In class we went through this question in a format of open discussion. We initially got distracted by our favorite economists (I having a thing for Milton Friedman) and then the so called “devil” of economics Alan Greenspan. I have respect for Greenspan and his intellect with economics, but his role in the sub-prime mortgage crisis was clear. Ironically Greenspan wrote his PhD dissertation with comments on soaring house prices and effects on consumer spending as well as anticipating a burst of the housing bubble.
In class we had a discussion based upon this question. Immediately we were separated into two camps, how inelastic or elastic was the demand for cigarettes. I put forward my opinion that the demand for cigarettes is more inelastic then elastic, many because those that smoke tend to continue to smoke and factors such as addiction help maintain the demand. From personal experience I know that people who smoke will buy cigarettes at any price, because they feel they need them.
In regards to the question, we came up with a list of several methods to stop people smoking.
Change in Cost:
- Raise Excise Tax (duty)
- Sales Tax (we considered it more effective as it is direct and the consumer notices)
- Goods and Services Tax (direct)
- Tax on the production of tobacco, and the production of cigarettes
Change in Branding & Advertising:
- Blank Packaging (no picture, white box, and small lettering for brand name)
- Gore Images (pictures on the boxes of people in hospital or tar in lungs)
- Laws on Advertising (ban on advertising tobacco products on television & radio)
- Supermarkets & General Stores Must Hide Tobacco Products
- No Smoking Inside or Workplaces (fines)
- No Smoking on Public Transport (fines)
- No Smoking in Public Places e.g. Trafalgar Square (fines)
- No Smoking Around Minors (Under 18)
Our ideas regarding cost brought up an interesting question, at what price will people stop buying cigarettes due to the major increase in opportunity cost? This is a problem with changing the price of cigarettes that due to factors such as addiction people still may consume them at the greater price, which just means the government is making money from the tax and not helping the people.
I would argue that introducing greater public restrictions would dramatically change the elasticity of the demand for cigarettes. This is because even though smokers see cigarettes as a need, they will be restricted where they can smoke, making it harder for them too smoke. The change in branding and advertising may just lead to a downward shift in demand but not too dramatic.
Towards the end of the harkness discussion we all clearly agreed that the prohibition of smoking would be preposterous idea as it would introduce a black market (greater than the current one). I personally do not believe it is the role of the government to stop people smoking; all the government must do is offer people assistance in stopping smoking and make decisions while aware of the health implications of smoking. We cannot simply bury the tobacco companies as they are a considerable part of economy. If people want to make bad decisions then let them, we are all ultimately responsible for ourselves. This is why I am in favor of public restrictions on smoking, such as no smoking inside, because that way others do not have to suffer from others problems.
While on the note of prohibition, I brought up the example of the legalization of marijuana. Currently marijuana being illegal leaves it on the black market, unregulated and easier to purchase by minors than tobacco and alcohol. Strict regulation and smart policies can help us control so called “sin” products such as tobacco, alcohol, and marijuana. I believe that this would be a more effective war on drugs, than the United States attempt.