Inquiry into illicit tobacco

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.

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12 Responses to Inquiry into illicit tobacco

  1. MareeS

    “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.”

    Well, who would have thought? Something similar happened in the US during prohibition, eventually elevated the Kennedys to the White House, and it is happening right now in Australia.

    You would have to be blind Freddy not to see it, especially if you had any real contact with the cannabis trade in Australia in the 1970s, because it’s déjà vu all over again.

    First thing, look around at how many younger people are smoking rollies. Check out how many packets of filters and cigarette papers are being sold through tobacconists. Then check out how much raw tobacco is being sold by tobacconists over the counter, subject to tobacco tax, compared to estimates of how much is being sold as chop-chop by (you guessed it) bikie and Asian gangs. Just like dope in the 70s and 80s. And THEN look at how the seizure of contraband cigarettes has escalated since the tax sledgehammer was applied by Gillard and Roxon.

    I don’t smoke dope, I don’t smoke tobacco, but I know people who are on the supply side of both markets, and they have said the government has opened up a whole new lucrative market after overdoing it on tobacco taxes.

    Road to Hell paved by wowsers with punishment for sinners in mind.

  2. Tim Neilson

    The illegal tobacco industry is doing more to alleviate poverty in Australia than just about anyone else.

  3. Some History

    What’s happening around the world concerning anti-tobacco under the nut-case leadership of the unelected, unaccountable World Health Organization defies sane description.

    You’d think that we’d learned something of the dangers of medically-aligned prohibitionism (including anti-tobacco) from early last century. Clearly we haven’t. For example, the eugenics catastrophe of early last century in America and Germany was led by the medically aligned. The medically-aligned and social engineering is a dangerous mix.

    Why is there an inquiry into illicit tobacco? There wouldn’t have been an inquiry 30, or 20, or even 10m years ago. Illicit tobacco wasn’t an issue back then but it has become a “problem” now. And guess who created it? The same nitwits that are now having an inquiry into illicit tobacco. Governments, of any political persuasion, since the 1980s have allowed the medically-aligned to monopolize thinking on tobacco. And the resultant monumental mess, of which eye-wateringly high extortionate taxes on tobacco and an illicit trade is only one part, was entirely foreseeable and avoidable. Yet governments have ploughed ahead with the derangement. They plough ahead, greedily, with ever-increasing extortionate taxes now, having already promoted an illicit trade. They are just recklessly further fueling illicit trade.

    From 2014, the Conference of the Parties (to the Framework Convention on Tobacco Control) attended by most countries, including Australia:
    The WHO’s secret tobacco tax
    “The U.N. health agency approves a new global levy after banning the press and public”
    “Moscow — After booting the public from its meetings on Monday, the World Health Organization’s (WHO) tobacco control convention ramped up its assault on transparency on Tuesday when the press was also banned from the Moscow conference.”
    “All indications were that the global tobacco tax would not pass until Thursday or Friday, if at all. Without the public and the media there to watch, delegates ratified the tax almost immediately.
    When I and a handful of other accredited journalists, showed up for a Tuesday morning press briefing, we were told that the briefing was canceled and the press was no longer allowed to attend any convention events at all.
    The rest of the convention, which cost world taxpayers nearly $20 million, will now take place in secret, behind closed doors. It’s a chilling and disturbing attack on the freedom of the press — especially given the impact decisions made at the convention will have on people throughout the world.”
    “On Tuesday, when the journalists were banned, there was no meeting and no vote. Protocol was not followed — not that “properly” banning the media would be appropriate — it would just be a touch less despicable. The secretive nature of the press ban comes across as particularly sleazy and shocking.
    A security thug representing the convention secretariat said the decision to prohibit the press was made overnight by the delegates and the secretariat. That same secretariat pockets $403,000 a year courtesy of world taxpayers for the task of overseeing a convention that meets every two years.
    As I was escorted away from the convention area by two guards, I passed a German reporter being physically restrained from entering the room while being yelled at by WHO officials.”

    http://www.washingtontimes.com/news/2014/oct/14/johnson-whos-secret-tobacco-tax/

    Consider Australia which must be the world leader in extortionate taxes on tobacco. There was the “one off” 25% hike in tobacco excise in 2010. Then there was a 12.5% excise hike in 2013, 2014, and 2015 (there’ll be another of 12.5% in 2016). Then there are 2 automatic hikes in tobacco price per annum that go back some years now. They used to be aligned to the CPI. But that wasn’t enough either. These hikes are now aligned to male average weekly earnings which yields a higher figure. And then there’s a 10% GST slapped on the lot.

