Economics and cigarettes

Abstract

Economic facts on cigarette consumption and production are summarized, and the health consequences of cigarette smoking are reviewed. The magnitude and distribution of these health consequences among the population are discussed in economic terms, that is, in an "accounting framework" comprising such disparate elements as lost lives, lost livelihoods, pain, fear, discomfort, medical costs, excise taxes, and the costs of regulating smoking behaviors. The importance of these factors and their potential influence on public policy and individual behavior are considered. Difficulties include assigning a monetary value to an expected extension of life, the "voluntary" nature of smoking (even though most smokers wish they could quit), deciding what to include as economic consequences of smoking, and the attribution to smoking of some share of the costs for diseases known to be affected by smoking. "Transfers," or purely financial transactions, in contrast to expenditures for goods and services, are explained as one assessment component of the economic impact of smoking-related diseases. The issue of the economic benefit to the United States as a whole and to the population engaged in the cigarette industry, because of the earnings and employment generated by cigarette purchases, is examined, as is the issue of cigarette purchases as a significant source of federal and state revenue.