David R. Henderson  

Substitution in Nicotine Consumption

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Yesterday's electronic New York Times and today's print edition carries the news story "Use of E-Cigarettes Rises Sharply Among Teenagers, Report Says" by Sabrina Tavernise.

It's actually very good. Indeed, it reminds me of some of the best of the Wall Street Journal news stories of the 1970s when I started reading that publication daily in graduate school. It's a mix of interesting facts put together in an understandable narrative that will show any reader with an open mind that e-cigarettes are substituting, especially with young people, for cigarettes, pipes, and cigars. An excerpt:

But the report also told another story. From 2011 to 2014, the share of high school students who smoked traditional cigarettes declined substantially, to 9 percent from 16 percent, and use of cigars and pipes ebbed too. The shift suggested that some teenage smokers may be using e-cigarettes to quit.

The narrative also cites the view that, from a health point of view, this is good. An excerpt:
Smoking is still the single-biggest cause of preventable death in the United States, killing more than 480,000 Americans a year, and most scientists agree that e-cigarettes, which deliver the nicotine but not the dangerous tar and other chemicals, are likely to be far less harmful than traditional cigarettes.

I was also pleased to see her place a counterpoint to the "ain't it awful" views of those who simply want people not to smoke and not to vape. She quotes an "ain't it awful" official:
"This is a really bad thing," said Dr. Thomas R. Frieden, the director of the C.D.C., who noted that research had found that nicotine harms the developing brain. "This is another generation being hooked by the tobacco industry. It makes me angry."

Then she lays out the counter position:
But the numbers had a bright side. The decline in cigarette use among teenagers accelerated substantially from 2013 to 2014, dropping by 25 percent, the fastest pace in years.

The pattern seemed to go against the dire predictions of anti-tobacco advocates that e-cigarettes would become a gateway to cigarettes among youths, and suggested they might actually be helping, not hurting. The pattern resembled those in Sweden and Norway, where a rise in the use of snus, a smokeless tobacco product, was followed by a sharp decline in cigarette use.

"They're not a gateway in, and they might be accelerating the gateway out," said David B. Abrams, executive director of the Schroeder Institute for Tobacco Research and Policy Studies, an anti-tobacco group.

What's striking is the amount of space she gives to that position.

She also points out that the FDA is taking steps toward regulating e-cigarettes, and here is the only place where I would fault the reporter. Ms. Tavernise writes:

The numbers came as a surprise and seemed to put policy makers into uncharted territory. The Food and Drug Administration took its first tentative step toward regulating e-cigarettes last year, but the process is slow, and many experts worry that habits are forming far faster than rules are being written. Because e-cigarettes are so new, scientists are still gathering evidence on their long-term health effects, leaving regulators scrambling to gather data.

There's nothing inaccurate in that paragraph. So what's the problem? There's no hint in the news story--possibly because Ms. Tavernise thinks it's going beyond the story but, if so, I disagree--about what some plausible FDA regulations will look like.

Think about it. If the FDA regulates, it will not be to make e-cigarettes more available. It will be to make them more costly, either in terms of accessibility or in terms of price, or both. If so, the FDA regulation will slow this healthy substitution away from more-toxic substances. Possibly, she couldn't find an economist willing to apply basic microeconomics to this issue. If so, I'm available.

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COMMENTS (15 to date)
Tom West writes:

I don't really have an opinion on cigarettes vs. e-cigs, but I will say that the dilemma of an improvement that also makes further improvements much more difficult is a very common problem in almost any field.

I suspect the Libertarian community would be split in its reaction to measures that lowered taxes, but also made them nearly invisible, making it much harder to motivate people against them in future.

ThomasH writes:

Could Professor Henderson outline what optimal regulation in this area ought to look like? What I mean by "optimal" is meta rule that under one set of facts about the harm of e-cigarettes relative to their substitutes and facts about different consumers' elasticity of behavior with respect to alternative regulations would give zero regulation for one set of facts and other kinds and levels of regulation for a different set of facts. What would a news item that would help us find such optimal regulation look like?

