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Retrospective and Prospective Benefit-Cost Analyses of U.S. Anti-Smoking Policies 1

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  • Jin, Lawrence
  • Kenkel, Don
  • Liu, Feng
  • Wang, Hua

Abstract

Regulatory policies designed to improve societal welfare by “nudging†consumers to make better choices are increasingly popular. The application of benefit-cost analysis (BCA) to this sort of regulation confronts difficult theoretical and applied issues. In this analysis we contribute a worked example of behavioral BCA of U.S. anti-smoking policies. Our conceptual framework extends the standard market-based approach to BCA to allow for individual failures to make lifetime-utility-maximizing choices of cigarette consumption. We discuss how our market-based approach compares to the health benefits approach and the “consumer surplus offset†controversy in recent BCAs of several health-related regulations. We use a dynamic population model to make counterfactual simulations of smoking prevalence rates and cigarette demand over time. In our retrospective BCA the simulation results imply that the overall impact of anti-smoking policies from 1964 to 2010 is to reduce the total cigarette consumption by 28%. At a discount rate of 3% the 1964–present value of the consumer benefits from anti-smoking policies through 2010 is estimated to be $573 billion ($2010). Although we are unable to develop a hard estimate of the policies’ costs, we discuss evidence that suggests the consumer benefits substantially outweigh the costs. We then turn to a prospective BCA of future anti-smoking Food and Drug Administration (FDA) regulations. At a discount rate of 3%, the 2010–present value of the consumer benefits 30 years into the future from a simulated FDA tobacco regulation is estimated to be $100 billion. However, the nature of potential FDA tobacco regulations suggests that they might impose additional costs on consumers that make it less clear that the net benefits of the regulations will be positive.

Suggested Citation

  • Jin, Lawrence & Kenkel, Don & Liu, Feng & Wang, Hua, 2015. "Retrospective and Prospective Benefit-Cost Analyses of U.S. Anti-Smoking Policies 1," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 6(1), pages 154-186, April.
  • Handle: RePEc:cup:jbcoan:v:6:y:2015:i:01:p:154-186_00
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    References listed on IDEAS

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    1. B. Douglas Bernheim & Antonio Rangel, 2007. "Toward Choice-Theoretic Foundations for Behavioral Welfare Economics," American Economic Review, American Economic Association, vol. 97(2), pages 464-470, May.
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    Cited by:

    1. Helen G. Levy & Edward C. Norton & Jeffrey A. Smith, 2018. "Tobacco Regulation and Cost-Benefit Analysis: How Should We Value Foregone Consumer Surplus?," American Journal of Health Economics, University of Chicago Press, vol. 4(1), pages 1-25, Winter.
    2. Philip DeCicca & Donald Kenkel & Feng Liu & Hua Wang, 2017. "Behavioral Welfare Economics and FDA Tobacco Regulations," Advances in Health Economics and Health Services Research, in: Kristian Bolin & Björn Lindgren & Michael Grossman & Dorte Gyrd-Hansen & Tor Iversen & Robert Kaestn (ed.), Human Capital and Health Behavior, volume 25, pages 143-179, Emerald Publishing Ltd.
    3. Donald S. Kenkel & Sida Peng & Michael F. Pesko & Hua Wang, 2017. "Mostly Harmless Regulation? Electronic Cigarettes, Public Policy and Consumer Welfare," NBER Working Papers 23710, National Bureau of Economic Research, Inc.
    4. Trinidad Beleche & Nellie Lew & Rosemarie L. Summers & J. Laron Kirby, 2018. "Are Graphic Warning Labels Stopping Millions of Smokers? A Comment on Huang, Chaloupka, and Fong," Econ Journal Watch, Econ Journal Watch, vol. 15(2), pages 129–157-1, May.
    5. Robinson, Lisa A. & Viscusi, W. Kip & Zeckhauser, Richard J., 2016. "Efficient Warnings, Not "Wolf or Rabbit" Warnings," Working Paper Series 16-033, Harvard University, John F. Kennedy School of Government.
    6. Hunt Allcott & Judd B. Kessler, 2015. "The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons," NBER Working Papers 21671, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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