Economic aspects of smoking

Smoking has become a major issue for public health policy in recent years. This paper deals with the economic aspects of smoking. First, we outline the basic concepts of welfare economics which subsequently are used as the normative framework of the analysis. In particular, we stress the role of efficiency as a criterion for economic policy evaluation. Second, we demonstrate that smoking is associated with several market failures, notably externalities and dependency/addiction (non-rational behavior). Third, costs and benefits of smoking are considered. We argue that the benefits of smoking are the satisfaction (utility) which the consumers derive from it rather than the employment effect of producing tobacco products or the revenues of the excise tax on these products. A general model for estimating the costs of smoking is developed and various cost concepts are discussed. Empirical cost estimates are presented for Switzerland. In 1976, estimated social (economic) costs of smoking were between 560 and 800 million Swiss francs while the external costs were between 140 and 260 million francs. Contrary to a widely held belief, smoking hardly influenced health care costs because the higher medical care costs of smokers during their lifetime are offset by their reduced life expectancy. The last section deals with intervention strategies to reduce smoking: anti-smoking publicity, advertising restrictions, and taxation. We discuss these three instruments on a conceptual level and summarize previous empirical studies. The main results are: (1) Both publicity and taxation offer a considerable potential as deterrents of cigarette demand. (2) The results for Switzerland imply that publicity campaigns are likely to be efficient in the sense that expected campaign benefits outweigh its costs.

[Nursing care cases and acute-care hospital beds: results of a one-day census]

For the purposes of an analysis of the hospital capacities of the canton of Basel-Stadt, a one-day census was conducted on April 20, 1983. On that day, the physicians in charge identified every fifth patient out of 2920 hospitalized patients as misplaced. "Misplaced" means that, from a medical point of view, mostly elderly patients could be treated and cared for as well (and cheaper) in other institutions (e.g., nursing homes) or in community settings if adequate home care services were available.

[The effect of smoking on mortality and life expectancy of the Swiss population]

The quantitative impact of smoking on mortality and longevity in Switzerland is investigated. The calculations are based on mortality ratios between smokers and nonsmokers reported in prospective epidemiologic studies, the prevalence of smoking in Switzerland, cause-specific mortality rates and the lifetable. The results imply that in 1976 roughly 3800 premature deaths were attributable to smoking, more than 90% involving males. Thus, smoking appears to be the leading preventable cause of death in Switzerland. The results of lifetable methods used to estimate the impact of smoking on longevity imply that smoking reduces male life expectancy by 12 to 16 months, and that eradication of smoking would increase life expectancy accordingly. Combining the above results suggests that, in 1976, between 52 000 and 54 000 life years were lost as a consequence of the smokers' premature mortality.

Does smoking increase medical care expenditure?

The impact of smoking on medical care expenditure is analyzed, challenging the widespread belief that smoking imposes a large cost burden on health services systems. The results imply that lifetime expenditure is higher for nonsmokers than for smokers because smokers' higher annual utilization rates are overcompensated for by nonsmokers' higher life expectancy. Population simulation, taking into account the effects of past smoking on present population size and composition, suggests that 1976 expenditure would have been the same if no male born since 1876 had ever smoked. The male population would have been larger, particularly at older ages, increasing medical care expenditure, but this increase would have been offset by lower annual medical care utilization rates. Thus the results imply that smoking does not increase medical care expenditure and, therefore, reducing smoking is unlikely to decrease it.