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The Economics of Smoking Policy

Popularity 12Viewed 4008 times 2014-4-24 15:41 |Personal category:Life health|System category:Economy| Smoking, social costs, taxation, regulation

I write this to round off a couple of earlier posts on this and because it might be of interest to economics students on the Forum. It is not intended to upset smokers but to look at how they can fit in. Economics does support freedom of choice to smoke or not to smoke, but after what economists call EXTERNALITIES are taken into account. That is simply the recognition that the private decision of an individual to smoke (or not) is usually taken based on private costs to that individual. yet there is overwhelming evidence that smoking imposes costs on others - social costs: second-hand smoke inhalation, medical care, hurt to loved ones from premature death. So in economic terms the smokers need to make that choice by comparing the private benefits (there are no clear social benefits) with the social costs which are higher than the private costs. So heavy taxation needs to be imposed on cigarettes to reflect this. If smokers choose to smoke once those costs are reflected, they are free to do so SUBJECT TO TWO OTHER CONDITIONS BELOW. In Western Countries the tax on cigarettes is very high to reflect this. In China it is not and cigarettes are very cheap - some less than 5 rmb a packet. So people smoke in China not facing the costs on others they produce.

The two other conditions are: 1) The people choose to smoke, educated about the risks - they make an informed decision. In the West, cigarette packets tell people that smoking kills. People cannot be encouraged to smoke by cigarette advertising. In China this education is not given so clearly and advertising is not restricted enough, especially at point of sale. 2) That there are certain situations where regulation must protect non-smokers because they cannot escape. The best example is no smoking on flights. The non-smoker cannot escape the effects of the smoke so it must be banned. It does not matter how much smokers would pay for cigarettes or for a first class plane seat, money cannot buy the right to smoke where it clearly harms others who cannot avoid it!.

So to sum up, the economics of smoking policy requires: taxation, education and regulation. If. after all that, folks choose to smoke where permitted, it is up to them.


Cheap cigarettes, lightly taxed, do not reflect true SOCIAL COSTS of smoking in China.

(Opinions of the writer in this blog don't represent those of China Daily.)


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Comment Comment (25 comments)

Reply Report 财神 2014-4-24 17:09
OMG!!!! again smoking issue??when will it stop!           
Reply Report ColinSpeakman 2014-4-24 19:29
财神: OMG!!!! again smoking issue??when will it stop!                    
After this!  
Reply Report voice_cd 2014-4-26 16:29
thanks for your story, we have recommended it.
Reply Report juliuy 2014-4-27 21:55
You know this time when reading your blog on smoking (we know it is not the first time we do it      ) I thought, wait a second, do we actually chose to smoke or not to smoke? Yes, we do chose that at some point, to start smoking or to refuse starting, or to quit. But in many cases we have very little control over our addictions. We want to give up but we can't. Don't we?
Reply Report ColinSpeakman 2014-4-27 21:58
juliuy: You know this time when reading your blog on smoking (we know it is not the first time we do it        ) I thought, wait a second, do we actually ...
You make a good point! At some time in the smoking habit, the tobacco probably takes over! That is why it is so important to get the education right at the start.
Reply Report seanboyce88 2014-4-28 07:55
Well I have started to quit smoking again. 55 minutes in and its going well. :p

My problem is whenever I drink alcohol...it's like I must smoke, I lose all willpower to resist. (probably tells you something about what I am like when I drink :p)
Reply Report thomas.wood 2014-4-28 10:11
I read an article in The Economist about this a while ago.  One of the reasons that the government doesn't want to put warning labels on cigarette packets is because they are commonly given as gifts.  In addition, they are unwilling to raise the price of cigarettes for several reasons.  Firstly, lots of people (especially those from poorer backgrounds and in rural areas) and they would be rather annoyed if the price of cigarettes was raised due to tax.  So the government wants to avoid antagonizing these people.  In addition the government controls the tobacco companies, they are all state-owned, so until the costs of healthcare outweigh the profits made by selling tobacco they are unlikely to change anything.

