I got invited to make a submission (PDF) to the Parliamentary Joint Committee on Law Enforcement Inquiry into Illicit Tobacco.
Here is a taste:
In this submission I have adopted an economic perspective on tobacco consumption as opposed to a public health perspective. The public health lobby view tobacco from a disease perspective. The World Health Organization, for example, talks about the “Global Tobacco Epidemic”. From this perspective it may be entirely sensible to wish to totally eliminate or eradicate tobacco consumption. This is a normative assessment – tobacco consumption is a very different “ailment” to, say, contracting small pox or polio. Unlike tobacco consumers disease victims do not voluntarily contract their diseases.
Economics strives to be a positive science that investigates human action and choice. It is only through a careful analysis of incentives, constraints, costs, and benefits that choices and decisions can be fully understood. Economics provides a coherent and consistent framework to investigate the totality of any policy choice or decision. It provides, in principle, for a full accounting of the costs and benefits under differing institutional frameworks of different choices and decisions.
From an economic perspective tobacco consumption is much like consuming any other good or service. There may be an informational asymmetry that results in market failure associated with the consumption of tobacco, but once that information asymmetry is overcome there is no further basis, in economic theory, for government intervention. The results produced by the Henry Review for Australia suggest there is no informational market failure associated with tobacco consumption in Australia.
This then lies at the heart of the confused policy analysis offered up by the Henry Review. It adopted the language of economics to recommend what is really a medical policy conclusion. In other words, the Henry Review worked back from a desired conclusion to fashion an argument that supported their preconceived conclusion. From an economic perspective public education and a carefully calibrated Pigouvian tax are the only policies required for tobacco control. At present excise tax rate are very likely to be well in excess of an “optimal” rate resulting in foregone revenue and excessive criminality. Any other tobacco control policies are likely to impose unnecessary costs on the economy and distract attention from the primary policies that are likely to be successful.
I also note with interest this comment from the Joint Research Centre on Transnational Crime:
This section gives the idea of what are the limits of regulation and how it should be necessary for regulators to take the consequences of their regulation into account. Responsibility must rest with those agencies competent to consider such matters.
Just a local example from Australia. It relates to the implementation of standardized packaging. My interests and curiosity goes to the consequences of this policy focusing on the criminal ones. My research is about the trade-offs between health, crime and sometime individual rights. Let me say, Sir, that I think, in the absence of hard data, that these Australian highly restrictive laws risk to be an example of regulation which causes the growth of crime (illicit tobacco), lowers health outcomes while having a direct cost to government revenue.