Horse 1088 - Everybody Knows... Or do they?

"Yes, but cigarette taxes pay for a third of the cost of the National Health Service. We are saving many more lives than we otherwise could because of those smokers who voluntary lay down their lives for their friends. Smokers are national benefactors."
- Sir Humphrey Appleby - "The Smoke Screen", Yes Minister.

Mr Rudd's proposal to remove all branding from cigarette packaging whilst it sounds like a noble idea, is in the long run quite counterproductive, for you see over the long run, the actual costs to the community of those people who would have ordinarily died of lung cancer and/or associated heart attacks, will instead die of other diseases in old age, which will invariably cost the taxpayer more in health care costs.

Consider the following:
http://www.treas.gov/press/releases/reports/tobacco.pdf
A young man who starts smoking can expect to generate as much as $12,700 in excess medical costs over the course of his life. For a young woman,smoking will increase her lifetime medical bills by $14,800.

http://www.usatoday.com/money/perfi/taxes/2009-03-31-cigarettetax_N.htm
The increases, which raise the federal cigarette tax from 39 cents a pack to $1.01, applies to all tobacco products. It comes as more than two dozen states, desperate for revenue in a sunken economy, consider boosting their own tobacco taxes this year.

Smokers on average live between 7 and 12 years less than non-smokers. Assuming a worst case scenario, on average the life expectancy for the US (I don't have Australian figures) is 78 years. If we assume that someone starts smoking a pack a day from age 20, then the government will collect over their lifetime, $16957.90 in taxes, which is actually about $4000 more than that additional associated medical expenses. In effect smokers actually subsidise everyone else.

If you don't believe me, perhaps you'd like to see a peer reviwed paper on the subject:

http://www.nber.org/papers/w4891.pdf
This paper assesses the appropriate cigarette tax needed to address potential market failures. There is no evidence of inadequate risk decisions by smokers regarding their own welfare. Detailed calculations of the financial externalities of smoking indicate that the financial savings from premature mortality in terms of lower nursing home costs and retirement pensions exceed the higher medical care and life insurance costs generated. The costs of environmental tobacco smoke are highly uncertain, but of potentially substantial magnitude. Even with recognition of these costs, current cigarette taxes exceed the magnitude of the estimated net externalities.
Published: Tax Policy and the Economy, vol. 9, ed. James M. Poterba, MIT Press 1995

The awful truth is that the overall death rate is 100%*. Everyone who lives will eventually die. What they happen to die of is the question. Whilst you might point to the increase of the incidence of cancers in the late 20th and 21st Century, it's probably almost exactly the result of people living longer into old age. People's cells replicate themselves making worse copies as time goes by; therefore if you increase the potential to create rogue copies of cells, which are otherwise called cancer by definition, then obviously the rates of cancer will go up.
People who aren't dying of cholera, TB and polio anymore, go on to die of something else... but eventually they will die; that fact is unavoidable.

Really all that these advert on telly; you've seen them, the Everybody Knows adverts, is telling us what we already knew. If "there is no evidence of inadequate risk decisions by smokers regarding their own welfare" then is it really worth the effort to legislate against something which they have decided to do? Basically, can you legislate against stupidity? Or, is it worth the economic expense in the long run?

Though I am for anything that reduces smoking (though for reasons that it smells and I don't much like the litter) there is something that has not been thought about. Only a small percentage will stop smoking because of the price rise. The rest will sacrifice something else to keep the habit such as food, fuel and clothing and sadly the kids will suffer. I know because I grew up in an area with a great deal of social housing, and eveytime the price of cigarettes and alcohol taxes went up, invariably the kids got less food, less school excursions and less new clothes etc.

Addressing peoples behaviour never works. Their worldview must be addressed as values and behaviour stem from people's worldview. The Alcopop Tax showed this, kids still went binge drinking but with beer or spirits instead. Making Alcopops expensive did not change their behaviour. It is their worldview that needs to be changed for changes to behaviour to occur. Just a thought, if pricing discourages people then good, but only insofar as much as their addictive behaviour is not transferred to something else that is cheaper.

The fact is that it is far cheaper to die of lung cancer and/or associated heart attacks than to live into old age and die of something else. In the long run, I will end up paying more in taxes because people are healthier...
... now isn't that ironic, don't ya think?

*Lazarus died twice, whereas Enoch and Elijah were "taken" without dying; even Jesus died once. This perhaps is worth a whole post unto itself.