The Effects of Prohibiting Smoking in the Public Places - Essay Example

THE EFFECTS OF PROHIBITING SMOKING IN THE PUBLIC PLACES It is a well documented fact that the smoking of cigarettes in public places imposes health and environmental health risks and, therefore, burdens society in many ways. Through an analysis of the externalities of smoking in public, this paper will explore the consequences that cigarette consumption in public imposes upon society. 1. Externalities An externality is an impact (positive or negative) on anyone not party to a given economic transaction. It occurs when a decision causes costs or benefits to third party stakeholders, often, although not necessarily, from the use of a public good. Economic theory considers any voluntary exchange to be mutually beneficial to both parties, for example a consumer (buyer) and firm (seller). Any exchange, however, can result in additional positive or negative effects on third parties. Those who suffer from external costs do so involuntarily, while those who enjoy external benefits do so at no cost. The left side of the chart shows externalities associated with consumption (such as health impact caused by smoking), while the right side shows production externalities (such as environmental impact). Headlines of people and companies suing tobacco makers are nearly an everyday occurrence recently.  More and more smoking is becoming less “cool” as the dangers of the drug are becoming clearer.  Yet despite the costs of this habit, nearly 25% of adults still smoke, helping fuel one of the largest industries in America.  The following graph illustrates the decline of people who smoke throughout the years (Graph made from data found on Center for Disease Control website). Cigarettes and the tobacco industry are plagued by many negative demand externalities.  The major one they encounter is the health risk associated with them.  More than 400,000 people die every year due to various cancers, heart diseases, and strokes caused directly from smoking.  This significant health risk has been ignored for years but is starting to become a serious issue.  Many other negative externalities are faced by smoking and smokers, such as not being able to smoke in most public buildings and many people find the smell of smoke on someone disgusting.  Also, many of the more positive externalities of demand, such as being “cool” if you smoke, are being destroyed as only a myth to encourage people to smoke.  Gone are the days of celebrities promoting smoking.  Now they hide the fact, as it is almost a public embarrassment.   The following illustrates this negative demand externality.  Demand curve D represents the private value of cigarettes.  However because of these negative effects, the social value is much lower (represented by D*).  This lowers the price and quantity sold.  To help negate these effects, the government internalizes the externality, by taxing the product.  Cigarettes are taxed heavily, with taxes representing about one-third of the price of a package Most of the production externalities are positive for tobacco companies.  Tobacco represents a large cash crop and puts a lot of people to work.  Tobacco is grown and made relatively pollution free.  The economies of many localities are dependent upon tobacco.  Overall, the production of cigarettes and tobacco create jobs and bring in money for localities. Tutor2U (n.d.) discussed the negative consumption externalities of smoking In these situations the marginal social benefit of consumption will be less than the marginal private benefit of consumption. (i.e. SMB < PMB) This leads to the good or service being over-consumed relative to the social optimum. Without government intervention the good or service will be under-priced and the negative externalities will not be taken into account. Again there will be a deadweight loss of economic welfare. If the cigarette consumer only considers their own private costs and benefits, then there will be over-consumption of the product. Ideally, the socially efficient level of cigarette consumption will be lower (Q2). Smoking tobacco creates fumes that many people find annoying and that present a health risk. Privately (personally), the individual enjoys the product more than society as a whole. The following chart from the CDC website ( http://www.business.uiuc.edu/ econ102Sp2000/WebProjects/Cigarettes/tim.htm) shows the ages that people begin smoking daily.  Roughly three-quarters began smoking daily before they were of legal age to smoke. 1.1. Environmental Impact The risks associated with exposure to environmental tobacco smoke, also known as secondhand smoke bears causal links to many preventable illnesses (U.S. Surgeon General, 2006). Secondhand smoke is a particularly harmful pollutant. Researchers in Italy conducted a study comparing the pollution produced by idling a low emissions diesel vehicle fueled with low sulfur fuel for 30 minutes to smoldering cigarettes, lit one after another for 30 minutes. What they found was that, compared to the car, the cigarettes released 10 times the particulate matter into the air (Invernizzi et al., 2004). Another researcher compared the amount of mutagenic substances released by automobiles and cigarettes. The findings concluded that a pack a day smoker releases the same amount of mutagens as an automobile driven 22 miles (Sanner, 1992). Environmentally, cigarette butts are the most common type of litter, and contrary to popular belief, they are made out of cellulose acetate, a type of non-biodegradable plastic, not cotton (Clean Virginia Waterways, 2006). Once littered, butts find their way to streams, rivers and lakes and wetlands where they generally take approximately 10 years to degrade (Clean Virginia Waterways, 2006). Coastal cleanup