The Costs and Benefits of Smoking

Cato Institute Seminar


"A few years ago, I was working on a story about the anti-smoking movement for Reason. One of the people I interviewed was Scott Ballin, chairman of the Coalition on Smoking or Health. I raised the question of why people smoke. "There is no positive aspect to it," he assured me. "The product has no potential benefits."

Not everyone concurs with that assessment. In a recent column in Vanity Fair, for example, Christopher Hitchens wrote that "cigarettes improve my short-term concentration, aid my digestion, make me a finer writer and a better dinner companion, and, in several other ways, prolong my life."

There seems to be substantial disagreement here, which illustrates one of the main problems with a cost-benefit analysis of smoking: How do we decide which costs and benefits to consider, and how do we measure them?

Basic economics tells us that smokers do in fact benefit from smoking. We know this because they spend money to buy cigarettes and continue to smoke despite the health hazards involved. Of course, this conclusion assumes that smokers are both well informed and rational. Anti-smoking activists don't think they are. They cannot fathom how a well-informed, rational individual could voluntarily choose to smoke. Surely smokers don't realize how dangerous smoking is; and if they do, surely they are pharmacologically compelled to smoke.

But it does not appear that smokers are the nicotine slaves the anti-smoking activists make them out to be. In his book Smoking: Making the Risky Decision, the economist W. Kip Viscusi reports that smokers are well aware of the risks associated with smoking. In fact, they tend to overestimate them. Furthermore, smokers are more apt to take risks than nonsmokers in other areas of life. This indicates that the decision to smoke is just one aspect of a general attitude toward risk; it is not an aberration caused by the addictive properties of nicotine.

The issue of addiction has in general been overblown. To say that someone is addicted to cigarettes simply means that there are significant costs involved in quitting. But as Viscusi notes, people make many decisions in life–including decisions about education, employment, marriage, and children–that are hard to reverse. That does not mean these decisions are irrational. And to say that change is difficult is not to say that it's impossible. About as many Americans have quit smoking as continue to smoke, and 90 percent or more of them quit without formal treatment. Furthermore, about a quarter of the adult population continues to smoke, despite the avilability of nicotine gum and patches. This fact alone suggests that there is something more to smoking than chemical dependence.

At the risk of seeming naive, let me suggest that the "something else" is simply this: Smokers like to smoke. Whether they like it for the reasons Christopher Hitchens cites, or for entirely different reasons, they get something out of smoking aside from an increased risk of lung cancer, heart disease, and emphysema. The EPA's recent analysis of the costs and benefits of the Smoke-Free Environment Act, which would ban smoking in almost all nonresidential buildings, concedes this point. "Since persons smoke despite the risks and costs," the report says, "one would presume that, provided these persons are rational, fully knowledgeable, and are able to accurately assess the consequences of smoking, including potential addiction, the benefits of smoking to them outweigh the risks and the costs."

Yet these benefits do not show up on the EPA's ledger. Admittedly, they would be hard to measure. But without taking into account the very reason that people smoke to begin with, how can you possibly pretend to analyze the net effect of smoking restrictions? The EPA also excludes from its analysis the inconvenience imposed on smokers who would have to go outside for a cigarette, the foregone pleasure of smokers who would eat out less often if smoking in restaurants were banned, and the loss to businesses whose employees would periodically leave the workplace for cigarette breaks. In fact, so far as the EPA is concerned, the costs of the nationwide smoking ban would be limited to enforcement and the construction of a few smoking lounges. In this cost-benefit analysis, smokers do not count.

Smokers also do not count in the cost-benefit analyses that are used to justify increases in cigarette taxes. When the price of cigarettes goes up, a certain number of smokers will cut back, and a certain number will quit. Is this good or bad? That depends on how you look at it. If you focus on the health-care costs associated with smoking, you will conclude that a reduction in smoking saves money. But if you focus on smokers' desires, you will recognize that an increase in the cigarette tax means that some people will forgo pleasure they would otherwise have enjoyed.

The net effect of these two factors–the money saved and the pleasure lost–will depend on who pays for health care. If the smokers who quit or cut back pay for their own health care, either out of pocket or through private insurance, the medical costs associated with smoking have already been taken into account. So the reduction in smoking caused by the tax increase amounts to a net loss.

