as a class would be systematically blind to their own interests vis-à-vis smoking rules when they pay careful attention to every other variable that affects their profits. Yet anti-smoking activists such as Stanton Glantz insist that the tobacco industry has brainwashed bar and restaurant owners into believing that smoking bans will hurt them, when in fact such laws increase their profitability by reducing personnel costs and attracting more customers. In the latest issue of Econ Journal Watch, David Henderson, an economist at the Naval Postgraduate School in Monterey (and a reason contributor), exposes the weaknesses in this argument, focusing on a 2004 Contemporay Economic Policy article that Glantz, a professor of medicine at the University of California, San Francisco, co-authored with Benjamin Alamar, now a professor of management at Atherton College.
Using a database that includes restaurant sale prices and gross revenues, Alamar and Glantz find that restaurants in jurisdictions with comprehensive smoking bans have higher price-to-revenue ratios than restaurants in other jurisdictions. "There was a median increase of 16%...in the sale price of a restaurant in a jurisdiction with a smoke-free law compared to a comparable restaurant in a community without such a law," they write. "This result indicates that contrary to claims made by opponents of smoke-free laws, these laws are associated with an increase in restaurant profitability." Contrary to Alamar and Glantz's implication, Henderson notes, they did not actually look at changes in restaurant sale prices that followed the adoption of smoking bans—only at differences across jurisdictions. He also points out that higher price-to-revenue ratios could result from lower revenue as well as higher sale prices. Just as important, the study's sample omits restaurants that were not sold, perhaps because they were not profitable enough or even because they went out of business as a result of a smoking ban.
That last point relates to a broader criticism of Glantz's claims about the economic impact of smoking bans. As Henderson points out, a smoking ban is most likely to hurt bars and restaurants that cater to smokers. The owners of these businesses have calculated that they gain more by allowing smoking than they lose, that the smokers (and smokers' friends) attracted by a smoker-friendly policy spend enough money to outweigh the business of potential customers repelled by the smoke. If these owners are right, they will lose money as a result of a smoking ban, while their competitors might make more once competition based on smoking rules is no longer permitted. The customers who valued the opportunity to smoke lose too. Neither kind of loss shows up in gross data on revenues or sale prices.
Henderson notes that Alamar and Glantz claim "externalities" require government intervention in this area but never identify the relevant externalities. Since neither customers nor employees are forced to spend time in bars or restaurants that allow smoking, they can decide for themselves whether they're willing to put up with the smoke. The owners, in turn, suffer any resulting loss of business or increase in personnel costs (because it's harder to find workers, because they demand higher compensation, or, as Alamar and Glantz suggest, because they miss more work days and have higher health care costs as a result of secondhand smoke). Unlike, say, the harm caused by toxins dumped into a river, the costs of secondhand smoke in a bar or restaurant are internalized. In their reply to Henderson, Alamar and Glantz bizarrely insist this is not the case:
It is not possible for a restaurant owner to internalize the cost of second-hand smoke on the health of the staff or the patrons. There is no mechanism by which a restaurant owner can compensate a patron for any health costs related to second-hand smoke, therefore it is not possible for the owner to have completely internalized the costs of the externality imposed by the smoker.
In their original paper, they likewise claim the costs of secondhand smoke exposure in a bar or restaurant cannot be internalized:
Smokers and nonsmokers are not two well-defined groups but are rather numerous individuals with varied tolerances for smoke and willingness to refrain from smoking or to go outside to smoke. Even if the staff of the restaurant is ignored, the number of interested parties is very large with greatly varied preferences in regard to the externality. The large number of interested parties would cause negotiation costs to be high, which violates the assumption of low costs in the Coase theorem.
Henderson deftly exposes the fallacy:
The restaurant owner...no more need get huge numbers of people with varying smoking preferences together to make bargains than he needs to get people together to decide the menu, the lighting, the music, and the air conditioning. In normal discussions of negative externalities, it is costly for the sufferer not only to negotiate but also to exit. It is usually assumed that they are stuck in the "game," and the emphasis is on the cost of negotiation. But in the matter of going to a restaurant, the parties in question can easily decide not to be party at all. They can drive to a different restaurant or eat at home. All the restaurant owner need do is decide on a policy, announce it to the world, and then see what happens.
