Economic Approaches to Estimating Benefits of Regulations Affecting Addictive Goods

Cutler, David M.; Jessup, Amber; Kenkel, Donald; Starr, Martha A.

doi:10.1016/j.amepre.2015.12.002

Cited by 10 publications

(11 citation statements)

References 33 publications

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“…These perceptions together with the expressed negative feelings about why they regret having started smoking (see reported feelings in online supplementary figure S3 ) agree with what the ASH survey and Slovic have called a picture of misery. 30 45 Thus, within the rational benchmark approach suggested by Cutler and colleagues as the most feasible for estimating the benefit–cost of tobacco regulations, 27 the findings shown in figure 1 suggest that the proportion of smokers who might be characterised as having a preference to continue smoking would be greatly outnumbered by the addicted, discontent and concerned smokers who want to quit and regret ever having started to smoke. Furthermore, these findings suggest that the second approach considered by Cutler and colleagues, namely measuring what happens to smokers’ subjective well-being when they quit smoking, should receive greater attention.…”

Section: Discussionmentioning

confidence: 99%

Reassessing the importance of ‘lost pleasure’ associated with smoking cessation: implications for social welfare and policy

et al. 2017

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IntroductionBenefit–cost analyses of tobacco regulations include estimates of the informed choice of smokers to continue smoking. Few studies have focused on subjective feelings associated with continued smoking. This study estimates how smoker discontent and regret relate to risk perceptions and health concerns.MethodsWe analysed data from a 2015 nationally representative, online survey of 1284 US adult current smokers. Information was collected on regret, intention to quit, perceived addiction, risk perceptions and health concerns. Multivariate logistic regression adjusting for sociodemographics and health status was used to examine factors associated with smoker discontent.ResultsMore than 80% of current smokers report high (22.5%) or very high (59.8%) discontent due to inability to quit, perceived addiction and regret about having started to smoke. Higher levels of discontent did not vary significantly by sex, age, race/ethnicity, education or income (adjusted odds ratios (AORs) 0.5–1.2). Compared with the smokers expressing low (5.9%) or very low (3.6%) discontent, those expressing higher levels of discontent perceived their health status as fair/poor (AOR=2.3), worried most of the time about lung cancer (AOR=4.6) and felt they were more likely to develop lung cancer in the future (AOR=5.1).ConclusionThe proportion of smokers who might be characterised as having a preference to continue smoking are greatly outnumbered by addicted, discontent and concerned smokers who want to quit and regret ever having started to smoke. These discontent smokers could have a substantial net welfare gain if new regulations helped them escape their concerns about the health effects from continuing smoking.

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Section: Discussionmentioning

confidence: 99%

Reassessing the importance of ‘lost pleasure’ associated with smoking cessation: implications for social welfare and policy

et al. 2017

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“…(2012) employ the phrase "using knowledge of when choices better reflect true preferences," and Cutler et al (2016) refer to this as the "rational benchmark;" but the idea is the same. The difficulty lies in identifying which consumers are biased.…”

Section: Discussionmentioning

confidence: 99%

Tobacco Regulation and Cost-Benefit Analysis: How Should We Value Foregone Consumer Surplus?

Levy¹,

Norton²,

Smith³

2016

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Recent tobacco regulations proposed by the Food and Drug Administration have raised a thorny question: how should the cost-benefit analysis accompanying such policies value foregone consumer surplus associated with regulation-induced reductions in smoking? In a model with rational and fully informed consumers, this question is straightforward. There is disagreement, however, about whether consumers are rational and fully informed, and the literature offers little practical guidance about what approach the FDA should use if they are not. In this paper, we outline the history of the FDA's recent attempts to regulate cigarettes and other tobacco products and how they have valued foregone consumer surplus in cost-benefit analyses. We discuss the evidence on whether consumers are fully informed about the risks of smoking and whether their choices are rational, reviewing the competing arguments made by different authors about these questions. We describe the appropriate approach to welfare analysis under different assumptions about consumer information and rationality.Based on our reading of the theoretical and empirical literatures, we advocate using a behavioral public finance framework borrowed from the literature on environmental regulation. This approach applies standard tools of welfare analysis while allowing consumer behavior to deviate from rationality and full information without requiring specific assumptions about the reason for the deviation. The use of this approach would substantially reduce the confusion currently surrounding welfare analysis of tobacco regulation.

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“…Mullainathan et al (2012) describe this as “using knowledge of when choices better reflect true preferences,” and Cutler et al (2016) refer to this as the “rational benchmark,” but the basic idea is the same. Of course, the difficulty lies in identifying unbiased consumers or situations.…”

Section: Discussionmentioning

confidence: 99%

Tobacco Regulation and Cost-Benefit Analysis: How Should We Value Foregone Consumer Surplus?

Levy

Norton

Smith

2018

American Journal of Health Economics

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Recent tobacco regulations proposed by the Food and Drug Administration have raised a thorny question: how should the cost-benefit analysis accompanying such policies value foregone consumer surplus associated with regulation-induced reductions in smoking? In a model with rational and fully informed consumers, this question is straightforward. There is disagreement, however, about whether consumers are rational and fully informed, and the literature offers little practical guidance about what approach the FDA should use if they are not. In this paper, we outline the history of the FDA’s recent attempts to regulate cigarettes and other tobacco products and how they have valued foregone consumer surplus in cost-benefit analyses. We advocate replacing the approach used in most of this literature, which first calculates health gains associated with regulation and then “offsets” them by some factor reflecting consumer surplus losses, with a more general behavioral public finance framework for welfare analysis. This framework applies standard tools of welfare analysis to consumer demand that may be “biased” (that is, not necessarily rational and fully informed) without requiring specific assumptions about the reason for the bias. This framework would require estimates of both biased and unbiased consumer demand; we sketch an agenda to help develop these in the context of smoking. The use of this framework would substantially reduce the confusion currently surrounding welfare analysis of tobacco regulation.

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Economic Approaches to Estimating Benefits of Regulations Affecting Addictive Goods

Cited by 10 publications

References 33 publications

Reassessing the importance of ‘lost pleasure’ associated with smoking cessation: implications for social welfare and policy

Reassessing the importance of ‘lost pleasure’ associated with smoking cessation: implications for social welfare and policy

Tobacco Regulation and Cost-Benefit Analysis: How Should We Value Foregone Consumer Surplus?

Tobacco Regulation and Cost-Benefit Analysis: How Should We Value Foregone Consumer Surplus?

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