Thursday, May 21, 2015

E-cigs: The Bootlegger/Baptist Opposition

It might seem that the debate over e-cigarettes and "vaping" should be a fundamentally empirical question. Does vaping primarily reduce cigarette smoking? If so, then it should be viewed as an overall benefit to public health and, at a minimum, not discouraged. Or does vaping serve as a gateway that leads to increased cigarette smoking? If so, then it should be discouraged in many of the same ways as cigarette smoking: public health advisories, taxes, no-vaping in public spaces, and the like.

But interpreting the evidence isn't simple. For example, the Centers for Disease Prevention and Control (CDC) put out a report on April 17, 2015, titled "Tobacco Use Among Middle and High School Students — United States, 2011–2014." The first paragraph offers this statement: "In 2014, e-cigarettes were the most commonly used tobacco product among middle (3.9%) and high (13.4%) school students. Between 2011 and 2014, statistically significant increases were observed among these students for current use of both e-cigarettes and hookahs (p<0.05), while decreases were observed for current use of more traditional products, such as cigarettes and cigars, resulting in no change in overall tobacco use." Some people see this shift from regular cigarettes to e-cigarettes as good news, because the health effects of e-cigarettes are lower (that is, they have nicotine, but none of the other by-products of smoking that are typically linked to cancer). Some see the rise in e-cigarettes as a threat to be stopped.

As the government regulators figure out what to do, it's important to remember that there is an industry lobbying powerhouse with a large incentive to restrict e-cigarettes: the big tobacco companies.  Jonathan H. Adler, Roger E. Meiners, Andrew P. Morriss, and Bruce Yandle make this argument in "Bootleggers, Baptists, and E-cigs," which appears in the Spring 2015 issue of Regulation magazine.

A bootleggers-and-Baptists coalition refers to legal restrictions that arise from a combination of those who don't want the activity to occur and those who want to use the regulations to cripple potential competition. In the canonical example, both bootleggers and Baptists favored laws prohibiting legal alcohol sales--but for different reasons. Other common examples include when industry partners with environmentalists to support tough environmental regulations, which industry favors because it will cripple any new competition.  In another example, existing examples of legal gambling--like state lotteries--often partnered with anti-gambling forces to oppose expanded gambling opportunities from Native American casinoes. Bruce Yandle and Adam Smith have a recent book out on the subject: Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory PoliticsHere's an interview with Yandle from a few years back.

In the case of e-cigarettes, the Adler, Meiners, Morriss, and Yandle  essay points out that  few years back, the four big tobacco companies (Philip Morris Inc., R. J. Reynolds, Brown & Williamson and Lorillard) signed an agreement in which they would pay $206 billion over time to 46 states, and in exchange, the states would not sue them for how smoking increased the health care spending costs of those states. Many anti-smoking groups broadly favored the settlement, because worked like a tax on cigarettes to push tobacco companies to raise their prices to consumers and thus discourage smoking.

But the big tobacco companies were concerned that new entrants to the industry might be able to undercut them on price, because new entrants would not have to make these payments to the states. As the Adler et al. group explains: "Therefore the MSA [Master Settlement Agreement] provided that for every percent of market share over 2 percent lost by a participating cigarette manufacturer, the manufacturer would be allowed to reduce its payments to the states by 3 percent, unless each participating state enacted a statute to prevent price competition from non-participating manufacturers (which each state did). The statutes require nonparticipating cigarette producers to make payments equal to or greater than what they would owe had they been participants in the agreement, to eliminate any cost advantage."

In short, the political process over how e-cigarettes should be regulated is not a pure public health argument. E-cigs represent a competitive threat to the tobacco industry, which will lobby to have have them regulated at least as harshly as conventional cigarettes, although the health issue posed by e-cigs (which, by the way, can contain little or no nicotine if the vaper desires) is clearly much lower. States will be worried that this new competition from vaping might in some way affect their revenues they are expecting from the tobacco companies. A certain group of anti-smoking neo-prohibitionists has pretty much already decided to view vaping as an insidious precursor to conventional cigarettes.

As I have pointed out, the anti-smoking efforts that began with the US Surgeon General's report back in 1964 have saved millions of lives, but even though smoking rates have diminished, tobacco use is still linked to 400,000 premature deaths and another $300 billion in economic costs due to health care costs and lost productivity each year. Perhaps e-cigs can help to reduce these costs. The evidence on how e-cigarettes interact with use of conventional cigarettes is still accumulating, but before we run with the assumption that e-cigs are part of the same problem, it's worth some critical scrutiny on the bootlegger-and-Baptist coalition that is pushing for this result.