Although Henderson confines himself to the economics of government-imposed smoking bans, the issues of profitability and externalities both have moral dimensions. Even if restaurateurs know less about their own business than Stanton Glantz does, it's still their business, theirs to fritter away through unprofitable smoking policies if they so choose. And since exposure to secondhand smoke in a bar or restaurant is not forced on anyone, there is no externality to be corrected and therefore no moral justification for the use of force by people who prefer a smoke-free environment.
Paul | September 19, 2007, 5:04pm | #
Lee Iacocca, certianly no intellectual slouch, testified before Congress that banning leaded gasoline would result in the elimination of the automobile manufacturing industry by 1975. The environmental activists and the majority of Congressmen who passed the ban disagreed with him.
You've made a good point, here, joe. I never run away from a good point, even if I might impale myself upon it.
You are very correct-- the automobile industry has fought tooth-and-nail every safety and environmental regulation suggested, fearmongering that it'll be the end of bidness as they know it. Any libertarian who ignores this is dishonest.
While it can be argued that the smoking ban is the same, it's got some subtle but important differences.
For one, no one tried to ban automobiles. I know this isn't in direct contrast to what's going on with smoking, but it's informative. Also, the regulations were primarily targeted at the manufacturers, not the consumer. In the case of smoking bans, the regulation affects the consumers-- it targets the behavior of the people on the street. More accurately, it forces private establishments to regulate the behavior of their customer. Also, big corporations like GM are capitalists the way Hillary Clinton is a capitalist: Not very. They're interested in economic protection, not economic freedom. What I'm getting at is that Lee Iacoca didn't want to retool his factories, period. Iacoca was fearing he'd have to upgrade his factories into bankruptcy. In the case of the restaurant, they're voicing an arguably legitimate fear that they're being forced to make changes which will eliminate customers.
It's probably hard to say what restaurants have lost money or which have improved their bottom lines. As we all very well know, there are always the pointy-headed customers who won't go anywhere a cigarette might be lit. They'll see an uptick from those customers...maybe. There are places where people want to smoke-- bars that cater to a more working class crowd-- who have seen dramatic decreases in clientele. There are restaurants which were already smoke free which should see no increase or decrease in bottom line attributable to the smoking ban.
I might tend to agree with you that the situations were comparable, if by enacting a smoking ban, restaraunts would have to retool their industry. This outcry from restaurants comes from a more honest fear that by not allowing customers to do something they want to do, they'll go home and do it instead.
Brendan Perez | September 19, 2007, 5:11pm | #
The existence of regulations does not justify more regulation.
Most of the regulations pertaining to health relate to things that are not immediately obvious or hidden, and can have extreme consequences from just a single exposure.
It's easy to tell if a place allows smoking. Anti-smokers first complaint and first justification for smoking bans is the (their words) "stench". You can smell it, you can see people lighting up, you can see ashtrays, you can see cigarette machines, etc.
Not only that, but even if you didn't know that there was smoking and happened to be exposed to it, you won't die or get sick.
The same cannot be said for all aspects of food preparation. Can you see the food being prepared? Do you know what temperature the food is being held at? Do you know if the cook washed their hands?
Each of these can contribute to contamination or bacteria, exposure to which can cause sickness and even death from just a single exposure.
The difference in severity and obviousness is substantial; and by extension, so the justification for regulation of one over the other.
All this talk from the anti-smoking crowd about the viability of non-smoking establishments really takes the wind out of the sails of their claims that government regulation is needed.
If non-smoking establishments are so viable, why aren't the anti-smoking groups asking their members to pool their resources and open some and up and reap the rewards from the oppressed non-smokers who've been forced to go into smoking establishments?
The answer:it's always easier to put your mouth where someone else's money is then to put your money where your mouth is. The fact that these non/anti-smokers would never use their own money to open a non-smoking establishment speaks volumes.
joe | September 19, 2007, 7:15pm | #
Brendan,
Ah, there's the rub!
They are not equally avoidable.
I can go into a restaurant that sells meat and order a salad.
I cannot go into a smoky restaurant and sit in a bubble of fresh air. My "choice" is to breathe the smoke, or not go inside.
