Abstract
In the late 1970s, health authorities began calculating how much tobacco use costs society in lost productivity, increased health care costs, absenteeism, etc. This was called the "social costs" theory and it was used sucessfully to advocate for effective tobacco control measures. This internal tobacco industry speech about the social costs of smoking was given in May of 1979, apparently before members of ICOSI (the International Committee on Smoking Issues, a group which consisted of the major tobacco manufacturers worldwide, and which was created to deal with the global decline in social acceptability of smoking). The speech was prepared by George Berman, who was affiliated with Philip Morris and the Tobacco Institute. In 1979, a George Berman (whose signature is very similar to that on Philip Morris documents) was listed as President of Devon Management Resources, Inc., which apparently acted as a consultant to Philip Morris.
In the speech, Berman explains the industry's strategy of avoiding a discussion of the social costs of smoking by outlining a four-pronged attack on the theory itself. Berman states,
"It would be pointless to just dispute these arguments with similar data, to attack their numbers with our numbers. Instead, our strategy is to attack the concepts of social cost analysis...If we can undermine the concepts, then we do not have to enter into public debate over specific numbers."
Berman then proceeds to outline the main points of the industry's strategy for attacking the social costs theory of smoking:
"Our attack consists of four major themes:
1. These social cost concepts are bad economics.
2. They do not fit into a philosophy of personal freedom and civil liberty.
3. Smoking benefits society and its members in many complex ways.
4. Anti-smoking programs and groups are harmful to our society."
Later in the paper, Berman concedes that, "Indeed, there may be a few cases where smoking creates uncompensated costs for non-smokers," but then adds, "but the economists are quite certain that most of the alleged medical expenses do not qualify as social costs, and the much larger charges of absenteeism and lost productivity are not social costs at all."
Fields
- Quotes
Dennis Durden has outlined the major social costs thrusts against our industry. Various critics are using a form of economic analysis to come up with an invoice, a bill of smoking costs which are paid for by society. It would be pointless to just dispute these arguments with similar data, to attack their numbers with our numbers. Instead, our strategy is to attack the concepts of social cost analysis. We have found that these concepts are most vulnerable. If we can undermine the concepts, then we do not have to enter into public debate over specific numbers.
Our attack consists of four major themes:
1. These social cost concepts are bad economics.
2. They do not fit into a philosophy of personal freedom and civil liberty.
3. Smoking benefits society and its members in many complex ways.
4. Anti-smoking programs and groups are harmful to our society.
[from Page 9, Bates No. 502091602]
...Consider smoking in an elevator. The smoker gets to smoke. But some people are made uncomfortable. It is not reasonable to expect them to walk to their floor. So some rules may be necessary. But a total ban on smoking simply reverses the inequity: now the smokers are uncomfortable for the sake of the occasional non-smoker who objects. The proper aim of cost/benefit analysis would be to help find a solution which is "fair" to both sides.
- Company
- R.J. Reynolds
- Author
- Berman, George (PM Social Acceptability Working Party (SAWP))
Philip Morris employee between Sept. 1976 and Feb. 1979 (estimate, could have been longer). Left PM to become independent consultant c. 1979. President of Devon Management Resources, Inc. 1979. Presented a talk on social costs for ICOSI, the International Committee on Smoking Issues, and assisted ICOSI with organization and implementation of the Social Costs/Social Values Project. WAs a member of ICOSI/SAWP. Appears to have been on a social costs working group with the Tobacco Institute arouned 1979-80.
- Recipient
- ICOSI, the International Committee on Smoking Issues
Named PersonVairginia Polytechnic Institute
Wagner, Richard, D., ESQ. (Economist, Virginia Polytechnic University)Spoke against the "social costs" theory of smoking on behalf of the tobacco industry.
Tollison, Robert D. (industry consultant)1994 Used by industry to discuss economic and other impacts of OSHA regulation of workplace smoking.
Proposed consultant to comment on Federal OSHA proposal on workplace smoking.
Berger, P.
Wildavsky, A.
Rutgers University
University of California
Russell Sage Foundation
Nozick, R.
Harvard University
Center For The Study of Public Choi
Feinhandler, S.
Harvard Univ Medical School
Durden, C. Dennis (VP of RJR Industries, 1984, TI Communications)Director of RJR Corporate Public Affairs, 1975, Dir. of Public Affairs Council, 1977, VP of R.J. Reynolds Industries, 1984. Served on the Communications Committee for the Tobacco Institute, 1977 (while an RJR employee).TI Communications
Named OrganizationInternational Committee on Smoking Issues (ICOSI)Was formed to address and reverse the global decline in social acceptability of smoking occurring in the 1970s Consisted of the major tobacco manufacturers worldwide, was created to deal with the global decline in social acceptability of smoking. ICOSI was created
TypeSPEECH
Subjectsocial cost
social policy
risk assessment
Document Images
Page 1: gie29d00
SOCIAL COSTS
SOCIAL VALUES
Page 2: gie29d00
1
DENNIS DURDEN HAS OUTLINED THE MAJOR SOCIAL COST THRUSTS
AGAINST OUR INDUSTRY. VARIOUS CRITICS ARE USING A FORM OF ECO-
NOMIC ANALYSIS TO COME UP WITH AN INVOICE, A BILL OF SMOKING
COSTS WHICH ARE PAID FOR BY SOCIETY.
