Stigmatise smokers

So we're spending half a million dollars playing on and fueling the stigmatisation of young smokers.

The sight of diseased livers, bloodshot eyeballs and rotting teeth on cigarette packets has almost no impact on young smokers, who view grotesque images as irrelevant, a new study suggests.

Instead, researchers from the University of Otago found warnings that play on young people's fear of social ostracism - and how unattractive they look and smell - are most effective.

Taglines like "Kissing a smoker is not a turn-on", "Everyone can smell a smoker", and "Smoking stuffs your lungs", had the biggest impact on a group of 18 to 30-year-olds.

Recall anti-smoking advocate Richard Edwards' plenary address from a couple of years ago.

We need to be very careful that interventions do not stigmatise smokers. Once again this involves keeping in close touch with how smokers are feeling through in-depth research. These quotes show how the experience of stigma among smokers and practice of stigmatising behaviours can be very real. This reduces support among smokes (and also among non-smokers) for tobacco control and the tobacco free vision, and may drive smokers together in a sort of Dunkirk spirit against the perceived assault from a marginalising society or harden the determination of smokers to smoke, as encapsulated in this last quote. We should be anti-smoking, but never anti-smoker.

I look forward to Otago's future recommendations to combat obesity by telling the obese that nobody likes them.

No, you can't tax your way to happiness

Imagine that you have a meta-preference against smoking, but your day-to-day preference is always to delay quitting. If only you had some way of stopping yourself, you'd be better off. In the absence of other commitment mechanisms, regulatory or tax measures can make this particular type of smoker better off: the smoker who seriously and honestly wants to quit and who hasn't been able to figure out how to use any of the available pre-commitment mechanisms or other stop-smoking aids.

As consequence of behavioural models of this sort, some folks have pushed for tobacco restrictions based on the idea that they make the smoker himself better off - they allow him to do what he's always wanted to do anyway but couldn't do on his own. 

But there are big problems.

First, even if the model holds for that class of smoker, there are other classes of smokers who will be made worse off. Some smokers don't even claim they want to quit: they love smoking and wouldn't quit if there were a free and effective way of doing it. Even if the model works, the policy only works if the gains to the winners outweigh losses to the losers. And, it's never quite been clear to me how we know that the alleged meta-preference is the thing that should be respected rather than the demonstrated preference. It's possible that some smokers who claim to want to quit are lying - they know that smoking draws social disapproval, and claiming that they really do want to quit alleviates some of the stigma. And even if there were a real me-tomorrow who wanted to beat up me-today, why does the government get to step in and take that guy's side? It seems just as reasonable to say that me-tomorrow discounts too heavily the fun I'm having today.

Second, there are other precommitment devices available that could let those smokers who really do want to quit do so. Go to Stickk, make a commitment, and start using e-cigarettes instead. The ones who really want to quit get to do it; the ones who don't, don't have to. Or, pick up a copy of Jon Elster's Ulysses Unbound and consider alternative precommitment mechanisms. 

James Zucollo at TVHE points to a new study by Odermatt and Stutzer showing that hikes in cigarette taxes make likely smokers worse off in life satisfaction surveys. They even hurt those smokers who want to quit. 

From the paper:

Higher cigarette prices are related to overall lower reported levels of satisfaction with life, ceteris paribus. The partial correlation is, however, measured with a large standard error. Still, the effect is economically meaningful (and corroborated by our differential analysis for people with different smoking propensities). For a fifty percent price increase, we estimate a reduction in average life satisfaction of 0.02 points (on a four point scale). This is about one tenth of the effect of being unemployed rather than employed or equivalent to the effect of a 2.4 percentage points higher rate of unemployment on the population at large. This finding does not lend support to the effectiveness of cigarette taxes as an internalization strategy.

And public smoking bans only improve outcomes for smokers who recently tried to quit smoking and failed; some specifications show harms to other smokers, others don't. Finding benefits for wants-to-quit smokers is consistent with some behavioural models where a wants-to-quit smoker is made worse off by seeing people smoking. But, again, we have to wonder why those smokers didn't choose non-smoking establishments prior to the ban. 

