Coyoteblog got me started a-thinking, and you know what that means: I get easily side-tracked, and end up doing all sorts of ancilliary research so that I can make a sound argument for something completely unrelated to the inspiring piece. I wanted to touch on his Trojan Horse idea of Public Health Care, which is really quite novel, insofar as it’s a concept I’ve approached, but hitherto hadn’t synthesized for myself. But then I ran wild on smoking.

Now, I’m young, relatively healthy, and practically invincible. My body can recycle alcohol. I am impervious to otherwise contagious diseases. I will eat almost anything on a dare. But I digress. I am an “occasional” smoker, by which I mean, when I go to the bar, I like to enjoy my smokes. If I’m camping, there’s nothing like a good Honduran or Dominican cigar around the fire at night, and so on. But a few things strike me about the alleged “sin-taxes” on cigarettes and the like. I’ve resorted only to rudimentary calculations, so feel free to point out my errors – it’s the best I can do on my lunch break:

Since the Master Settlement Agreement in the mid-late 1990s, the wholesale price of cigarettes has increased by about 40%. Anecdotally, the price on the shelf in Michigan has increased accordingly (from $4 to $5.50 a pack.) Proponents of the tax-hike will quickly point out the decreased consumption. But overall consumption has decreased by only about 7%, while per-capita consumption has decreased by only about 3% over the same time frame. This tends to suggest that a very few less smokers are smoking approximately the same amount as they previously were, albeit paying a much higher real price (in $/cigarette). Additionally, a geometric average of the percentage of disposable income spent on tobacco products over the period studied suggests that despite several significant fluctuations (which are likely price-driven), consumption has remained relatively constant at about 1% (.997%) of disposable income over an 11-year period. (source)

That there has been a marked increase in cost, followed only by a nominal decline in consumption suggests an extremely inelastic demand for tobacco, somewhere in the neighborhood of .15 to .20 (|7% decrease in use / 40% increase in price|). Because the Captain likes charts so much, I thought I’d draw one up myself. Mind you, this is just an approximation based on basic economic principles:

As the price moves from P1 to P2, due to the tax, the quantity demanded decreases only slightly. The effect of this, is that the burden of such a tax falls mainly on the consumer (the orange area), and only very insignificantly on the producer (the small triangle). This is true for any product for which demand is extremely inelastic. Unfortunately, it is this inelasticity that has made this particular sin-tax such a boon for State coffers.

At the expense of whom, you might ask? Well, the numbers demonstrate that high-school dropouts are about four times more likely to smoke than are college graduates, and that people living below the poverty level are 50% more likely to be smokers than those in the upper income brackets. (source)

Due to the rigid inelastic nature of the demand for the product, coupled with the relative poverty of the typical smoker – It’s about as regressive a program you could possibly draft – but fuck, what do I know, it’s all part of the politics of “feeling good” as Kip would put it. As long as your goals are noble, you can feel good at the end of the day regardless of whether you’re part of the problem or part of the solution.

But this is definitely not a solution. I’d suggest, as I will with most issues that involve externalities – that if we simply stop relying on the trojan horse of Government provided health care, we can eliminate the burden, and hence any legitimate justification for trying to “internalize” the problem. But more on that some other time.

Trends since MSA
some .xl sheet
per cap consumption
domestic output
per cap expendituressome paper i didn’t read