When I was at NUS Open House last Saturday and I spoke to this Year 1 Law student, I asked her whether there’s a lot of ‘smoking’ in law faculty. I was of course referring to the figurative sort of smoking but as she ‘err…’, it dawned on me that lawyers are known to be a rather smokey bunch (in the literal sense) so I clarified my question by saying, I mean the figurative type.
I was, in the most literal sense, applying to Law at NUS and there, I suddenly realised that I might have to survive with quite a big bunch of people who smoke if I really end up studying there. One thing is for sure: I hate smokers. My Grandpa used to smoke, and since the age of 3 when I could spoke pretty fluently, I urged him not to smoke. I drew ‘No Smoking’ signs that blurred the difference between a cigarette and a Pokey snack and place them all around the house in a bid to discourage my Grandpa from lighting up. It worked, especially when it came from a kid who was barely in Primary School. Soon after I enter Primary School, my Grandpa quit smoking. I am not sure how much effort it took him; today he’s 80 plus, very strong and healthy, free from any ailments that plague the old and very active still.
If perhaps, every smoking man/women have a single young kid bugging him/her everyday to get him/her to quit smoking, we can create a smoke-free nation. But of course, that’s not possible. Alternative policies are needed. And in a recent research paper that is about to be published, done by some people (I am not sure if they are students or professors, usually it’s a mixture) at MIT, it is claimed that higher cigarette taxes benefits poorer smokers because it gives them a more practical reason to quit. Where cigarettes are cheap enough for the poor to afford but expensive enough to take up a substantial part in their expenses, cigarettes have the effect of escalating poverty. They mentioned that the poor are more sensitive to price rises than the rich and thus they may have higher tendency to quit smoking in face of higher cigarette prices. Such a policy is of course, easier to implement than public education on the negative effects of smoking and more effective than erecting No Smoking signs around the place.
Yet there’s another camp, I realised, that was brought up by my lecture notes in the subject of Economics as well as myself. It is the argument that smokers are naturally price insensitive, because smoking is more or less a result of addiction. That is to say that the price elasticity between rich and poor smokers should not differ by too much. The implication of this argument is huge; the reason being that the prescribed cigarette taxes would only serve to make the lives of the poor more worst off because they end up spending more on cigarettes and this eventually widens the income gap.
I believe every country presents a different case and the position of the families/people on the scale of poverty does affect their price elasticity of demand. In case of extreme poverty where essential goods might have to be sacrificed in order to obtain cigarettes after imposition of new taxes, the policy is likely to succeed in convincing poor smokers to kick their habit. It’s no longer a choice between a short term pleasure and long term health and survival, it would become a choice between smoking now and living through the next couple of days. However, if taxes are imposed such that cigarette prices are raised to an insufficient level, the poor but not extremely poor smokers may continue to smoke and they end up being poorer because higher proportion of income is spent on cigarettes. For them, it’s a choice between the short term pleasure and improving their lives in long term. Having suffer so much, a puff to them is rewarding enough and they can only hope for the better.
Therefore there’s a need to assess the reaction of the smokers to cigarette price variations to correctly determine whether the taxation policy would actually work. My take is that it can never work perfectly; some smokers will be kicking the habit, some smokers will be worst off because of higher expenditure on cigarettes but the proportion of smokers belonging to either category needs to be carefully studied so that the tax applied can maximize the number of people who quit smoking and at the same time, not hurt those who refuse to quit (too much).