Tax maximisation, smoking, and the Stalin Gap

If my lifestyle and leisure choices lead me to remit less to the government in taxes than I would have under alternative scenarios, have I imposed an externality on the State?

James Meanwell asks:

Eric, care to weigh in on a debate I'm having about this elsewhere? Specifically, does loss of tax revenue as a result of lower productivity (e.g. due to smoking, eating too much) count as an externality? I've argued that the government would have to be spending efficiently, which is unlikely, for the loss of revenue to count as an externality and so it probably doesn't (count). Not sure if that's right, but the notion (i.e. loss-of-revenue-due-to-lower-productivity-as-externality) seems odd to me.

I started replying to his comment, but reckoned it deserved its own post.

Let's start with the big picture and work down to details.

Consider two people, alike in relevant ways at age 10 and equal in earnings potential, but with different utility functions. So they make different choices.

Mr. A decides that the rat race isn't for him and decides instead to take a part-time job at 20 hours per week instead of 40. Were he to have worked a full time job, his earnings would have doubled and, because of progressive taxation, his tax payments would have more than doubled. But he's not on welfare; he just can transform relatively little income into a fair bit of happiness because he really likes leisure.

Mr. B does not enjoy sitting idle; he consumes his leisure by smoking while working a full-time job. Associated health issues reduce his productivity and, as consequence, he earns a quarter less than he otherwise would; his tax payments are then perhaps a third lower than they otherwise could have been. Other sources have a lower wage penalty for smoking; we'll stick with a big one for present purposes.

If Mr. B's lower tax payments because of his choice to smoke are of policy consequence, then so too are Mr. A's lower tax payments because of his choices. Indeed, we could say that Mr. A is far worse than Mr. B: while Mr. B pays, in New Zealand, about three times as much in tobacco excise as he'll cost the public health system and is so kind as to die before costing the superannuation system very much, Mr A pays zero tax on his leisure and will earn two-thirds of the national average wage in his retirement despite having contributed relatively little to the superannuation system.

If we need to use policy to nudge Mr. B into smoking less, because of reduced tax earnings, then we also need to nudge Mr. A into working harder. And when nudges don't work in tobacco and start becoming shoves, we need to start shoving Mr. A as well.

Mancur Olson argued that Stalinist Russia had the world's most effective extractive tax regime. Workers were effectively compelled to work by near complete inframarginal taxation combined with very low taxation at the margin. If Stalin had had the ability to solve the Socialist Calculation Problem, he could have done slightly better, leaving each worker with an individualised menu of two choices: starvation, or a personalised bundle of very hard work and some goods leaving the worker epsilon better off than under starvation. I suppose that we could consider any deviation from that level of work as a harm imposed on the state. But it's only Stalin who'd really want to push there.

The Okun Gap is the difference between potential and realised GDP due to excess unemployment. I'll call the Stalin Gap the difference between an individual's potential maximal tax payments and his actual tax payments based on his choice to consume leisure over labour - partially because he would choose some leisure even in the absence of taxes, partially because too high of income tax rates yields substitution to leisure.

Most of us could earn more, and consequently submit higher tax payments, by choosing more labour and less leisure. But we'd be less happy.

So that's the big picture: the world in which the smoker's lower income tax payments (ignoring his much much higher excise tax payments) are sufficient basis for taking away his leisure is one where we want to penalize people for taking holidays or failing to work as many hours as they otherwise could: closing the Stalin Gap. Unless we say that leisure via time off relaxing is, by assumption, good, while leisure via smoking is bad - but that remains question-begging.

Smaller picture: is this even an externality?


Short answer: likely, but likely very small, and that small portion mostly because of how the tax system treats poor people.