If the government pays a smoker's medical bills, however, those costs do not figure into his decision to smoke. So it is difficult to say whether the benefits he gets from smoking outweigh all of the costs. Anti-smoking activists argue that, because of public health insurance, the government is justified in taxing cigarettes or using other measures to discourage smoking. Since the government picks up the tab, it should be able to regulate the behavior that generates the expense. Similar rationales have been used to justify a wide range of measures, from seat-belt laws to drug prohibition. But it should take only a moment's reflection to see the totalitarian implications of this argument. If the government may regulate risky behavior to avoid future outlays under public health insurance, there is no end to the controls that it may impose. The real problem is not the risky behavior but the decision to subsidize it with taxpayers' money.

The question of who pays for the costs of smoking is crucial yet frequently ignored. Consider another example. Anti-smoking activists cite studies finding that smokers miss more days of work than nonsmokers. It's not clear whether this difference is actually due to smoking, since people who smoke differ from people who don't in various ways. But for the purpose of this example, let's ignore that issue. The EPA cites smoker absenteeism in its cost-benefit analysis. It also claims that smokers increase maintenance costs by dropping ashes and getting smoke everywhere.

These costs are part of the EPA's case for a nationwide smoking ban. But both of these are factors that employers are free to take into account when making personnel decisions. If the costs are high enough, some employers may refuse to hire smokers, or they may choose to pay them less. There is no reason to believe that the government is in a better position to assess these costs than individual employers are. If anyone would be concerned about absenteeism or extra maintenance, it would be the people who have to pay for it. The same point applies to employer-provided health insurance, if we assume that smokers will draw on this benefit more than nonsmokers.

In all the cases I've mentioned so far, someone has voluntarily assumed the costs: the smoker himself, his employer, his insurer. Many people argue that secondhand smoke is different. People are forced to breathe it; they have no say in the matter. Just as the government regulates the pollution that comes out of a factory's smokestack or a car's tailpipe, it should regulate the pollution that comes from the end of a cigarette.

This analogy is fundamentally flawed, however. Unlike air pollution, secondhand smoke on private property is not imposed on people against their will. If you choose to eat in a restaurant, fly in an airplane, or work in an office where smoking is permitted, you thereby consent to secondhand-smoke exposure. You may not like it; you may even worry that it will increase your risk of lung cancer. But you have implicitly decided that the annoyance and the possible risk are outweighed by the benefits of eating in that restaurant, flying on that airplane, or working in that office.

If, on the other hand, you refuse to enter any enclosed space where smoking is allowed, you send a signal to the airlines, the restaurateurs, and the employers. If there are enough people like you, some businesses will ban smoking, while others will segregate smokers from nonsmokers. That is why businesses restrict smoking even in the absence of government-imposed regulations. But in the free market, unlike in some cost-benefit analyses, smokers count too. That is why some businesses continue to permit smoking.

So the effects of secondhand smoke are taken into account by all the individuals involved. Furthermore, this is true whether secondhand smoke is a health hazard or simply an annoyance. I am not convinced by the evidence that secondhand smoke kills, but quite a few people are. Fine. Let them consider that risk, and let them tell other people about it. Such fears will affect the market signals that businesses receive, since prospective customers and employees will seek to avoid secondhand smoke in greater numbers and with greater determination. But the ultimate decision should still be left to private property owners.

I realize that this approach may sound cold-hearted. After all, people who want to avoid secondhand smoke don't always have a wide range of choices, especially when it comes to employment. But that objection would apply to any aspect of the employment contract, including wages, benefits, hours, and various aspects of the working environment. Should these and other employment conditions be left to voluntary agreements between individuals, or should they be dictated by the government? If we allow government to second-guess private contracts, there is no assurance that we will always like the results.

Similarly, we all have a stake in protecting private property rights. It is just as wrong for the government to tell a restaurateur that he may not allow smoking in his establishment as it would be for the government to tell you that you may not allow smoking in your dining room. (Or, for that matter, to insist that you must allow smoking.)

Finally, we all lose something if we allow the government to penalize people for unfashionable habits. Personally, I do not perceive enough benefit in smoking to make it worth the risk. That's why I don't smoke. But I'm sure that a lot of people, including many smokers, would have difficulty understanding why I enjoy bungee-jumping. I do not ask that other people share my tastes and preferences, only that they tolerate them. And toleration is another casualty of the crusade against smoking.

Individual rights, of course, do not figure in the cost-benefit analyses of smoking. As with many other important things, their value is hard to measure in dollars and cents. More to the point, these analyses take a collectivist approach; their purpose, as the EPA puts it, is to help "identify those government actions which leave society as a whole better off." It's not surprising that the rights of individuals do not play a role in these calculations. Fortunately, the EPA concedes that "cost-benefit analysis does not by itself . . . provide definitive answers." It has to be "weighed with other policy considerations." The question is, how much does freedom weigh?