California
just reported a 29% drop-off in cigarette sales. Good news, say supporters
of Proposition 10, the voter-approved initiative placing a 50 cents
tax on a pack of cigarettes. Actor-director Rob Reiner, who spearheaded
the initiative, barely contained himself, "It’s thrilling. It’s
only been six months and we’re off to an amazing start."
Well, sort of.
Smoking may be foolish, but this does not necessarily make smokers
fools. Many simply cross the border to purchase their cigarettes in
states with lower taxes, or travel south of the border, into Mexico,
to buy cheaper cigarettes. Some use the Internet to purchase cigarettes
and avoid some state taxes. And, what about the black market? A tobacco
analyst for an investment firm said, "There’s no doubt that imports,
both legal and illegal, have taken up much of the demand. The market
is smart. It will seek the lowest price."
Not only did Proposition
10 drive up the price of cigarettes, but the government-induced $206
billion tobacco settlement caused companies to increase prices by
an average of nearly fifty cents a pack. On top of that, California
added still more taxes on back of the Prop. 10 taxes, jacking
the price of cigarettes to as high as $4.00 a pack!
The rationale
behind the tobacco settlement? That the government needs the money
to recoup its smoking-related health expenses. But, writes Matthew
Rees of the "The Weekly Standard," "A June report from
the Congressional Research Service, a government agency, concludes
that, because smokers die prematurely and thus do not receive retirement
benefits or incur nursing home costs, they save the federal
government $29 billion each year in healthcare expenditures."
But some good
news lies beneath this nonsense. For a California anti-smoking professor
said about the decline in smoking, "It’s very good news. It says
that all the economists who said people are price sensitive were right."
Well, well. What’s
this? Some respect for economists? Economists did, indeed, predict
a decline in smoking as the price increased. Economics 101 says: Make
certain types of behavior more expensive, you get less. Make certain
types of behavior less expensive, you get more.
During the dark,
old days of "Hillarycare," 560 economists sent a letter
to the President, urging the administration to abandon its healthcare
plan. The wary signers stated, "Price controls produce shortages,
black markets and reduced quality." "Clintoncare,"
they said, inevitably leads to rationing, inefficiencies, and lack
of innovation—all without achieving its objective of lower prices.
How did many react to the economists’ plea? With yawns, but now some
in the feel-your-pain crowd seem ready to acknowledge the logic behind
fundamental economics. So, let’s grab this sliver of intelligent life
while we can, and attempt to apply it elsewhere.
For example, children
having children remains our most disturbing social problem. Here,
too, California recently registered a drop in births to single women.
The good economy helped, but much of the credit for the out-of-wedlock
birth rate drop goes to welfare reform. While various state laws provide
exemptions and exceptions, welfare mothers now face "term limits,"
and so-called "family caps," stopping welfare mothers from
getting more money for more children.
Yet Anna Ramirez,
the director of California’s Office of Family Planning, does not seem
to think the drop occurred because of the change in incentives, "The
one thing that has started to change is our own society’s attitude
toward out-of-wedlock birth. There’s been some significant question
about children having children and an overall non-acceptance of that."
Not quite.
Many have long
criticized welfare. Indeed, in 1985, a "Los Angeles Times"
poll asked poor people whether poor young women "often"
or "seldom" had babies to receive public aid. 64% of poor
people agreed that welfare recipients "often" had babies
to collect the benefits. In fact, by 64% to 44%, more
poor people than non-poor people agreed that welfare begets welfare.
Attitudinal change
without policy change did nothing. Only after Congress finally removed
welfare incentives did we begin to see nationwide declines in welfare
rolls and the out-of-wedlock birth rate of young women.
High cigarette
prices change behavior by increasing the cost of the targeted activity.
Similarly, time limits and family caps created economic disincentives
for out-of-wedlock births, and, surprise, surprise, we got less of
it.
Yet anti-smoking
forces applaud economists for correctly "predicting" a drop
in cigarette smoking. But, when economists and others argued that
welfare generosity facilitated out-of-wedlock birth, the same feel-your-pain
crowd screamed, "Insensitive! Cold-blooded! Mean-spirited!"
So, let’s declare
a partial victory. On this issue, the no-smoke folks gave two-thumbs-up
to economists. But these same insensitive, cold-blooded, mean-spirited
economists also bemoan minimum wage laws, rent control, farm subsidies,
and monopolistic government schools.
Who knows? Maybe
now somebody’s listening.