crews consistently cite butts as the most common type of debris found. The strong presence of littered butts has more than just an aesthetic impact. Cigarette butts have been found to be toxic to daphnia, organisms commonly called water fleas, which are extensively used by biologists to test acute toxicity of chemicals on aquatic invertebrates. Used cigarette butts, both with and without remnant tobacco, have been found to cause daphnia to alter their swimming patterns, accumulate dark deposits in their setae (a body part similar to hair), float without attempting to swim and clump together in groups. It was also found that the remnant tobacco causes a higher toxicity than the butt alone. (Register, 2000) Although the overall ecological impact of these findings is unknown, the evidence suggests that the effects of this little known externality of smoking could alter the food chain, which ultimately affects the human food supply (Rand, 1995). 1.2. Impact to Health Passive smoking has been linked to a number of serious illnesses such as lung cancer or heart disease in the adult population. Passive smoking affects particularly the health of young children and babies, causing asthma, bronchitis or sudden infant death syndrome. Medical studies consistently find that smokers impose a negative externality on non-smokers. 2. Supply and Demand Supply and demand is the relationship between the quantity of a commodity that producers have available for sale and the quantity that consumers are willing and able to buy. Demand depends on the price of the commodity, the prices of related commodities, and consumers' incomes and tastes. Supply depends not only on the price obtainable for the commodity but also on the prices of similar products, the techniques of production, and the availability and costs of inputs. 3. De-merit Goods De-merit goods are those goods or services that create negative externalities when the product is consumed. This reduces the social marginal benefit of consumption and also leads to potential market failure through over-consumption The government normally chooses to tax those products that generate negative consumption externalities e.g.: a) Cigarettes b)Alcohol. Alcohol and tobacco or cigarettes are singled out as a demerit good whose consumption is depreciated by the government .Public opinion is more and more converging on the idea that smoking has negative effects on people’s health. Since June 2004, smoking is no longer allowed in cafés and restaurants (Schroyen & Aasness, 2005). Chaudhry (2000) suggests that it would however, be useful to consider the economics of tobacco from the point of view of merit and demerit goods, which means that any revenue or income related to unacceptable products should also be considered as unacceptable to the society, irrespective of the quantum of its contribution to the economy. The studies on economics of tobacco generally indicate that the costs incurred by society due to tobacco use more or less match the benefits received by the society3. 4. Effect of tobacco taxation The demand for tobacco is strongly influenced by its price. Taxation is the most cost-effective way of reducing tobacco consumption, especially among young people and those on low income. In developed countries it generates significant revenues for governments. It can also cover the costs to society of tobacco use. Cigarette consumption falls when taxes rise. Price increases encourage people to stop smoking, prevent others from starting smoking, and discourage ex-smokers from starting smoking again. Apart from the health benefits, there is evidence that, in the longer term, tobacco tax increases actually shift the tax burden from the poor to the rich (Tobacco Taxation, 2003). 5. Conclusion: The market for cigarettes and tobacco has a rich and important history.  Despite still doing a lot of business, the market is in a decline and heading for trouble.  Problems with its illegal target audience and cancer-causing product will catch up to the market and drag down its profits.  With more negative externalities then positive ones, cigarettes also face other challenges.  All this adds up to a questionable future for an industry that was once vital to our country. References: Chaudhry, K., 2000,’Multisectoral and Intersectoral Approach to National Tobacco Control’, The WHO International Conference on Global Tobacco Control Law, New Delhi, India. Clean Virginia Waterways, 2006,’Facts about cigarette butts and litter’, Longwood University, Available at: Invernizzi, G., Ruprecht, A., Mazza, R., Rossetti, E., Sasco, A., Nardini, S., and R. Boffi. 2004. “Particulate matter from tobacco versus diesel car exhaust: an educational perspective.” Tobacco Control 13: 219-221. Rand, G. M., 1995,’Fundamentals of Aquatic Toxicology’, Philadelphia: Taylor and Francis. Register, K. M., 2000, ‘Cigarette butts as litter—toxic as well as ugly’, Underwater Naturalist, Bulletin of the American Littoral Society 25(2): 23-29. Sanner, T., 1992,’Air pollution from cigarette smoking and gasoline cars with catalytic Converter’, Presented at the 8th World Conference on Tobacco and Health, Buenos Aires, Argentina. Schroyen, F., and Aasness, J., 2005,’Marginal Tax Reform analysis with merit good arguments and environmental concerns: Norway, 2000’. ‘Tobacco Taxation’, 2003, Tobacco Control at the Union: United for a Tobacco-free future, Available at: http://www.tobaccofreeunion.org/content/en/14/1.-Tobacco-taxation. Tutor2U, (n.d.) Available at: http://tutor2u.net/economics/content/topics/externalities/ what are_externalities.htm. U.S. Surgeon General, 2006,’the Health Consequences of Involuntary Exposure to Tobacco Smoke: A Report of the Surgeon General’, Available at: http://www.surgeongeneral.gov/library/secondhandsmoke/report/. Read More