I recently read an article that was published by Pierre Lemieux in 2001 called "The Diminishing Returns of the Tobacco Legislation." In his article, he discusses how governments have imposed, on more than one occasion, something called a "sin tax" for tobacco products in an effort to deter people from using the harmful product at all. A diminishing return is when one factor of production is increased but all others remain constant, but the yield or return in fact decreases. For example, if you add a cook to a kitchen that is already full, he/she may become more of a hindrance than a help in the production process.
I find this to be quite a controversial issue for several reasons. Here's why:
I find this to be quite a controversial issue for several reasons. Here's why:
Pierre states that over a decade (1985-1995) prices of cigarettes had been increased by 52% (all taxes!) in an effort to "reduce consumption" (I put this in quotations because I have a very hard time believing that this was their motivation. Can you say gold mine?)Well, their "plan" worked and consumption dropped by 18%. More than likely though this 18% just included all us "social smokers" and people who weren't necessarily addicted. Over the next 4 years (1995-1999), government increased taxes yet again, by another 48%, but this time consumption only dropped by 11%. A clear sign of diminishing returns. 'It worked well and we made a ton of money, ahem, a lot of people quit the first time, so why not try it again!' However, during this period black market tobacco products started popping up more than usual - perhaps this 11% just started shopping else where. According to World Bank economists, nearly this percentage of sales is in fact smuggled. This 11% of people do after all suffer from an addiction that they have to feed and it doesn't matter where they find it at that point. This type of illegal activity could closely be related to someone with a more illicit drug addiction such as marijuana or cocaine. I believe that the government recognises the fact that smoking is an extremely inelastic demand and is taking advantage of people who suffer from an addiction to it.
A few short years later, the government made yet another attempt to convince citizens to kick the habit. Perhaps this time they had our best interests at heart as they didn't introduce another tax hike, but instead passed a law that a certain percentage of the cigarette packaging must be covered by warnings and disturbing pictures of what could potentially happen if we don't quit. Diseased lungs, rotten yellow teeth, blackened lungs. You get the picture. For many of my smoker friends the shock value didn't last long at all and this did not reduce their consumption in the least.
I completely understand why governments from all around the world may want to make certain attempts to get everyone to quit smoking. Health care costs. Call me cynical, but there are pros and cons to every situation and I have a hard time believing that smoking increases cost so much that the government felt the need to raise the cost of cigarettes by 100% in order to pay for it. Unhealthy habits are a detriment to the human doing them by causing their life span to shorten, that's their choice. Think of all the health care costs to the elderly for diseases such as Dementia. This particular disease often requires constant watch and care by a trained health professional; a lot more costly than a person who dies of lung cancer or heart disease within a month.
To wrap it up, I'd have to agree completely with Pierre that in order to keep up the momentum of all this government intervention, they'll have to introduce even more taxes and more gruesome pictures to look at when you reach for that nicotine fix. In my opinion, if this keeps up, more and more people will start turning to the black market and it could become as large of a problem as drugs that are actually illegal. Then police forces will be in need of larger budgets. Vicious circle - sometimes they should just let sleeping dogs lie.
Put that in your pipe and smoke it......
A few short years later, the government made yet another attempt to convince citizens to kick the habit. Perhaps this time they had our best interests at heart as they didn't introduce another tax hike, but instead passed a law that a certain percentage of the cigarette packaging must be covered by warnings and disturbing pictures of what could potentially happen if we don't quit. Diseased lungs, rotten yellow teeth, blackened lungs. You get the picture. For many of my smoker friends the shock value didn't last long at all and this did not reduce their consumption in the least.
I completely understand why governments from all around the world may want to make certain attempts to get everyone to quit smoking. Health care costs. Call me cynical, but there are pros and cons to every situation and I have a hard time believing that smoking increases cost so much that the government felt the need to raise the cost of cigarettes by 100% in order to pay for it. Unhealthy habits are a detriment to the human doing them by causing their life span to shorten, that's their choice. Think of all the health care costs to the elderly for diseases such as Dementia. This particular disease often requires constant watch and care by a trained health professional; a lot more costly than a person who dies of lung cancer or heart disease within a month.
To wrap it up, I'd have to agree completely with Pierre that in order to keep up the momentum of all this government intervention, they'll have to introduce even more taxes and more gruesome pictures to look at when you reach for that nicotine fix. In my opinion, if this keeps up, more and more people will start turning to the black market and it could become as large of a problem as drugs that are actually illegal. Then police forces will be in need of larger budgets. Vicious circle - sometimes they should just let sleeping dogs lie.
Put that in your pipe and smoke it......
Lemieux, Pierre, The Diminishing Returns to Tobacco Legislation,
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