Cowen’s question

Tyler Cowen asks of the new tobacco bill:

For purposes of argument, let’s say you buy into paternalism and the government’s ability to do a good job with it (no need to reargue those points in the comments, they are only simplifying assumptions for the purpose of focusing on another question).

My question is: why impose quality restrictions when higher taxes would appear to be more efficient in limiting consumption and raising revenue at the same time? Revenue is especially scarce right now and making cigarettes less appealing lowers the revenue that can be raised by taxing them.

He’s right, of course, that higher taxes would be a more sensible policy. But raising taxes is a win-lose proposition: It’s a win for health activists and politicians, a loss for the cigarette companies. It’s hard to push the tax hike through the political process. Regulating quality is potentially a win-win: A win for health activists and politicians and a win for Big Tobacco companies who get to protect their market share via the menthol exemption, restrictions on advertising, and new hurdles to the creation and marketing of safer tobacco products. Taxes create opposition between the two groups, regulation can bring them together.

This legislation is obviously illogical from a public health point of view. It makes sense only as bootleggers and Baptists style cooperation, as one more significant step toward the cartelization of the tobacco industry.

Permalink - Share/Save - Comments (2)

Tagged as: FDA, tobacco