Do Smokers Value Their Health and Longevity Less?

One reason why individuals consume harmful addictive goods is that the "full" price of such goods is low. Using data on adults specifically collected for this study, we examine the internal cost of one such good by estimating the value that smokers and nonsmokers place on loss of health and longevity from a major lung disease, chronic obstructive pulmonary disease (COPD). Differences in the nonpecuniary internal cost of getting COPD between current smokers and people who have never smoked range from $80,000 to $260,000, implying that one reason people continue to smoke is that they face a lower full price of smoking. Our results suggest that although taxation and regulation of cigarettes may be justified for externality reasons, the principle of consumer sovereignty implies that the case is much weaker for interventions based on helping smokers internalize costs they impose on themselves. (c) 2009 by The University of Chicago. All rights reserved.