IT WOULD BE POINTLESS TO JUST DISPUTE THESE ARGUMENTS WITH
SIMILAR DATA, TO ATTACK THEIR NUMBERS WITH OUR NUMBERS. INSTEAD,
OUR STRATEGY IS TO ATTACK THE CONCEPTS OF SOCIAL COST ANALYSIS.
WE HAVE FOUND THAT THESE CONCEPTS ARE MOST VULNERABLE. IF WE CAN
UNDERMINE THE CONCEPTS, THEN WE DO NOT HAVE TO ENTER INTO PUBLIC
DEBATE OVER SPECIFIC NUMBERS.
OUR ATTACK CONSISTS OF FOUR MAJOR THEMES:
1. THESE SOCIAL COST CONCEPTS ARE BAD ECONOMICS.
- 2. THEY DO NOT FIT INTO A PHILOSOPHY OF PER-
SONAL ~- ~
SONAL FREEDOM AND CIVIL LIBERTY.
3. SMOKING BENEFITS SOCIETY AND ITS MEMBERS
IN MANY COMPLEX WAYS.
4. ANTI-SMOKING PROGRAMS AND GROUPS ARE HARMFUL
TO OUR SOCIETY.
------ ------- /
Page 3: gie29d00
2
THUS, OUR PROJECT IS CONCERNED WITH BOTH SOCIAL COSTS
. ~
AND SOCIAL VALUES.
OUR RESOURCES IN THIS FIGHT ARE PEOPLE AND IDEAS. I WILL
NOW INTRODUCE YOU TO THE KINDS OF PEOPLE AND IDEAS THAT ARE
CRUCIAL TO THE DEVELOPMENT OF COUNTERMEASURES AGAINST SOCIAL
COST ANALYSES.
Page 4: gie29d00
-- 3 -
THE TECHNIQUE OF' COST/BENEFIT ANALYSIS WAS ORIGINALLY DEVE-
LOPED IN THE 1920'S TO ASSIST THE U.S. GOVERNMENT IN MAKING
INVESTMENT DECISIONS. IN FACT, THE ANALYSIS WAS AIMED AT ONE,
VERY NARROW, KIND OF DECISION: IF WE ARE GOING TO BUILD A DAM,
AND WE HAVE X-DOLLARS TO SPEND, WHICH OF SEVERAL POSSIBLE DAMS
SHOULD WE BUILD?
NOTICE HOW MUCH OF THE DECISION-MAKING IS STILL OUTSIDE OF
COST/BENEFIT ANALYSIS:
- WE WILL BUILD A DAM.
- WE WILL SPEND X-DOLLARS.
- THESE ARE THE ALTERNATIVE DAMS.
THE ROLE OF COST/BENEFIT ANALYSIS WAS LIMITED TO AN APPRAISAL
OF ALTERNATIVE INVESTMENTS, ONE AGAINST THE OTHER.
~
IN RECENT YEARS, SOME OF THE CONCEPTS OF COST/BENEFIT ANALYSIS
HAVE BEEN APPLIED VERY LOOSELY, ESPECIALLY IN THE AREA OF GOVERN-
MENT REGULATION. RIGHT NOW A MOST HEATED DEBATE IS TAKING PLACE
IN THE U.S. OVER THE "ACCEPTABLE" LIMITS OF VARIOUS SUBSTANCES.
HOW MUCH RADIATION IS "ACCEPTABLE" AROUND A NUCLEAR PLANT?
Page 5: gie29d00
WHAT LEVEL OF TOXIC CONTAMINATION SHOULD BE ALLOWED IN VARIOUS
FOODS? THE DEBATE, HOWEVER, IS NOT SO MUCH ABOUT WHAT THE LIMITS
SHOULD BE, BUT WHETHER COST/BENEFIT ANALYSIS IS AN APPROPRIATE
METHODOLOGY TO USE FOR SUCH DECISIONS.
THE LEGITIMACY OF COST/BENEFIT ANALYSIS IN PRODUCT REGULATION
IS A SUBJECT THAT GOES FAR BEYOND OUR INDUSTRY.