I think China will remain a nation that smokes a lot not just because cigarettes are so cheap but because smoking is so engrained in social etiquette: offering a cigarette is a standard friendly gesture, smoking when drinking and after eating a family meal are normal.  It's also something that people do whilst waiting around for other people to arrive, which seems to happen a lot!
Reply Report ColinSpeakman 2014-4-28 10:49
thomas.wood: I read an article in The Economist about this a while ago.  One of the reasons that the government doesn't want to put warning labels on cigarette pac ...
Yes the gift market for cigarettes in large boxes is big in China. I personally think that there might be a way round that with no warnings on the outer packing of such. You are right that the money made by the state owned tobacco companies is a key factor. Also a very simple point, that certain anti-smoking laws would be hard to enforce in such a huge country in remote areas in practice. However, that applies most to the older generation who got into the habit a long time ago and it may be one of their main pleasures! My focus would be on the younger generation that can learn a different route in life and thus education about smoking dangers is paramount. It should be in school textbooks and vigorously restricted in the environment they grow up in - at school, on public transport, in restaurants etc. Of course there is the question whether the parents are good role models or not!  A start had to be made somewhere!
Reply Report LanaLiao 2014-4-28 19:37
Indeed, heavy taxation needs to be imposed on cigarettes. However, it seems that our government still has a very long way to go before it is able to return we nonsmokers a clean and healthy space.
I hate people smoking around me. In our office, we have a male smoker, the only smoker in our office. He may smoke once a week here  . Each time he smokes, I run out for some fresh air, yet the smoke lingers. So I've decided to politely ask him to go out for a cigarette next time.
Reply Report cecilia颖 2014-4-29 09:01
here is an interesting thing, my father is already a smoker before i was born. so when i was young, i did not know it has something bad in it, and thought it was a natural thing for men to smoke... once my brother and i even tried to imitate my father smoking. haha. so another impact of smoking, bad example,:)
Reply Report ColinSpeakman 2014-4-29 10:49
cecilia颖: here is an interesting thing, my father is already a smoker before i was born. so when i was young, i did not know it has something bad in it, and tho ...
Yes, in that one aspect, not a good role model!
Reply Report ColinSpeakman 2014-4-29 10:52
LanaLiao: Indeed, heavy taxation needs to be imposed on cigarettes. However, it seems that our government still has a very long way to go before it is able to r ...
I was in a restaurant a few nights ago where a guy was smoking at one table and a women at the next table spent most of the evening waving the menu at the smoke to waft it away. Some smokers only think of themselves!  It needs education and understanding that others cannot stand that smoke in their face. It is not about what folks do at home or in a big open space but what they do when others cannot escape the action. New laws please!
Reply Report LanaLiao 2014-4-29 10:59
ColinSpeakman: I was in a restaurant a few nights ago where a guy was smoking at one table and a women at the next table spent most of the evening waving the menu at ...
Yeah, strict laws are in urgent need.
Reply Report thomas.wood 2014-4-29 11:03
Do you know if it's included in school textbooks at all?  I think I might ask my students about this.  I think if smoking is restricted in bars then it will make a big difference as to whether young Chinese start smoking.
Reply Report ColinSpeakman 2014-4-29 13:08
thomas.wood: Do you know if it's included in school textbooks at all?  I think I might ask my students about this.  I think if smoking is restricted in bars then i ...
Do ask and let me know the answer!
Reply Report Maierwei 2014-4-30 21:05
thomas.wood: I read an article in The Economist about this a while ago.  One of the reasons that the government doesn't want to put warning labels on cigarette pac ...
Interesting perspective, and I totally agree. It is not taxes but the "culture". Alcohol, similarly is "fuel" for ALL business deals and many people are in alcohol coma after such meetings. Smoking and drinking are seen as a part of "culture", are used for bribing and even given as gifts. I was quite shocked to see cigarette ads so often in China.

But I think exactly for this reason there should be warnings on alcohol bottles and cigarette packets....
Reply Report Maierwei 2014-4-30 21:08
cecilia颖: here is an interesting thing, my father is already a smoker before i was born. so when i was young, i did not know it has something bad in it, and tho ...
This is a pattern in late industrialized countries that men need to do certain things to enjoy their traditional authority, and smoking is one of them. Their lives are stressful, smoking lessens stress (!) so it's natural for them whereas it is undesirable for a woman because it makes them "less pretty" (just because they think a woman is sexually available if she smokes)
Reply Report ColinSpeakman 2014-5-2 18:12
Maierwei: This is a pattern in late industrialized countries that men need to do certain things to enjoy their traditional authority, and smoking is one of them ...
A woman is thought to be sexually available if she smokes! BUT I do not like kissing ashtrays!   
Reply Report ColinSpeakman 2014-5-2 18:16
Maierwei: Interesting perspective, and I totally agree. It is not taxes but the "culture". Alcohol, similarly is "fuel" for ALL business dea ...
Point of sale is the worst abuse. We know that confectionery companies seek cooperation from supermarkets to place candies, chocolates by the cash desk so that while waiting for service people are tempted by the display. However in China, we also see special illuminated cigarette display advertising at the counter. That is shameful and outlawed in the West. This is one Chinese authorities need to attack.
Reply Report Maierwei 2014-5-2 19:38
ColinSpeakman: A woman is thought to be sexually available if she smokes! BUT I do not like kissing ashtrays!   
Makes sense! But I guess it has to do with the idea that women are caring mothers who warn you for doing things bad for your health, instead of doing such things themselves.

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ColinSpeakman

International Educator, Economist, goal of helping to increase understanding of China by the West

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