Smoking and Externalities

On the AP Economics discussion list, a teacher mentioned how he teaches the concept of externalities – costs or benefits that happen to someone not party to an economic decision – with a discussion about smoking in public places. He mentioned he was glad that public smoking bans, when passed, are followed by a dramatic drop in heart attacks at local hospitals. He then lamented a recent repeal of such a ban.

Another person responded with praise for the repeal of the ban, indicating it to be a victory for freedom in his view. This is known as a “normative” statement in economics. Normative statements imply a value or other judgment. Positive statements in economics merely describe conditions, regardless of value. “Unemployment is at 9.7%” is a positive statement, for example.

Anyway, I had to respond to the idea of smoking as a freedom for one and all to enjoy. Here’s my response…

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Ah, the glories of the normative arguments of freedom in issues regarding externalities! But for every normative argument, there is at least one equal and opposite normative argument, so let’s explore the issue.

If the smokers aren’t paying the medical bills of the people they impact, that’s one massive externality. If the cost cannot be passed on to the smoker through increased taxes, banning the activity reduces the extent of the externality and its impact.

If I claim to get pleasure from placing unshielded high-grade uranium ore on the table in front of me (and go to www.unitednuclear.com to order your hunk today!), and then go to a restaurant and sit next you with my hunk of unshielded 31,000-50,000 CPM pitchblende, you might have one of several legal reactions:

1. You might decide it’s my right as an American to enjoy the pleasures of uranium wherever I go. You endure the beta and gamma radiation and bear an increased chance of cancer from that moment forward. If it’s a big meal, you might develop radiation sickness within a week.

2. You can decide that if I’m gonna irradiate the room, I can pay for it, as well. Results are as in 1, but we now have a civil suit regarding who pays your medical bills. Since I’m already wiped out from paying for my own treatment, your lawyers advise you to pay your own. You’re now out the cost of your combined legal and medical bills.

3. You could also go after the company that sold the uranium ore. When you go to http://unitednuclear.com/index.php?main_page=product_info&cPath=2_4&products_id=463, you discover a disclaimer that your lawyers tell you is sufficient for their coverage. Since I used the uranium in a manner inconsistent with their instructions, they’re clean. Results as in 2, but with a much lower legal bill – probably just $50 for the initial consultation.

4. You could charge me with aggravated battery. That would at least get me off the streets with that radiation rock. Assuming your case prevails over my cries of, “I didn’t know! I was intoxicated! He got cancer somewhere else! I was eating Twinkies!”, I pay an economic price for my crime of injuring you by being put in jail for a period of time.

5. You could retaliate by lighting up a cigarette and giving me a taste of my own medicine. Freedom is freedom, right?

6. You could work with other like-minded individuals to pass a law that criminalizes possession or transport of unshielded radioactive materials. I can’t even have them in my own home under the statute. I grumble about it, move to a trailer home in a remote location, put barbed wire around my home, and continue using it in solitude. The small-town cops out there choose to tolerate my activity rather than follow a path of strict enforcement. I still injure myself and, if indigent, society bears the cost of my treatment, but the law has reduced the risk to others.

Exposing people to chemicals that will knowingly injure or kill them forces them to bear the costs of an economic decision they were not party to: it should therefore be their legal right to take proper recourse to reduce their exposure to those chemicals. In so doing, they enjoy the freedoms associated with a healthier lifestyle than one impacted by second-hand smoke. And, truthfully, I think we can all be happier with the statutory option than with the nuclear one.

Now that I think about it, maybe there are a few guys out there planning the nuclear option… better start passing some laws!

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