When 3/4 of the establishments in a Jim Crow-era town were verboten to black people, did their ability to enter the other 1/4 void their claim of being oppressed? In other words, was it only the businessowners who were oppressed under Jim Crow, or were black would-be customers oppressed, too?
Of course, the latter.
Now, you can claim that people are not being coerced out of entering smoky restaurants, but I ask you: are there any other areas where you would claim that using noxious chemicals to influence people's behavior against their will is consistent with principles of consensual choice?
Now, of course, one can rightfully use coercion to keep people from entering one's home. And, of course, one cannot rightfully use coercion to keep people from going into a public street (unless you're the government, the street's owner).
The issue, as I see it, is the legal status of "places of public accomodation." Some would claim that government regulation in those places should be comparable to a private home. Others, who dismmiss the private ownership of property entirely, claim that it should be comparablel to a public park. Most people consider them to occupy some middle ground.
Kevin | September 19, 2007, 9:45pm | #
The author misses the larger point. In accepting Governments are simply being duped by poor information we have to first consider the origins of the anti smoker campaign was those same governments. Nations referred to as participating controlled states, who signed the World Health Organization treaty, which predated the campaign.
Further the same WHO promotion of a corruption process known as an HIA Health Intervention sought out conflicted funds. The gathering of partners or Stakeholders, who will invest in a campaign with profitability protected, for those investments at the tax payers expense. Governments are investing in coercion and domination of free speech in a huge public purchase of politics. Libertarians rather kindly described as social engineering, turning the population upon itself incredibly punishing consumers for use of a legal product while ignoring the conniving dragon, said to be the Tobacco Industry.
The traveling sideshow moved around the planet selling boilerplate rhetoric which politicians dutifully echoed. So obviously, little to do with public opinion or protecting anything beyond the profits of stakeholders. This reeks of Fascist impositions in tune with the participants of the WHO, another UN agency notorious in its level of failure, Nepotism and Industry partnered corruption.
This is fraud on an unprecedented scale.
For the Nay Sayers; explain why it was a necessary part of the campaign to redefine the term "Public Places" If this was a worker safety issue alone why would that move be necessary when workplace safety standards were already in place?
The redefinition was necessary to take the property rights away from the owners of that property. Necessary to promote bans under the fear [also invented] of casual exposures. Not long term but casual exposures, directing the actions of patrons to fear each other regardless of the owner’s wishes or any stretch of scientific credibility.
Smoking sections initially existed only to consider the wishes of people who did not like the smell of smoke. Fear was not a predominant motivator at that time.
Lowering "Casual exposures" in a linear perspective, would not improve health effect or decrease, to even a minor degree, the level of diseases or mortality associated with the so called smoking related diseases.
Moderation would be the message which would have found beneficial effect; "no safe level" opens us up to a whole new set of hazardous effects.
It doesn't take a lot of education or intelligence to understand that; if there was ever a genuine will to improve the lot of others more predominant than the will to improve the lot of the self important stakeholders.
fyodor | September 20, 2007, 2:05am | #
When a restaurant owner allows 100 people to smoke in his bar, he is making the decision that everyone in that bar is, in fact, going to breathing air roughly equivalent to having someone blow smoke in your face.
Well certainly the 100 people who are smoking are fine with the situaion. I don't know how big your hypothetical bar is, but the bigger it is, the less it's true that the air is like having smoke blown in your face, and the smaller it is, the more significant it becomes to accomodate the smokers relative to the non-smokers.
Let's say a courthouse had air quality comparable to that bar. Would people who cannot enter without suffering ill effects, and who then "choose" not to go to court, be denied their rights?
Maybe. But that's pretty obviously different. Government facilities operate at the pleasure of and for the benefit for the People. Bars operate at the pleasure of and for the benefit of their owners. People open bars to make money, and if they can't make money in a manner that's acceptable to them, they'll do something else to make money. No one has a right for there to
be a bar in the first place, someone has to take the initiative to open one for their own purposes.
All of these "consents" are implied.
Yeah, my standard for recognizing consent is somewhat higher than a mere state of being. Based on your logic, one could see consent in anything. I'm not saying
you see consent in anything, I'm saying
based on your logic, one could make a case for consent to just about anything.