THE APPLICATION OF SOCIAL COST ANALYSIS TO SMOKING IS DEFECTIVE
ECONOMICS APPLIED TO UNCERTAIN DATA. TO DEVELOP THIS POINT, WE
HAVE CALLED ON TWO LEADING ECONOMISTS FROM THE CENTER FOR THE STUDY
OF PUBLIC CHOICE, AT VIRGINIA POLYTECHNIC INSTITUTE.
DR. RICHARD WAGNER IS THE AUTHOR OF 11 BOOKS AND MONOGRAPHS,
AND OVER 20 ARTICLES, IN THE FIELD OF PUBLIC FINANCE AND ECONOMICS.
DURING THE LAST YEAR HE WAS VISITING PROFESSOR OF ECONOMICS
AT THE RENOWNED UNIVERSITY OF KONSTANZ.
HIS COLLEAGUE, DR. ROBERT TOLLISON HAS SERVED AS A CONSULTANT
TO THE U.S. GOVERNMENT TREASURY DEPARTMENT, COMMERCE DEPARTMENT,
OFFICE OF TECHNOLOGY ASSESSMENT AND THE COUNCIL ON WAGE AND PRICE
STABILITY.
Page 6: gie29d00
5
THESE TWO GENTLEMEN ARE CO-AUTHORS OF A FORTHCOMING BOOK CALLED
PERSONAL LIBERTY, STATE ACTION AND ECONOMIC COORDINATION, A TITLE
WHICH CERTAINLY COVERS THE SUBJECT OF THIS PROJECT.
THE ECONOMISTS WORKING.ON THIS PROJECT ARE FIRST DEVELOPING
A "LAYMAN'S GUIDE" TO SOCIAL COST/BENEFIT ANALYSIS. THE ATTACKS
AGAINST US CLAIM TO USE ECONOMICS TO JUSTIFY FURTHER ACTION. THE
LAYMAN'S GUIDE WILL ADDRESS THREE KEY QUESTIONS.
1. WHEN IS SOCIAL COST/BENEFIT ANALYSIS CALLED FOR?
THERE IS A LIMITED QUANTITY OF RESOURCES AVAILABLE TO SOCIETY.
JUST SO MUCH LAND, LABOR AND MATERIALS. THE OBJECT OF COST/BENE-
FIT ANALYSIS IS TO GET THE MAXIMUM VALUE FROM THESE RESOURCES.
BUT WHAT IS VALUE? TO THE ECONOMIST, IT IS THE VALUE THAT PEOPLE,
AS INDIVIDUALS, PLACE ON SOMETHING. FOR THIS REASON, MOST COST/
BENEFIT ANALYSIS IS ACCOMPLISHED BY PEOPLE IN THEIR DAILY ECONOMIC
DECISIONS. IF I AGREE TO PAY THE PRICE OF A PACK OF CIGARETTES, I
AM SAYING THAT THE BENEFITS I GET ARE AT LEAST AS LARGE AS THE COST
OF THE RESOURCES USED TO MAKE THE CIGARETTES. AND I AM SAYING
THERE IS NO OTHER USE OF THIS MONEY WHICH I VALUE MORE HIGHLY,
OTHERWISE I WOULD SPEND IT DIFFERENTLY.
Page 7: gie29d00
, - 6 -
EVEN IN MORE COMPLEX SITUATIONS, INVOLVING GROUPS OF PEOPLE,
IT CAN USUALLY BE SHOWN THAT THE GROUP HAS ARRIVED AT A SOLUTION
WHICH ADEQUATELY TAKES INTO ACCOUNT THE COSTS AND BENEFITS OF
EACH MEMBER OF THE GROUP. THUS, THERE IS NO JUSTIFICATION FOR
THE LARGER SOCIETY TO INTERVENE.
THEN, WHEN MIGHT IT BE APPROPRIATE FOR THE GOVERNMENT TO
.
ANALYZE SOCIAL COSTS? ONLY WHEN SOME OF THE COSTS CANNOT BE
MATCHED WITH BENEFITS. THESE ARE CALLED "UNCOMPENSATED COSTS".
FOR EXAMPLE, WHEN A FACTORY IN ONE AREA CREATES POLLUTION IN
ANOTHER AREA, SOME OF THE COSTS OF THE FACTORY PRODUCT ARE BORNE
BY PEOPLE WHO HAVE HAD NO OPPORTUNITY TO PARTICIPATE IN THE ECO-
NOMIC DECISIONS WHICH HAVE BEEN MADE.
INDEED, THERE MAY BE A FEW CASES WHERE SMOKING CREATES UNCOM-
PENSATED COSTS FOR NON-SMOKERS. BUT THE ECONOMISTS ARE QUITE CER-
TAIN THAT MOST OF THE ALLEGED MEDICAL EXPENSES DO NOT QUALIFY AS
SOCIAL COSTS. AND THE MUCH LARGER CHARGES OF ABSENTEEISM AND LOST
PRODUCTIVITY ARE NOT SOCIAL COSTS AT ALL.
