Governments have tried everything to reduce smoking.
They have used the best method available to such a market failure - tax and forced the price up to many times the actual cost of production. The problem is that this addictive good has very inelastic demand and so the effect on existing smokers is small.
Two primary methods of moving the demand curve to the left have been tried:
Education has failed. Everyone knows that smoking is bad for them, but they have failed to understand the full extent of the damage they do to themselves yet young smokers continue to take up the habit.
Banning advertising has not worked either.
However all these measures have reduced smoking and it is much less of a problem than it was in the 1960's when almost everyone smoked.
So what can governments do when they are faced with the failure of policy to correct this market failure? Unusually the best answer is more regulation. Normally the best solution to market failure is some sort of tradeable permit, then tax, but not with smoking.
The latest attempt is the banning of distinctive packaging. This has been introduced by Australia where all cigarette packets are now olive green with nasty pictures on them. The idea is to deny brand loyalty and make them unattractive.
Of course the tobacco companies claim its not going to work and even claim it is unfair. But these were the same companies who claimed smoking didn't cause cancer when they had evidence that it did, so lets not take too much notice of them.
Umar Ahmed
ReplyDeleteThe introduction of graphic packaging I believe will be effective and will reduce smokers in the short term but mainly in the long term as youngsters will be less attracted to the packaging and be put off smoking, as said in the article. Also as the packaging has been "sicking" causing the taste of cigarettes to worsen, people may have more will power to give up due to this new motivation and the mental effect which causes people to think it tastes worse.
One of the main issues though is that the black market for cigarettes might grow which will mean less tax revenue and more harmful cigarettes which will mean more costs for the NHS. There are other disadvantages as well such as trouble distinguishing between packages for shops, but these are trivial issues.
So overall this form of regulation will be effective mainly in the long term.
Perhaps the Government should rapidly increase the rate of cigarette duty so that supply would fall, meaning that prices would go up and less people would be able to afford to smoke. Then the Government could make tougher sentences and penalties for tobacco provided through the black market. That could reduce smoking. Another thing Government could do is to make smokers pay for any treatment they need for smoking-related diseases which could then put smokers of smoking because of the risk of them becoming ill.
ReplyDeleteIt can be hard to determine whether a disease is smoking related or not, because there is a chance of getting, for example, lung cancer if you are not a smoker, and who's to say that the external factors aren't what caused it rather than smoking. The only real solution is to raise duty, because the images displayed have been seen already in adverts, or anti smoking campaigns so wont have much of an effect, the best tactic is to prevent people from starting smoking by making tobacco products cost more.
DeleteI believe these new packet will in the long run have a lasting effect on the number of smokers in future generations. But in the short term, these gruesome images will have a small effect on the demand for cigarette, A product with a very inelastic demand. I do think the aim still should be to make continuous smoking as much of an inconvenience as possible. An even higher increase in government taxation causing a rise in prices, which should result in a fall in quantity consumed, as well as reducing supply, is a method that could be employed. Another method could be making the smokers pay for any medical treatment they need which is caused by their smoking. A combination of the taxation, medical bills, and the change in cigarette packets, would cause a definite change in the number of smokers in both the short and long run. But. one would have to question whether the cut in the tobacco and cigarette industry would hit specific economies too hard, e.g. Brazil. Brazil being the world's largest exporter of tobacco.
ReplyDeleteI think that the packages could either increase demand or decrease it. On the one hand, it would decrease the allure of brands, but in general I don't think that people buy them on the basis of packaging and brands anyway, so the main people it'd affect would be the first time smokers, rather than the already addicted. On the other hand, the featureless boxes might lend it a certain mystique that could draw new smokers in. The gory pictures should help with that though.
ReplyDeleteAs a personal opinion, I think that tobacco products should be kept below the counter rather than on shelves behind it, since when it is out of view then it will occur to people to buy them less when they aren't being reminded of them in shops.
In addition to this article, it is important to talk about the negative externalities of smoking. Here it is important to mention that every individual probably only cares about the private costs of smoking, which includes the price of a packet of cigarettes, but never think about the negative consumption externalities of the good.
ReplyDeleteFirst of all, probably the biggest externality of smoking is lung cancer. This affects the individual who smokes the cigarette himself and is a long term effect and can be fatal. 85% of all lung cancers in the US are due to smoking, where there are about 135.000 deaths per year from the lung cancer. This is a horrible statistic, as it keeps rising every year. There are various other risks of smoking, which involve cardiovascular disease and emphysema. These are all very bad negative consumption externalities and would mean a big marginal external cost of the good if drawn on a diagram.
Vincent Vogl