David R. Henderson writes:

Could Professor Henderson outline what optimal regulation in this area ought to look like?
Yes. Don’t regulate.
What would a news item that would help us find such optimal regulation look like?
I don’t know, and it’s not what I’m advocating. I would have wanted her to point out that this would raise the cost of using e-cigarettes and would have reduced the substitution.

Charles Lindsey writes:

David, if I read the numbers right in today’s Wall Street Journal, the percentage of high-schoolers who consume tobacco products has increased: from 17.2 percent in 2013 to 22.6 percent in 2014.

Cigarette smoking itself has been in a steep decline among teens since the late 1990s, long before e-cigarettes hit the market, so it seems plausible that vaping has had nothing to do with that drop.

That “substantial acceleration” of teenage quitters was in evidence in the past—again, in the late ‘90s, before e-cigarettes were a thing. Moreover, the stats show a big recent boost in hookah smoking, plus a bump in smokeless-tobacco use around 2008, and that hasn’t dropped a bit since.

Neither hookahs nor smokeless tobacco represent any kind of health advance over cigarettes.

Regulation issues aside (although seriously: you wouldn’t regulate children’s access to tobacco?), I don’t see how you can find any good news in this report. The “e-cigarettes help people quit” mantra obviously means money for the makers of vaping products, and maybe wishful thinking for everybody else. There’s been plenty of recent skepticism about that claim.

BernhardA writes:

Instead of regulation restricting access to e-cigarettes by making them more costly or limiting access, it could also promote their usage by prohibiting that they contain harmful chemicals. Customers who currently dont trust the health consequences of using them might thus be reassured of their relative harmlessness. The demand effect might outweigh the supply effect.

ThomasH writes:

Professor Henderson

Do you mean that there are no set of facts about the relative harm from e-cigarettes and elasticities of behavior wrt different kinds of regulations that would warrant regulation or just that you're pretty sure that those facts and elasticities are so improbable that it would not be worth your time to try to think about?

[I understand the latter position. We all have policy areas like that; neither of us would waste out time trying to come up with an "optimal" policy on torture.]

But I guess the "just say no" to economic regulation inclination compared to a "cost/benefit" inclination is an approximation to the difference between a Libertarian and a market friendly Liberal. (And I agree that there are Liberals who hardly ever see any costs at all.)

Liam McDonald writes:

I am surprised that the article did not cite one of the problems that is currently facing law enforcement in regards to vaping. No smell.

With the use of e-cigarettes there is no smell emitted by them so when you substitute other things for the nicotine (think cannabis) there is no way to tell if what they are smoking is legal or not.

Better hurry that State legalization effort.

A writes:

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Alex Stewart writes:

Liam, e-cigarettes do in fact emit a smell oftentimes. However, due to the popularity of flavors like piña colada and strawberry cheesecake, I think most people don't find the smell as offensive as tobacco cigarettes. I suspect that many times people might now even realize where those smells are coming from.

I worked with a guy who vaped, and I could always tell what flavor it was.

Tom West writes:

ThomasH does bring up an interesting point. I presume the Libertarian position is that smoking should also be unregulated (ignoring minors, etc.).

Given that, it does seem a little odd to complain that that the media didn't address an aspect that was essentially irrelevant to one's support of the issue.

I could see doing so if the blog was a political arena, where support for the policy is crucial no matter the reasons for that support. But in policy based blog, where I think the health implications would be irrelevant as to whether deregulation is a good idea or not, it seems odd.

Of course, my point does presuppose Libertarian support for deregulation of cigarettes.

(I'm trying to find an analog on issues I support as a matter of principle, to see if it feels equally odd from the inside perspective, but can't come up with anything.)

David R. Henderson writes:

Do you mean that there are no set of facts about the relative harm from e-cigarettes and elasticities of behavior wrt different kinds of regulations that would warrant regulation or just that you're pretty sure that those facts and elasticities are so improbable that it would not be worth your time to try to think about?
Both. But also with respect to the latter, not just facts about vaping, elasticities, etc., but also facts about how government actually works. The unjoined debate, to use the late George Stigler’s term, in regulation is not over whether you can find hypothetical examples where regulation could create better outcomes, but over why one would think that government officials have the right incentives.