You appear to agree that it is a ridiculous position to claim that the government should have no more power to regulate what happens in a restaurant than what happens in a private home.
On what basis do you make this distinction?
First of all, I would replace the word "ridiculous" with "wrong". Let's not be gratuitously dramatic! (Well, unless it's to be funny!)
Secondly, maybe this seems like mere semantics, but it is you who are making a distinction; I am
not making a distinction.
What is common between the two situations which gives me no need to make a distinction is ownership, aka private property. Imagine that!
fyodor | September 20, 2007, 10:58am | #
when no one who is not party to the transaction is affected
Obviously people are "affected" by the transaction wherein smokers are allowed to smoke in a bar; what is NOT happening is anyone's rights being violated. Let's not load joe's gun for him!
And to be fair to joe, he has explained his distinction. A bar is a place of "public accomodation" which he likens to a courtroom.
I tried to describe why a citizen may possibly have a "right" (loosely speaking) to a, let's say "reasonable person's" expectation of what constitutes reasonable access to government facilities but not to someone else's private property, regardless that that property is being run as a business that serves a "public" clientele. To wit, if a stranger walked in your house uninvited and not during an open party, you'd say, "Who are you and what the hell are you doing here?" If a stranger walks into a bar, the bartender says, "What'll it be, bud?" Now, whether that's a difference that invites government regulation between consulting adults and accomodation to would-be customers who may not like aspects of the bar environment and/or its service policies and whether opening such a business implies inherent consent to government meddling in said business are the effective issues here, and here I would agree with you that I don't see it at all.
And in case joe thinks I'm downplaying the "noxious fume" and health aspect of this, I don't think things are so cut and dry when A) lots of people ENJOY smoking and in the company of other smokers and many non-smokers couldn't care less, and B) it is easy to for smoke haters to avoid without it posing any undue burden to protecting their rights (as lack of access to government facilities would do (think I explained the difference there a little better this time!)).
And btw joe, aside from the objections I've already raised about this supposedly statistical study, how do we know the "comparible businesses" are really comparible? Who decided this? Anyway, if the vast majority of reputable statiticians agree that smoking bans help restaurants but restaurateurs are still against them, I'd have to agree they're just a crazy lot. But until that point, it doesn't pass the sniff test, and it shouldn't for any reasonable person!!
David W. Kuneman | September 21, 2007, 11:03am | #
Let's not forget that the Glantz article in Tobacco Control is also flawed by the fact that the controls are not pure controls.
Glantz assumes that restaurants in areas without bans are representative of owners freedom of choice, when, in fact, most are required to only allow smoking in limited indoor areas.
For, example, in Missouri, all restaurants over 50 seats are required to set aside 70% of their space as nonsmoking. Most other states have similar statutes.
For this reason, the owner's choice has already been interfered with. In some circumstances, such as exist in southern Missouri, in some counties, 30-40% of the adults smoke. It is entirely likely, that smokers' wait times for smoking seating are longer than nonsmokers' because of this statute. Everywhere in Missouri, if an owner choses to allow smoking, he has to rely on a forced mix of patrons, some of whom prefer smoking, and some of whom, do not, for his business. Most also have had to pay for and operate expensive ventilation systems, and endure other costs to operate as smoker friendly under this statute.
In addition to these costs, in order to allow smoking, and still attract nonsmoking customers, owners may have to keep prices lower than they would if they could be 100% smoking.
For these reasons, restaurants which still allow smoking easily may have already suffered some negative economic consequence not factored into the findings and ignored by Glantz. These negative consequences would be caused not by allowing smoking, but by the statutes limiting smoking to certain areas which may be of insufficient size. The Glantz study is another shoddy study, at best. No one knows what the economic performance of a large, 100% smoking restaurant would be.
Neither argument recognizes that the free market is already interfered with in both the control restaurants and test restaurants.
My partner and I have researched states with smoking bans and states without them. I have also collected a large body of studies by others which confirm that bans do indeed harm business.
http://kuneman.smokersclub.com/economic.html
David W. Kuneman
Dir of Research
The Citizen's Freedom Alliance
The Smokers'Club
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