    It was Labor, supposedly the Party of the working class, that has initiated all the major hikes in tobacco taxes. It went to the 2013 election with the intended 4 x 12.5% hike that would lift the cost of a pack of cigarettes to $20. The Liberals initially objected but then adopted the same policy. It was one of the first bills passed when they were elected to government in 2013. And with the looming 2016 election, the Labor Party again intends another 4 x 12.5% hikes in tobacco excise that would lift the cost of a pack of cigarettes to $40. It’s extraordinary in the perverse sense that Labor’s major idea since 2013 for raising revenue is 8 (yearly) x 12.5% increases in tobacco excise, i.e., robbing those who smoke to finance election promises and budgetary black holes. This is obviously de facto prohibition for those of lower income. And with the prohibition comes a contraband market. If those of lower income do not have access to lower cost contraband, then continuing to smoke means they are being robbed by ever-increasing amounts by government that is supposed to represent them. The circumstance is beyond obscenity.

  4. Some History

    The World Health Organization, for example, talks about the “Global Tobacco Epidemic”.

    The [medically-aligned] eugenicists of early last century in America and Germany also spoke of a “tobacco epidemic” [the supposed “epidemic” is not of tobacco but tobacco use]. What evidence did they have? None. It was based on wild speculation within a dangerously shallow ideological framework. Much of the rhetoric of the current anti-tobacco crusade, also ideologically motivated, has been heard before; it’s straight out of the early-1900s.

    Proctor (1996) notes that:
    Historians and epidemiologists have only recently begun to explore the Nazi anti-tobacco movement. Germany had the strongest antismoking movement in the 1930’s and early 1940’s, encompassing bans on smoking in public spaces, bans on advertising, restrictions on tobacco rations for women, and the world’s most refined tobacco epidemiology, linking tobacco use with the already evident epidemic of lung cancer …. German anti-tobacco policies accelerated towards the end of the 1930‘s, and by the early war years tobacco use had begun to decline. The Luftwaffe banned smoking in 1938 and the post office did likewise. Smoking was barred in many workplaces, government offices, hospitals, and rest homes. The NSDAP (Nationalsozialistische Deutsche Arbeiterpartei) announced a ban on smoking in its offices in 1939, at which time SS chief Heinrich Himmler announced a smoking ban for all uniformed police and SS officers while on duty. The Journal of the American Medical Association that year reported Hermann
    Goering‘s decree barring soldiers from smoking on the streets, on marches, and on brief off duty periods.

    Smith et al. (1995) also indicate that:
    The Public Health Office and the German Medical association, both under the leadership of Dr Gerhard Wagner, repeatedly issued precise pronouncements regarding the dire health consequences of smoking. By
    1939 Wagner’s successor, Dr Leonardo Conti, had established the Reich Bureau Against the Dangers of Alcohol and Tobacco. The Reich Health Office also made numerous statements, which its president, Hans Reiter, reiterated at his inaugural address at the opening of the ‘first scientific institute for the struggle against the dangers of tobacco’ at the University of Jena in 1942 …. Recognition of the damaging effects of smoking on health led to much antismoking legislation; this included legislation banning smoking in public places by those under 18 and prohibiting both tobacco advertising and smoking in public buildings and on public transport. Pregnant women and those deemed to be sick because of smoking had their tobacco rations withdrawn, and there was serious discussion regarding whether those sick with illness caused by smoking should receive medical care equal to that given to patients whose illnesses were not considered to be self-inflicted.