All right. An individual chooses between smoking, leisure and labour. In a world with private health care and no taxation, the individual optimally balances health harms from smoking against enjoyment of smoking - he earns less because he smokes, but that's just part of the full cost of tobacco that he enters into his optimisation. All you behavioural guys who want to complain about whether he can be rational or informed on this can shut up for the moment - we're trying to figure out whether he's imposing an externality on the government once we move to a tax regime, so the behavioural stuff is entirely beside the point.

Some optimal level of smoking will be found above. What happens when we add taxation and government? The smoker will bear fewer of the wage costs of smoking because the government takes a portion of his earnings and so he should optimally smoke more. But again, the same is true of the individual's choice to consume other forms of leisure in the presence of income taxation. Recall that in economics, we don't care about externalities because of pecuniary effects like "the government gets less in tax". We care about them rather because they distort choices: people move from taxed labour to untaxed leisure in the presence of income taxation. The incremental increase in smoking when the returns to labour drop under a taxation regime can be viewed as a distortion. But, again, think of anything that helps increase the marginal utility of leisure. In a world with taxes and government, people choose more days off playing cheap but excellent video games relative to the zero-tax world. What then is the productivity cost of video games? Or of any other kind of leisure? It's hard for me to see any productivity externality of smoking that is different in kind from any other labour-leisure distortion generated by taxation. And it would take some number crunching to show that the technological portion of any effect* here isn't already over-internalised by current levels of tobacco excise.

Gordon Tullock reminded us in 1998 that government produces externalities as well as solving some externality problems. The vast bulk of reduced income taxation accruing to government due to smoking could only be remedied by imposing harms on smokers that are larger than the potential gains to government. Now, if you want to assume that smokers are irrational and hurting themselves by their choice to smoke, you can do that, but you don't really need the effects on income taxation to make the case.

Recall that smoking is concentrated among poorer cohorts and that marginal tax rates, though not average tax rates, are very high for the poor. If the deadweight costs of high marginal tax rates are making poor people smoke more than they otherwise would because the personal income losses are low, they're probably also screwing up a whole lot of other choices that are of greater consequence as well. If you're going to worry about it, start by trying to fix the tax schedule and abatement rates for the various income-contingent benefits so that the effective marginal tax rates facing poor families are not insanely high.

The Ministry for Social Development noted that 35% of beneficiaries (people receiving benefits other than just Working for Families, NZ's EITC) in paid work in 2008 enjoyed effective marginal tax rates higher than 75%, with some non-beneficiary low income families enduring abatement of the minimum family tax credit facing EMTRs over 100%. MSD concluded dryly, "Work incentives are very low for such families".

Effective marginal tax rates in excess of 75% are very likely to induce all sorts of very real distortions in behaviour; I expect the decision to smoke incrementally more because of reduced returns to wages is pretty trivial in this mess.



* Again, we don't care about externalities that are pecuniary. Imagine that the smoker smokes exactly as much under a tax regime as under a no-tax regime. The government earns less than it would were the smoker a non-smoker, but this is purely pecuniary: the gain to the government by forcing him to quit would be overmatched by the losses experienced by the smoker. The only portion that can matter for welfare is the excess smoking induced by the lower return to labour under the tax regime. And that's unlikely to be large relative to the amount of smoking that's invariant to income tax rates.

Tobacco plain packaging, if we cared about evidence

The Science Media Centre provides an expert round-up of commentary on a new paper finding, unsurprisingly, that people like branded tobacco packs more than they like plain packs. What's more relevant for policy, and what we really have no clue about, is whether changing the branding on packages has effects on aggregate sales or whether it works instead to break brand loyalty and move consumers to lower-cost no-name packs. As Professor Richard Edwards noted in his plenary address to the Oceania Tobacco Control Conference in Brisbane last October:

Plain packs have not been implemented, so evidence of the probable population impact must come from experimental studies, focus groups, surveys and so on; rather than rigorous controlled studies of the impact of the actual intervention in the real setting, as would be the ideal.

If we cared about knowing whether tobacco plain packaging has any effect, we could find out pretty easily. Set the whole thing up as a randomized policy trial. Some parts of the country get plain packs, some parts don't, and watch what happens over the subsequent few years. I'd sketched out a framework for that kind of trial back in April. Even better: if Australia is implementing the same policy, run the trial across both countries.

