A Critique of the Proposed National Tobacco Resolution and a Suggested Alternative

The first criticism is that the proposed resolution would not require manufacturers and, in tum, consumers to pay anything approaching the true total costs of cigarettes, costs that we estimate to be at least $7 per pack, a number that is considerably higher than other estimates that have been reported in the media. Our estimate includes some, but not all, of the costs borne ultimately by smokers themselves, by smokers\u27 insurers, and by individuals injured by second-hand smoke. It includes only future costs and excludes many of those. So, for example, the figure includes neither the health-care costs that have previously been caused by smoking nor the future pain-andsuffering costs borne by smokers or family members of deceased smokers. Unlike most economists who have previously attempted to measure the costs of cigarettes, we do not reduce our estimate of cigarette costs to take into account the savings resulting from cigarette-induced premature deaths. Those savings - measured mostly in the form of smokers\u27 unclaimed pension and nursing-home entitlements - may not in fact be real, and in any event, are not relevant to the questions of whether and how best to regulate the market for cigarettes

The Costs of Cigarettes: The Economic Case for Ex Post Incentive-Based Regulation

Cigarette smoking causes over 420,000 deaths annually in the United States, roughly twenty percent of all U.S. deaths, making cigarettes the single greatest preventable cause of death in this country. Indeed, tobacco kills more people every year than alcohol, illicit drugs, automobile accidents, violent crime, and AIDS combined. And not only are cigarettes deadly to smokers; they kill nonsmokers as well. According to a recent report from the Environmental Protection Agency (EPA), the sidestream or passive smoke from cigarettes - so-called environmental tobacco smoke (ETS) - is responsible annually for approximately 3000 lung cancer deaths, between 150,000 and 300,000 lower respiratory ailments in children, and approximately 37,000 heart disease deaths. Considering the staggering social costs imposed by cigarette smoking, an outside observer might find it odd that cigarette production and consumption in this country are, to a remarkable extent, unregulated. It is true that selling cigarettes to minors is illegal in every state. It is also true that a number of states and municipalities have passed laws and ordinances restricting the right to smoke in various public domains-from government buildings and health facilities to, in some cases, private workplaces. And if one compares these levels of regulation to the level of regulation imposed on, say, bubble gum consumption, cigarette smoking seems fairly heavily regulated. If, however, one compares cigarettes with other products that are considered dangerous but are comparatively less costly to society, such as heroin or cocaine, the level of cigarette regulation seems inadequate. After all, adult smoking is legal in all fifty states. Likewise, if one compares the hands-off approach to regulating cigarette companies with the hands-on approach to regulating, say, pharmaceutical companies (many of whose products treat or even cure, rather than cause, serious health problems), tobacco companies appear to be essentially unregulated. Of the tobacco regulations that do exist, many turn out to be industry-friendly. On top of all this, until very recently it appeared that cigarette companies, unlike most product manufacturers, were effectively immune from regulation by tort law

The First-Party Insurance Externality: An Economic Justification for Enterprise Liability

This Article explores the insurance and deterrence implications of important and long overlooked facts. Consumers are insured through first-party mechanisms against most of the risks of product accidents. However, first-party insurers rarely and imperfectly adjust premiums according to an individual consumer\u27s decisions concerning exactly what products she will purchase, how many of those products she will purchase, and how carefully she will consume them. Such consumer decisions we refer to as consumption choices. This failure by first-party insurers to adjust premiums according to consumption choices gives rise to a first-party insurance externality. Based on this insight, this Article offers an economic justification for an enterprise liability regime that does not recognize the defense of contributory negligence

The Costs of Cigarettes: The Economic Case for Ex Post Incentive-Based Regulation

Cigarette smoking causes over 420,000 deaths annually in the United States, roughly twenty percent of all U.S. deaths, making cigarettes the single greatest preventable cause of death in this country. Indeed, tobacco kills more people every year than alcohol, illicit drugs, automobile accidents, violent crime, and AIDS combined. And not only are cigarettes deadly to smokers; they kill nonsmokers as well. According to a recent report from the Environmental Protection Agency (EPA), the sidestream or passive smoke from cigarettes - so-called environmental tobacco smoke (ETS) - is responsible annually for approximately 3000 lung cancer deaths, between 150,000 and 300,000 lower respiratory ailments in children, and approximately 37,000 heart disease deaths. Considering the staggering social costs imposed by cigarette smoking, an outside observer might find it odd that cigarette production and consumption in this country are, to a remarkable extent, unregulated. It is true that selling cigarettes to minors is illegal in every state. It is also true that a number of states and municipalities have passed laws and ordinances restricting the right to smoke in various public domains-from government buildings and health facilities to, in some cases, private workplaces. And if one compares these levels of regulation to the level of regulation imposed on, say, bubble gum consumption, cigarette smoking seems fairly heavily regulated. If, however, one compares cigarettes with other products that are considered dangerous but are comparatively less costly to society, such as heroin or cocaine, the level of cigarette regulation seems inadequate. After all, adult smoking is legal in all fifty states. Likewise, if one compares the hands-off approach to regulating cigarette companies with the hands-on approach to regulating, say, pharmaceutical companies (many of whose products treat or even cure, rather than cause, serious health problems), tobacco companies appear to be essentially unregulated. Of the tobacco regulations that do exist, many turn out to be industry-friendly. On top of all this, until very recently it appeared that cigarette companies, unlike most product manufacturers, were effectively immune from regulation by tort law