John Hayes writes:

Tom West,

I don't think it's reasonable to presume that is the libertarian position. Taxation of an activity, or singular presumed use of a product, is reasonable when it is the most efficient way to deal with an externality. There are more actors outcomes than state, consumer and company.

Lets put the whole children thing aside because it's a bit of mind killer. How does someone determine the safety boundaries of a product to see if it within the parameters for their own life?

Options are determining trust in the company itself, an industry standards group, an independent standards group, an insurance company or the civil law system in general. The vast majority of complex products we use are assured by private organizations. Electronics have a "UL" mark which is a network of private testing labs - the government isn't anywhere near it. Lawyers, doctors, actuaries, accountants, dentists are all private organizations (although most have lobbied for a government monopoly to prevent competition on standards of practice).

The health implications are relevant because the company is liable through civil action. In general, government regulation reduces this civil liability by creating a standard of practice lower than "I will never get a disease attributable to this product".

If you read the headlines, the government believes the lawsuits against tobacco companies are a victory - the tobacco companies got off scott free while the consumers were screwed. Current consumers now pay higher prices to pay new taxes to the government (compensating the government for health-care charges that they were obligated to pay to the citizens that contributed to social security). Past consumers receive nothing and cannot receive compensation for the actual loss of health and years of their life.

Imagine a company contaminates a water supply in a town for 30 years, then the government comes in a sues the company - keeps all of the money and prevents the towns citizens from suing he company. Finally to pay for the proceeds, instead of taking it from the company's profits a special tax is passed in the town to pay the government.

By disrupting the civil court system, the government introduced a huge injustice. Given this track record, I'm not excited future regulation in the absence of an approach that explicitly preserves liability for the company. I'm also not excited about the government taking action because "this thing looks like this other thing that's unpopular".

Tom West writes:

John, I'm always a bit leery of presuming a position that I don't personally hold, but (leaving aside minors), wouldn't the Libertarian position be on cigarettes (right now, forget the past), be complete deregulation?

Attempting my Turing Test (to borrow Bryan's parlance), I'd argue that the risks are widely known, and it is up to the customers to understand the risks of product use.

Stores might choose not to sell cigarettes for fear of reputational hit from selling hazardous products, although this seems to be an acceptable hazard in our society.

I am, of course, presuming that the cigarette companies are not deliberately hiding the risk, although they may have no position upon it, if they are willing to suffer the reputational hit. They just can't *lie*.

I would assume higher consumption because cigarette companies could pursue the same sort of policies they used in less regulated markets in order to (successfully) increase consumption (lower prices, extensive advertising, free sample packs, etc.)

If the consumer is informed (or expected to be informed), I can't imagine there'd be any more case for lawsuits than for selling hang-gliders. (In fact, is it even the company's responsibility to inform purchaser's of possible hazard, as long as purchase or exposure is voluntary?)

However, if I'm misunderstanding the Libertarian position, I'd like to know.

Mark Bahner writes:
...I don’t see how you can find any good news in this report.

Cigarette smoking is down in 2014 (substantially).

Cigar smoking is down in 2014 (substantially).

Smokeless tobacco use is down.

Seems like good news to me.

And given that cigarettes and cigars are several orders of magnitude more harmful than e-cigarettes, the fact that e-cigarette usage has increased doesn't mean much.

NZ writes:

As is often the case in reporting about drugs and tobacco, several misconceptions are promoted:

Misconception 1: the health effects of vaping are some big mystery. In reality, it's fairly well-known what vaping chemicals are made of and how they react when heated. The lack of regulation simply means that companies can't advertise exactly what their products will or won't do to you.

Misconception 2: tobacco use rises or falls evenly among the demographics in question. In reality, different sorts of teens get into different sorts of tobacco products for very different reasons. Walking around with an electronic smoking gadget doesn't go over as well in a black inner-city high school as it does in a suburban white high school. (In contrast, where do you expect to see the most high-school-aged pipe smokers? What about Black&Mild smokers?)

Also, what exactly is meant by "cigars"? If that label includes Black & Milds, then you have a much more complicated task to sort out the data than if it means the expensive hand-rolled items that hipsters get from the humidor.

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