    Proctor (1997) provides considerable detail as to the extent of antismoking sentiment and measures by the Nazi regime:
    Tobacco was opposed by racial hygienists fearing the corruption of the German germ plasm, by industrial hygienists fearing a reduction of work capacity, by nurses and midwives fearing harms for the ‘maternal organism’. Tobacco was said to be ‘a corrupting force in a rotting civilization that has become lazy’, a cause of impotence among men and frigidity among women. The Nazi-era antitobacco rhetoric drew from an earlier generation’s eugenic rhetoric, combining this with an ethic of bodily purity and performance at work. Tobacco use was attacked as ‘epidemic’, as a ‘plague’, as ‘dry drunkenness’ and ‘lung masturbation’; tobacco and alcohol abuse were ‘diseases of civilization’ and ‘relics of a liberal lifestyle.’ (p.441).

    Advertising bans included a ban on ads implying that smoking possessed “hygienic values,” as were images depicting smokers as athletes or even sports fans, or otherwise engaged in “manly” pursuits (Proctor, 1997, p.460).

    Specialized antitobacco institutes were also established. The most important of these was the Institute for Tobacco Hazards Research. This was established by a 100,000 RM gift from Hitler’s Reichskanzlei (personal funding) to the University of Jena amidst great media fanfare in April, 1941 (Proctor, 1997, p.463). Within the medical and “health” leadership, antismoking was strongly propagated. For example, “Reich Health Fuhrer Leonardo Conti pointed out that tobacco was an addictive drug, weakening the ability of leaders to serve their nation. Karl Astel, the SS officer and physician who founded the institute [Institute for Tobacco Hazards research], denounced the health and financial costs of smoking, but also the ‘ethic of apathy’ fostered by the habit.” (Proctor, 1997, p.463)

    Proctor, R.N. (1996) Anti-tobacco campaign of the Nazis: A little known aspect of public health in Germany, 1933-45, British Medical Journal, 313, 1450-1453.

    Proctor, R.N. (1997) The Nazi war on tobacco: Ideology, evidence, and possible cancer consequences, Bulletin of the History of Medicine, 71, 435-488.

    Smith, G.D., Strobele, S., & Egger, M. (1995) Smoking and death. British Medical Journal, 310, 396.

  5. Baldrick

    You’d have to be mad to think the social engineering wowsers will stop with tabacco restrictions. Leftards love the ‘sin’ tax.

  6. MareeS

    Sin taxes. The fun busters have tried it throughout the history of humankind, they have failed every time.

    Go away. Leave us alone.

  7. Pusnip

    Its nice to see an economic perspective being brought to the issue of tobacco consumption, although Sinc’s is a little underdone. As the Industry Commission noted in its early 90s document on The Economics Of Smoking, there are, in addition, to potential information assymetries, various internalities to be taken into account arising from the addictive nature of the product. There is also peer group pressure and persuasive advertising (though the latter is limited these days) that can affect preference formation. This more sophisticated economic perspective gives answers somewhat different to those I suspect Sinc, with his more limited framework, arrives at.

  8. ella

    Pusnip, a quote from Sinclair’s post:

    “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”

    As an expert on research, Pusnip, will you comment on the corruption Sinclair exposed?

  9. .

    Pusnip
    #1940952, posted on February 10, 2016 at 12:14 am
    Its nice to see an economic perspective being brought to the issue of tobacco consumption, although Sinc’s is a little underdone. As the Industry Commission noted in its early 90s document on The Economics Of Smoking, there are, in addition, to potential information assymetries, various internalities to be taken into account arising from the addictive nature of the product. There is also peer group pressure and persuasive advertising (though the latter is limited these days) that can affect preference formation. This more sophisticated economic perspective gives answers somewhat different to those I suspect Sinc, with his more limited framework, arrives at.

    There sure are information asymmetries. Laughable space cadets such as your goodself don’t even know that moderate smoking has any health benefits. The government has created these asymmetries.

  10. Mick Gold Coast QLD

    From Dot . at 9:48 am:

    “Laughable space cadets such as your goodself …”

    Dot old mate – why on earth do you bother?

  11. ella

    Dot,

    The problem with Pusnip is that he has no manners.

    Pusnip, if you want to insult the Doomlord, it’s considered abnoxious and rude on the Cat to push through to the front of the queue.

    There is etiquette at the Cat – go to the back of the line, Pusnip.

  12. .

    Because I have a problem, Muck. :p

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