In June I did a four part series on the cost of smoking that showed that the social cost of cigarettes was $40 per pack ($2000):
- $33/pack in private costs borne by the smoker mostly through shortened life span
- $5.50/pack in quasi-external costs borne by the household (spouse and children) primarily via increased morbidity and mortality
- $1.50/pack in pure external costs that represent the net effect of smoking on things like Medicare, Medicaid and Social Security
Yesterday I posted on the substantial life extension benefits that accrue from smoking cessation even as late as age 65. I am going to write more about the methods used in that study, but first wanted to revisit the cost series briefly to amplify on a type of cost that we didn’t include in our estimates of the cost of smoking.
Working on the book The Price of Smoking was great fun, because we had a large project team that discussed and debated many issues. One that was particularly contentious was whether to include intangible costs such as the cost of my son not knowing one of his grandfather’s and the anguish that this fact causes my wife. We decided to not include such intangible costs in order to stick with conservative estimates as well as difficulty in assigning a cost. We did of course provide a dollar estimate of the cost of shortened life span, the primary cost of smoking. This paper by Viscusi and Hersh estimated the private mortality cost (assumed to be borne by the smoker) of $222/pack for men and $96/pack for women (in 2006$). Cutler (2002) $22/pack and Gruber and Koszegi (2001) $30/pack had private mortality costs per pack that were more similar to our estimate ($33/pack in 2000 dollars).
Attaching a dollar value to a statistical life is plenty controversial, but accepted, and there are different methods and approaches that can be compared. In the end, intangible costs such as a child not knowing his grandfather are real, but we thought it better to not provide a dollar value for them and leave that up to the reader, in part because of how many sources of intangible costs we could identify as a project team. If you start including such costs, where do you stop? In any event, our estimate of the social cost of smoking at $40/pack in 2000 dollars is a lower bound estimate and there are harms not accounted for in this figure.
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Papers/Works Cited
Frank A. Sloan, Jan Ostermann, Gabriel Picone, Christopher Conover, Donald H. Taylor, Jr. The Price of Smoking. MIT Press, 2004.
W. Kip Viscusi, Joni Hersch. The mortality cost to smokers. Journal of Health Econmomics 2008;27:943-58.
Cutler, D.M., 2002. Health care and the public sector. In: Auerbach, A.J., Feldstein, M. (Eds.), Handbook of Public Economics. Elsevier Science,
North Holland, pp. 2145–2243.
Gruber, J., Koszegi, B., 2001. Is addiction rational? Theory and evidence. Quarterly Journal of Economics 116 (4), 1261–1303.