Instead, we're designing policy to avoid ever being able to find out whether it's had any effect. In Oz, they're bundling plain packaging with a simultaneous national increase in tobacco excise taxes. The effects of price increases will be hopelessly confounded with the effects of plain packaging unless there's reasonable ex ante state level variation in tobacco prices.

The price of cigarettes would rise to $20 a pack under a Gillard Government proposal that would reap an extra $1.25 billion a year in taxes.

The West Australian understands the Government is considering a 25 per cent rise in tobacco excise that would raise $5 billion over four years.

The plan emerged from a Treas- ury reconsideration of so-called "sin" taxes. It would repeat the financial windfall from an identical move in 2010.

The proposal is in line with long-standing advice from the National Preventative Health Taskforce and would lift the price of a pack of 30 cigarettes by $2.62.

Peter Jackson 30s, now about $18.30, would cost almost $21 under the measure and the price of Dunhill 25s would increase $2.18, taking the retail price to more than $19.50.

The excise increase may be timed to coincide with the introduction of mandatory plain-packaging for tobacco products on December 1. [emphasis added]

International research has found there is a 4 per cent fall in smoking rates for every 10 per cent increase in price. Anti-smoking crusader and Curtin University Professor Mike Daube said higher cigarette prices would discourage children and people on low incomes from smoking. "An excise increase sooner rather than later could also prevent tobacco industry efforts to subvert the impact of plain packaging by lowering prices," he said.

There are non-crazy reasons for wanting to bundle excise increases with plain packaging. If, absent brands, smokers see there being less difference between low cost off-brand cigarettes and higher cost branded cigarettes, they may substitute down to the lower cost cigarettes and then smoke more - I expect this is the main worry of the tobacco industry as they make their returns on the branded product. Consumption goes up but margins go down more than proportionately. Countering this with excise increases isn't entirely nuts if you want to curb smoking rates, but it makes it awfully hard to tell whether plain packaging does anything other than destroy the value of the tobacco companies' brands.

I still think a randomized policy trial is what's needed if we care about finding out truth rather than just beating up on Big Tobacco.

More tobacco incidence

Last week, I pointed to Callison and Kaestner's recent piece suggesting aggregate tobacco price elasticity might be lower than we'd otherwise thought: among adults, smoking wasn't particularly price sensitive.

Youths seem more price sensitive. Gabriel Rossman points to work by Huang and Chaloupka finding a participation elasticity ranging from -0.44 to -0.6 by exploiting a neat quirk in some youth survey data. The Monitoring the Future survey of youth annually surveyed kids, but didn't survey all schools at the same time. And a very large federal tax increase came mid-2009 that resulted in average price increases on the order of 22% for cigarettes. Because the tax increase hadn't hit when some schools had been surveyed, but had when other schools had been surveyed, Huang and Chaloupka are able to get a 2008 baseline over all schools and a 2009 year effect separate from the tax effect by comparing those schools surveyed post-tax with those surveyed pre-tax. So they can compare the 2008-2009 within-school changes for those schools whose students were surveyed before the tax change with those surveyed after the tax change while also adjusting for any differences across the two sets of schools that might have existed in 2008.

It'll be interesting to see what happens with New Zealand's fairly large recent and projected tax increases.

Socialising private costs

What's a good way to make sure that smokers cost other people money? Make it illegal for private health insurers to charge smokers more. Seems a particularly stupid policy, but Australia's going for it.

Private health insurers have failed in a push to charge smokers higher premiums. While the federal government triumphed over big tobacco this week, the Minister for Health, Tanya Plibersek, said smokers should not be penalised with higher premiums - and people should pay the same regardless of the state of their health. She ruled out allowing the health funds to charge smokers more.

Private insurers - led by NIB - are interested in the idea and argue it is the next step the government could take to reduce rates of smoking.

