Smokers are good for the economy-really

Antismoking advocates cheered in the summary of 1997 when the U.S tobacco
industry agreed to pay out more than US 368.5 biliion to settle lawsuits brought by
forty states seeking compensation for cigarette-related medicaid cost. Mississippi
attorney general mike moore, who helped organize the states legal campaign,
called the pact “ the most historic public health achievement in hostory?”. But were
the states right to do what they did?

The fundamental premise of lawsuits, and other anti-tobacco initiatives, is that

smokers and hence, tobacco companies place an added tax on all of us by heaping
extra costs onto public health care system. The argument is that those, and other
social costs, outweigh the billions in duty and tax revenue that our goverments
collect from cigarette distribution. But a basic actuarial analysis of that premise
suggests that quite the opposite is true. As ghoulish as it may sound, smokers save
the rest of us money because they die sooner and consume far less in health care
and in benefits such as pensions. The extra costs they do generate are far
outweighed by the the subsidies they pay each time they plunk down their money
for a pack of cigarettes.

First of all, let’s look at life expectancy consistently over the past decade. In 1994
testimony before the U.S. senate Finance Committee, the U.S Office of Technology
Assessment showed that the average smoker dies fifteen years earlier than a
nonsmokers because they die about a decade earlier. The longer a person lives, the
more it costs to treat him or her, especially since the vast majority of health care
costs occur in the last few years of life.

One of the paradoxes of modern medicine is that advances in treatments that

extend lives have actually increased lifetime heakth care costs. People who would
have died from an acute illness during their working life in the past are now
enjoying lengthy retirements, and suffering various debilitating diseases that
require high-cost medical intervention. According to an expert, richard lamm, who is
now director of the center for public policy and contemporary issues at the
university of denver, the average nonsmoker is treated for seven major illnesses
during his or her lifetime. The average smoker survives only two major illnesses. So
how much more do nonsmokers add to the national health care bill than smokes?
One of the best studies is by duke university economist kip viscusi, who conducted
an exhaustive comparative analysis in 1994 for a conference on tax policy hosted
by the national bereau of economic research in washington, DC.