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Is a society with smokers profitable?
Date:7/16/2009

taxes

The question which then arises is whether the taxes are sufficient for the costs generated by tobacco. For Lpez, "if we bear in mind all the significant costs, the evidence available indicates that this is not so".

In their work, and according to the evidence collated, the financial externalities are partly compensated for by the level of taxation applied in many industrialized countries. Nevertheless, the most solid justification for increases in taxes lies "in the existence of failures in the sovereignty of the consumer, both when starting to smoke and when attempting to give it up and sticking to such a decision. These failures generate a demand for self-control mechanisms, and the high price is one of the most effective mechanisms", the economist explained.

Under no circumstances can it be said that a society with smokers is per se economically ineffective. According to Lpez, it depends on whether the smokers are fully aware of the harm they cause to themselves and smoke because they want to (not because they cannot overcome the addiction) and whether they compensate the rest of society for the external costs they generate. "It is quite difficult for these premises to be fulfilled", the researchers asserted.

The taxes on tobacco, the study says, can also be justified by the existence of externalities arising from the social use of tobacco and by the possible inappropriateness of regarding the costs imposed by secondhand tobacco affecting the rest of the family as private costs. The restrictions on consumption in closed public places is another powerful self-control mechanism and represents "a second solution to the problem of the externalities arising from secondhand tobacco".

According to Lpez, "both taxes and the restrictions on consumption are measures which impose losses of welfare on the people who smoke with full sovereignty, in other words, those who value the pleasure of smoking more than the
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