''We should be able to offer a discount for good healthy behaviour like not smoking and exercise,'' the chief executive of NIB, Mark Fitzgibbon, said.

The Australians have a pretty extensive regulatory apparatus around "private" health insurance; see Robson et al for a recent analysis. I'd suggested in the introduction to that issue of Agenda that whatever goals are sought by community rating could better be achieved by providing transfers to individuals based on the exogenous parts of their individual risks and letting insurers set actuarially fair premiums: poorer and less healthy people are given money to help them buy insurance, but incentives to make efficient investments in your own health are maintained.

Once you've banned insurers from charging differential fees for smokers, all kinds of anti-smoking policies can have second-best cases supporting them; first best would just let insurers set fair premiums. Government creates the "market failure", then supplies the interventions that partially offset the failure. And everybody gets to shout about how markets are terrible because absent intervention, everybody else has to share the costs imposed by smokers.

It's hard to tell what's satire

Joe Bennett wonderfully sends up Turia's army. New Zealand's Associate Health Minister in charge of tobacco eradication recently suggested that Kiwis violate the traffic code by honking their horns at people seen smoking in cars carrying kids.

[S]he proposed other drivers put social pressure on those smokers.

"Maybe one of the ways we could do better is to encourage people who see people smoking in cars, tooting to them and doing the 'you shouldn't be doing that, mate' [gesture]."

She wagged her index finger in a scolding gesture to demonstrate how this could be done.

In the accompanying NZ Herald web poll, 22% agreed they'd honk to shame a smoker; a further 12% said they might; 39% worried about being opening themselves up to road rage. A spokesman for ASH downplayed road rage fears while endorsing Turia's suggested honking and finger waggling. I would love to have a high-res version of Turia waggling her finger disapprovingly. I could put it in every tobacco post henceforth.

Here's NZTA advice about using your horn:

The horn should only be used as a reasonable traffic warning. It should not make an unnecessary or unreasonably loud, harsh or shrill noise.

Joe Bennett goes the step further:

Sometimes, and you'll find this hard to believe, the smoking murderers kick back, blasting their own horns and giving me the fingers. Well they don't scare me. I follow them, stick right on their bumper, giving them a blast every few seconds to let them know I'm not giving up. I follow them all the way home.

"That's where they live, kids," I say when they pull up. "Remember that address, eh. " I don't have to say any more.

An evening or two later the kids don their little brown shirts and announce that they and their classmates are just going out to play for a bit. "Good on you, kids," I say, "and here's a snack for the road," and I hand them a tray of rotten eggs that I've been saving specially.

"Oh and no throwing stones," I say. "They can do terrible damage to windows."

Off they go, my little darlings, and my heart just swells with pride and with love.

Do read the whole thing.

When I first read it, I didn't know that Turia had actually recommended finger-waggling and tootling; I thought the whole thing was satire of a possible plausible next ridiculous thing Turia might recommend.  And so I was amused that commenters were taking it seriously. But the only satire was Bennett's purported endorsement of the suggestion.

Meanwhile, a Twitter feed purporting to be the Twitter arm of a new anti-tobacco "wiki"* site started providing some rather absurd offerings. I wasn't sure if the Twitter feed and the wiki were set up to make the anti-tobacco movement seem a bit silly. It looks now like the wiki is real while the Twitter feed is a parody. Again, it's hard to tell anymore. The Wiki warns about libertarians:

The tobacco industry has increasingly aligned itself over the last few years with a growing number of libertarian bloggers, think tanks and activists, who in turn argue that individual liberty and freedom to choose where to smoke should be more important than further restrictions on smoking.

Suspicious, that. Aligning themselves with those who are philosophically predisposed to valuing individual rights instead of, well, people who would prefer to waggle fingers and tootle horns.

*Is it still a wiki when you have to apply for editor rights and sign a bunch of disclaimers? It's hard to imagine that the same folks who set up the fake Twitter feed wouldn't have had an awful lot of fun with a wiki that didn't have that restriction, so it's not nuts that they have that restriction. But is it still a wiki?