FDA De-Lights

This past summer, smokers may have noticed a change in some of their cigarette packages. For example, popular varieties such as “Marlboro Lights” and “Newport Lights” have been re-branded “Marlboro Gold” and “Newport Menthol Gold.” This is due to the recent Family Smoking Prevention and Tobacco Control Act that has restricted the use of labeling cigarettes with misleading terms that might suggest those varieties cause fewer health problems. In an effort to educate all smokers on the health risks of smoking, the FDA has prohibited the production of tobacco products labeled “light,” “low,” and “mild.” Some packages even include notices inside, such as the one depicted, elucidating any false impressions of the “light” varieties.

On the surface, it is easy to identify the affects of packaging regulations like these; bluntly stating that these cigarettes do not help in quitting smoking and that they are not any healthier is a way of making sure consumers are fully informed and are not being mislead by the advertising. This appeals to the public interest and may dissuade potential smokers from taking up these risks. However, these regulations may also help the companies that are producing them. New firms trying to jump into the tobacco industry must find a way to appeal to consumers, but with so many restrictions on what they are allowed to advertise, it is difficult to get their name out to potential consumers. Because established companies like Phillip Morris already have multiple cigarette brands out, consumers have no incentive to switch to other cigarette brands, especially if the clearly stated risks are going to be the same. This regulation protects the few companies already in the oligopoly of the tobacco industry from competition, and allows them to charge higher than optimal prices to consumers.

In my opinion, this regulation hurts more than it benefits the tobacco companies. If the FDA does its job effectively, they could deter potential consumers, not only through the explicit caveats, but because of the higher cost of taking up smoking.

Some Taxes Might Make Our Future Society Healthier.

This New York Times article discusses the various arguments that economists and others make for imposing taxes on consumption as a possible way to raise tax revenue during tough economic times. The article states that there has often been economic support of “taxing consumption rather than income, on the grounds that consumption taxes do less to discourage saving, investment and economic growth.” The author of the article then proceeds to argue that consumption taxes are usually placed on goods which, when consumed, produce unfavorable effects on third parties not involved in the consumption of the good, aka (in terms we have used in class) goods that have negative external costs in consumption. The author argues that a lot of the time, when the government imposes a specific tax on the consumption of a good with negative externalities, like gasoline, the consumer will internally think more about the costs their gasoline consumption has on the environment, road traffic, and their neighbors’ daily activities, which is good for society as a whole (especially if the consumer decreases their gasoline consumption).

However, this article was especially interesting to me because it introduced new information about consumption taxes and the role of government in individuals’ lives that I had not thought about before. In the instance of a good like cigarettes, is the negative externality produced when the good is consumed more detrimental to society or to the consumer himself? The article argues that “if the consumption induces say, smoking- or obesity-related illness, it raises health care costs, which we all pay for through higher taxes or insurance premiums…Yet this argument has a flip side: if consumers of these products die earlier, they will also collect less in pension payments, including Social Security .” When considering all of these elements, what is the actual external cost of consumption of cigarettes on society? How does the government know how to tax cigarettes appropriately (as cigarettes will always be taxed)?

On a similar note, the article also addresses the issue of negative costs of consumption on the actual consumer in the future aka “the person today enjoys consumption, but the person tomorrow and every day after pays the price of increased risk of illness.” As the title of this article suggests, should we give the right to tax specific goods which produce negative costs of consumption for the consumer, like drinking soda, to the government in order to save our future selves from our current selves? If we do, this means society acknowledges that one’s present self is a different person from one’s future self, which is an interesting idea to consider. Also, would taxing soda and other high sugar goods have a positive effect on society today? Or just in the future? How would individuals in society feel about the government placing taxes on goods that they deem unhealthy for future society? Is this giving the government too much control? This article raises many valid points as to how negative costs associated with consumption can be appropriately taxed, but it also seeks to question if it is in the public’s best interest to give the government the right to decide what is healthy and what is not for individuals.