February 21, 2010

Yes...Government Regulates That, Too

The next time you are considering going outside for a cigarette break, consider this: Uncle Sam does not want you to smoke. At least, that was the impression I felt when congress passed a bill last summer to put regulation of labels on cigarette packets, advertising methods, and most other production behavior of the tobacco industry under the strict control of the Food and Drug Administration. Accordingly, the FDA would have the power to regulate the market to whom tobacco companies advertise: “Under the new law, most flavored tobacco products — which tend to attract young smokers — would be banned, as would advertisements that use Joe Camel and other cartoon characters that might appeal to children. It also requires stronger warning labels and prohibits the use of the words "mild" and "light," which leave the impression that the products are safer.” (Etter, Mundy, 2009). The players in this act, those concerned about tobacco use, undoubtedly included the American Cancer Society: “’Every day, 3,500 children pick up their first cigarette and 1,000 become addicted smokers’” says John Seffrin, chief executive for the American Cancer Society (Tedford, 2009). Also involved was Senator Chris Dodd, a democrat from Connecticut, who spearheaded the bill. Before I go looking for my soapbox, allow me to say that I think smoking is dangerous and bad for one’s health. However, as a student of economics, I cannot simply stop my analysis at “it’s bad;” especially so, when the government collectively decides they are going to regulate something. Here are a few of my own observations on the matter.

Without regulation, cigarette producers would naturally be incentivized to, at some point, provide alternatives to cigarettes. Cigarettes, despite their addictive nature, are NOT a perfectly inelastic product, and the producers of cigarettes are still subject to the order of consumers. Ludwig Von Mises, in his series of lectures titled Economic Policy: Thoughts for Today and Tomorrow, said it best: “The real bosses in the economic system are the consumers. And if the consumers stop patronizing a branch of business, these businessmen are either forced to abandon their eminent position in the economic system or to adjust their actions to the wishes and to the orders of the consumers.” (Mises, pg. 20) That is to say, if consumers are no longer satisfied by the products which cigarette companies bring to market (which is entirely probable and likely; I could easily ask anyone off the street if they want cancer, and be certain of their response), they will “punish” cigarette producers by not buying their products. Spurred by profit losses, producers would be forced to offer alternatives that would better satisfy the wants of consumers. Sure enough, cigarette producers have already tried to do this by releasing such products as Snus (smokeless nicotine chew), and nicotine pellets, which are claimed to be less harmful than cigarettes. This bill passed by congress has the potential to limit the ability of cigarette producers to bring these alternatives to market: “The regulations also require makers to pull from the market products that were introduced after February 2007, which could hurt some dissolvable tobacco pellets and strips.” (Etter, Mundy, 2009)

Now, legislators, government officials, and certainly the ACS, were concerned over the deaths due to cancer from smoking: “According to the American Cancer Society, 443,600 people in the U.S. die from tobacco-related illnesses each year” (Tedford, 2009). Furthermore, they were concerned that candy and fruit flavored cigarettes, paired with the use of cartoons to advertise such products, would attract younger smokers. While I have no basis to say that either of these concerns are groundless (The former, to the best of my knowledge, is certainly true), I must question whether there is real benefit from government enforcing rules that keep people from doing bad things to themselves . What are the costs, explicit and implicit, of doing so, and are they acceptable compared to the benefits? Again, Mises to the rescue: “But the notion that a capitalist form of government can prevent people from hurting themselves by controlling their consumption is false. The idea of government as a paternal authority, as a guardian for everybody, is the idea of those who favor socialism” (Mises, pg. 21). Granted, the bill passed which puts the FDA in control of cigarette regulation may reduce the rate of cancer caused by cigarettes and other tobacco products, encourage (force) people to make healthier decisions, and etc. However, the government tried the same thing during the Prohibition years, the costs of which included, amongst other things, bloodshed (I must give due credit to Mises for using this example in his argument).

My last observation, which I intend to illustrate as purely theoretical, is the possibility for this legislation to open the gate for government involvement in other areas of product regulation. Mises’ conjecture on Interventionism, or the idea that “government not only fails to protect the smooth operation of the market, but that it interferes with the various market phenomena” (Mises, pg. 40), applies in this case. Government legislators had decided that, due to the harmful nature of tobacco, they must regulate the sale, marketing, and type of tobacco products on the market. Well, certainly aerosol-can office dusters are very harmful if you inhale their contents. Those same legislators may now decide that, due to the harmful nature of inhaling aerosol-can office dusters, that government should regulate who may purchase aerosol-can office dusters, who may sell them, how they are advertised, and what they are made of. What’s to stop them? The population has already voted them the power to make such decisions!

All in all, given the nature of the observations I've just made, had I the opportunity to summarize my own thought on the congressional tobacco bill, it would be simple: it was passed without consideration for all possible ramifications of the action. However, arguing a moral standpoint on a issue such as is may be best left somewhere else. Although, the title, Curious Congress and the Case of the Tobacco Regulatory Bill, is quite amusing.

Reference: Mises, Ludwig Von (2006). Economic Policy: Thoughts for Today and Tomorrow, 3rd edition. Regnery/Gateway Inc., Chicago, IL. Originally publish in 1979

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