Page 8: gie29d00
IT CAN BE SHOWN THAT MY ABSENCE FROM WORK DOES NOT COST YOU
ANYTHING. AND THIS CONCLUSION IS ONE WHICH WILL BE SUPPORTED
BY A WIDE RANGE OF ECONOMISTS. IN MOST OF THE CASES CITED
AGAINST US THE NECESSARY BALANCE OF COSTS AND BENEFITS HAS
BEEN ACHIEVED BY THE WORKING OF THE ECONOMY ITSELF.
2. WHAT SHOULD BE ANALYZED?
IT DOES NOT MAKE SENSE TO ANALYZE AN ENTI:RE INDUSTRY'S
SOCIAL COSTS. THE ONLY VALID AND USEFUL ANALYSIS IS ONE THAT
FOCUSES ON A PROPOSED GOVERNMENT ACTION. IF THE GOVERNMENT IS
GOING TO INVEST IN A DAM, THAT ACTION WILL HAVE BENEFITS WHICH
MUST EXCEED THE COST OF THE DAM IN ORDER TO JUSTIFY ITS CONSTRUC-
TION. IF THE GOVERNMENT IS GOING TO RESTRICT SMOKING IN RES-
TAURANTS, THE BENEFITS TO INDIVIDUALS OF THESE ACTIONS MUST EX-
CEED THE COSTS TO OTHER INDIVIDUALS. NEITHER THESE COSTS NOR
THESE BENEFITS HAVE ANYTHING TO DO WITH THE COSTS OR BENEFITS OF
AN ENTIRE INDUSTRY. SUCH AN ANALYSIS IS SIMPLY MEANINGLESS, AND
WE MUST GET THAT MESSAGE ACROSS.
Page 9: gie29d00
- 8 -
1 3.
WHAT IS THE PROPER OBJECTIVE OF THE ANALYSIS?
FROM THE POINT OF VIEW OF ECONOMICS THE OBJECTIVE OF GOVERN-
MENT MENT INTERVENTION IS TO RESOLVE UNCOMPENSATED COSTS. AND, FUR-
THERMORE, THERMORE, TO RESOLVE THEM IN THE WAY PEOPLE AT LARGE WOULD IF
THEY COULD NEGOTIATE WITH THOSE WHO ARE_ GETTING THE BENEFITS.
FOR EXAMPLE, CONSIDER SMOKING IN AN ELEVATOR. THE SMOKER
GETS TO SMOKE. BUT SOME PEOPLE ARE MADE UNCOMFORTABLE. IT IS
NOT REASONABLE TO EXPECT THEM TO WALK TO THEIR FLOOR. SO SOME
RULES MAY BE NECESSARY. BUT A TOTAL BAN ON SMOKING SIMPLY RE-
VERSES THE INEQUITY: NOW THE SMOKERS ARE UNCOMFORTABLE FOR THE
SAKE OF THE OCCASIONAL NON-SMOKER WHO OBJECTS. THE PROPER AIM
~
OF COST/BENEFIT ANALYSIS WOULD BE TO HELP FIND A SOLUTION WHICH
IS "FAIR" TO BOTH SIDES.
THIS LAYMAN'S GUIDE WILL INCLUDE THE PARTICIPATION OF ECONOMISTS
FROM COUNTRIES OTHER THAN THE UNITED STATES. WHEN A BASIC POSITION
HAS BEEN ESTABLISHED, THE ECONOMISTS WILL EXAMINE CLOSELY THE
SOCIAL COST PAPERS WHICH HAVE APPEARED IN EACH COUNTRY. A CRITIQUE
OF EACH PAPER WILL BE FILED WITH ICOSI ALONGSIDE THE PAPER ITSELF.
THIS WILL PROVIDE US WITH A WEAPON AGAINST ARBITRARY, CARELESS
ATTACKS USING "SOCIAL COST" AS A F.ATIONALE.
Page 10: gie29d00
9
COST/BENEFIT ANALYSIS WAS A REASONALBE, IF RATHER INACCURATE,
TOOL FOR EVALUATING GOVERNMENT INVESTMENTS. THE MAJOR PROBLEM
WAS DETERMINING THE SOCIAL BENEFITS WHICH WOULD BE OBTAINED.
WHEN THE COST/BENEFIT CONCEPT IS APPLIED TO PRODUCT REGULATION,
HOWEVER, WE ARE IN A MAKE-BELIEVE WORLD OF BOTH COSTS AND BENEFITS.
THE ECONOMIST KNOWS HOW THESE SHOULD BE DEFINED BUT HE OFTEN ADMITS
THAT MEASUREMENT WILL BE IMPOSSIBLE OR VERY :CNEXACT.