A Critique of the Proposed National Tobacco Resolution and a Suggested Alternative

The first criticism is that the proposed resolution would not require manufacturers and, in tum, consumers to pay anything approaching the true total costs of cigarettes, costs that we estimate to be at least $7 per pack, a number that is considerably higher than other estimates that have been reported in the media. Our estimate includes some, but not all, of the costs borne ultimately by smokers themselves, by smokers\u27 insurers, and by individuals injured by second-hand smoke. It includes only future costs and excludes many of those. So, for example, the figure includes neither the health-care costs that have previously been caused by smoking nor the future pain-andsuffering costs borne by smokers or family members of deceased smokers. Unlike most economists who have previously attempted to measure the costs of cigarettes, we do not reduce our estimate of cigarette costs to take into account the savings resulting from cigarette-induced premature deaths. Those savings - measured mostly in the form of smokers\u27 unclaimed pension and nursing-home entitlements - may not in fact be real, and in any event, are not relevant to the questions of whether and how best to regulate the market for cigarettes

First-Party Insurance Externality: An Economic Justification for Enterprise Liability

This Article explores the insurance and deterrence implications of important and long overlooked facts. Consumers are insured through first-party mechanisms against most of the risks of product accidents. However, first-party insurers rarely and imperfectly adjust premiums according to an individual consumer\u27s decisions concerning exactly what products she will purchase, how many of those products she will purchase, and how carefully she will consume them. Such consumer decisions we refer to as consumption choices. This failure by first-party insurers to adjust premiums according to consumption choices gives rise to a first-party insurance externality. Based on this insight, this Article offers an economic justification for an enterprise liability regime that does not recognize the defense of contributory negligence

A Critique of the Proposed Tobacco Resolution and a Suggested Alternative

The following essay is adapted from testimony presented to the Senate Democratic Task Force on Tobacco in Washington, D.C., on Oct. 9 1997, which in turn is based on the authors\u27 forthcoming article, The Costs of Cigarettes: The Economic Case for Ex Post Incentive-based Regulation, 107 Yale Law Journal (March 1998) If the goal of cigarette regulation is either to reduce substantially the public health problem created by cigarette smoking or to allocate the costs of smoking more equitably, there are significantly better alternatives to the regulatory regime than would be created by the state attorneys general\u27s Proposed Tobacco Resolution. Indeed, from either perspective, we are doubtful that the current proposal represents an improvement over the status quo. Our study of the issue leads us to make two largely independent criticisms of the proposed resolution. We will only mention the first here and will focus our attention on the second

Rescuing the Revolution: The Revived Case for Enterprise Liability

The article proceeds as follows. Part I defines important terms and introduces the two-by-four Products Liability Matrix by explaining the eight possible positions that might be taken with respect to the mutability and liability-standard dimensions of products liability. Part II provides a backdrop for the current products liability debate, first by setting out a capsule history of the evolution of the modem products liability regime, and then by explaining the arguments offered by the first generation of products liability scholars to justify expanded manufacturer liability. Part II also illustrates the utility of the Products Liability Matrix by locating many of the landmark products liability cases within it. (Readers already familiar with the history of products liability may want to skip Part II, though they may find that examining classic cases in terms of the Products Liability Matrix offers some novel insights into an otherwise familiar area.) Having provided the necessary framework in Parts I and II, the article in Part III analyzes the current products liability debate by critiquing individual members of the contractarians\u27 and regulators\u27 camps. Part III first sets forth the contractarians\u27 seemingly successful rejection of the first generation\u27s rationales for expanded manufacturer liability. Part III then uses the Products Liability Matrix to show how scholars in both the contractarians\u27 and the regulators\u27 camps have taken positions in one dimension of the Matrix that are in tension with the positions they take in the other dimension. Part III further explains why the current products liability debate is unsatisfying. Part IV provides an affirmative case for enterprise liability by articulating the market failures that necessitate regu1ation. By offering new arguments on behalf of the old justifications for the expansion of manufacturer liability, Part IV revives the legacy of the first generation, whose instincts Part IV argues were correct but whose arguments lacked economic sophistication and thus provided an easy target for the present generation of products liability scholars