Smoking —50 Years of Progress." Most of the nearly 1,000-page report (think before you hit "Print All Pages" on this one!) focuses on health effects of tobacco use. Basic message: Tobacco use is much more hazardous than we thought in 1964, and even more hazardous than we thought 10 or 20 years ago. But round about p. 700 of the report it offers a few chapters on tobacco use and tobacco policy, which is where the economic issues begin to appear explicitly.
As a starting point, here are long-term trends for tobacco consumption in the United States. The first graph shows that per capita consumption of tobacco--that is, total use divided by total population--has fallen from 12 pounds per person per year in the 1950s to about 4 pounds per person per year at present.
This figure shows the share of the adult population that currently smokes cigarettes. More than half of men and about one-third of women smoked in 1964; now, it's around 20% for women and a little higher for men.
Clearly, U.S. tobacco use has dropped a great deal. But as the Surgeon General's report reminds us: "Despite declines in the prevalence of current smoking, the annual burden of smoking-attributable mortality in the United States has remained above 400,000 for more than a decade and currently is estimated to be about 480,000, with millions more living with smoking-related diseases. ... Annual smoking-attributable economic costs in the United States estimated for the years 2009–2012 were
between $289–332.5 billion, including $132.5–175.9 billion for direct medical care of adults, $151 billion for lost productivity due to premature death estimated from 2005–2009, and $5.6 billion (in 2006) for lost productivity due to exposure to secondhand smoke."
Since the 1964 re[pt, a variety of anti-tobacco policies have been enacted: taxes on cigarettes, lawsuits against tobacco companies, warning labels, anti-smoking media campaigns, limits on advertising cigarettes, support for quitting, and rules that limit exposure to secondhand smoke in public places. What difference has it all made and where do we stand? The January 8, 2014, issue of the Journal of the American Medical Association (JAMA) has a useful set of articles reviewing the evidence and arguments (which can be read on-line with a slightly clunky browser).
In "Tobacco Control and the Reduction in Smoking-Related Premature Deaths in the United States, 1964-2012," Theodore R. Holford, Rafael Meza, Kenneth E.Warner, Clare Meernik, Jihyoun Jeon, Suresh H. Moolgavkar, David T. Levy take on the task of estimating how much smoking in the U.S. has been reduced as a result of the anti-smoking efforts. They write (and for readability I have deleted (bracketed information about the statistical confidence intervals from this description): "In 1964-2012, an estimated 17.7 million deaths were related to smoking, an estimated 8.0 million fewer premature smoking-related deaths than what would have occurred under the alternatives and thus associated with tobacco control (5.3 million men and 2.7 million women). This resulted in an estimated 157 million year of life saved, a mean of 19.6 years for each beneficiary (111 million for men, 46 million for women). During this time, estimated life expectancy at age 40 years increased 7.8 years for men and 5.4 years for women, of which tobacco control is associated with 2.3 years (30%) of the increase for men and 1.6 years (29%) for women."
What is the appropriate public policy with regard to tobacco? The Surgeon General's report writes: "This nation must create a society free of tobacco-related death and disease." In a note before the report, the Secretary of Health and Human Services Kathleen Sibelius writes: "I believe that we can make the next generation tobacco-free." I'm fine with all sorts of anti-tobacco policies, but I confess that I do not find the spirit of prohibition any more attractive when applied to tobacco than when it was applied to alcohol. People eat and drink all sorts of things that can cause ill-health, especially if taken to extremes. People also fail to exercise or to take multivitamins or small amounts of aspirin that would improve their health. But the usual starting point for economic analysis is that a free society is better off when people make their own choices. There are several potential reasons for reaching a different conclusion.
For example, one possible reason is that people lack information in making their decisions, and so the government should assure that such information is provided. After 50 years of warnings, and drilling the health hazards of smoking into schoolchildren everywhere, I find it difficult to believe that many people are ignorant of the health risks. Indeed, cigarettes were referred to as "coffin nails" as far back as the 19th century. Sure, it's possible to make the health warnings more explicit, even grotesque, but at some point such efforts stop being about "information," and are essentially propaganda.
Another possible reason for anti-smoking policy is "externalities"--that is, smoking imposes costs on others. But when smoking reduces the productivity and wages of a smoker, the smoker bears that cost directly. When smoking shortens life expectancy, the smoker bears that cost directly, too. Indeed, even when smoking causes sicknesses that lead to expenditures on health care costs, the grim truth (as economists and demographers are willing to note off the record), is that shorter life expectancies mean less government spending for programs like Social Security and Medicare. In addition, many of those who die from smoking-induced strokes or heart disease impose relatively low costs on the health care system. The "externalities" argument is a strong justification for reducing unwanted exposure to second-hand smoke. But given that we already have taxes on tobacco products that can be viewed as helping to offset the health care costs imposed by these programs, it's not clear how much more policy intervention can be justified by this argument.
The final reason for anti-smoking policy is sometimes called "internalities"--that is, people would like to quit smoking, but many of them find themselves unable to do so, and so they need some public policy help to avoid imposing costs on themselves. The Surgeon General report states that "68.9% of current adult daily smokers in that year  were interested in quitting smoking. ... In 2012, the overall quit ratio (i.e., the percentage of ever smokers who had quit smoking) among U.S. adults was 55.1%, which means that in that year there were more former smokers than there were current smokers in the United States." In this spirit, the panoply of anti-smoking policies can be views as helping people who want to quit--or perhaps would prefer never to start the habit--to find the extra energy and incentive that they need to do so. But the "internalities" argument should not be pushed so far as to conclude that everyone who smokes should always wants to quit. Some smokers will prefer to follow Mark Twain's old advice, related to his own prodigious cigar smoking, "If you can't reach 70 by a comfortable road, don't go."
The evidence on cigarette taxes and the rate of smoking is compelling. The Surgeon General writes (citations omitted): "In 2012, the federal tax rate was $1.01 per pack and the mean state tax rate was $1.53 per pack. The average price, nationally, for a pack of cigarettes in 2012 was $6.00." Here's a figure showing the real-inflation adjusted price of a pack of cigarettes, compared with consumption of cigarettes. It's intriguing to note that cigarette consumption has fallen as the after-tax price has risen.
The Surgeon General's report also discusses the range of other anti-smoking policies. But the report touches only lightly on the most intriguing current method for reducing smoking: that is, electronic cigarettes that provide a dose of nicotine without producing smoke. That January 8, 2014, issue of JAMA includes an article by David B. Abrams called "Promise and Peril of e-Cigarettes: Can Disruptive Technology Make Cigarettes Obsolete?" Abrams writes that e-cigarette revenues have doubled each year since 2008, and have now reached $2 billion. There is some preliminary evidence that e-cigarettes might help people to quit smoking altogether, but even if this fails to hold up in further studies, e-cigarettes pose a vastly lower health risk than smoking tobacco, both to the user and to anyone around them.
Abrams points out that e-cigarettes create a tension between those who believe in "abstinence" and those who believe in "harm reduction." My own general view is that while it's fine in many famioly and educational contexts to suggest that abstinence would be a sensible individual decision, public policy should focus less on enforcing abstinence and more on offering opportunities for harm reduction. I've never smoked tobacco in any form--cigarette, cigar, pipe--and I have no particular intention of giving it a try. But those of us who are regular consumers of caffeine, like me, should probably hesitate before we get too strident about those who prefer to consume nicotine.