Tobacco Documents Online

THE UNIVERSITY OF MICHIGAN I I I i I I I SCHOOL OF PUBLIc HE.%LTH DEPART\[EVT OF HEALTH PLA\'NI\C A.1D ADMIaISTR.iTLON rj:v-4 AxsOR. MICHIC.vi 48109 October 6, 1980 Walter P. Maner III Executive Secretary Michigan Tobacco G Candy Distributors and Vendors Assoc. Inc. 523 West Ionia Street Lans ing, Michigan 48933 Dear Walt: Thank you for your letter of October 1. You did not request a response, but I feel that your comments warrant one. First, I want you to know that I read Dr. Schafer's paper with great care and interest. I_am familiar with some of the literature which questions the smoking-illness connection and since you hold Dr. Schafer in such esteem, I looked forward to his review and interpretation of that literature. After read- ing it I chose not to respond to it in writing because, frankly, I felt that it speaks for itself. Since you have mentioned his paper again, I will now convey to you my principal reactions. . Throughout his paper, Dr. Schafer emphasizes one point: that statistics cannot literally prove causality. I agree fully with the technical argument but find it substantively vacuous. For all practical intents and purposes -- including both individuals' decisions about how they want to live their own lives and governments' decisions on public policy -- the strength of the statistical association linking smoking to illness is so overwhelming that calling smoking a risk factor instead of a cause of illness reduces to a matter of semantics. To put it another way, I agree that causality cannot be proven in a literal sense by statistics -- such "proof' is tautologically impossible -- but I would regard as foolish anyone wfio failed to perceive the health hazard associated with smoking because the truly extraordinary correlation between smoking and a variety of illnesses "only" establishes smoking as a "major risk factor" in these diseases. Walt, would you hand the keys to your car to a man who was staggering after having consumed ten drinks? Should the police not try to get drunken drivers off the road? The link between driving while intoxicated and a much higher than normal accident rate represents a statistical association, like smoking and illness a strong one, though I would guess that it is statistically less well established than the smoking and illness case. Literally, drinking is a risk factor in motor vehicle accidents and fatalities. Dr. Schafer, you, or I could argue, correctly, that statistics cannot prove that driving while intoxicated causes accidents. It will be a dismal day when society awaits an impossible "proof" to take action to protect the public's health and welfare. I might add that I was astonished by the first page of Dr. Schafer's text. Does he believe -- or do you or does the Tobacco Institute -- that anyone with a moderate degree of health knowledge thinks smoking is the only cause of lung cancer and heart disease? I have never seen that seriously suggested. It is well establish- ed, with an unusual degree of sound statistical and epidemiological evidence, that -270-

Nlalter ?. ~faner III October 6, 1980 cigarette smoking is the major risk factor in lun g cancer, but not the only one, and a major risk factor in a variety of heart diseases, but again certainly not the only one. Thus I can only interpret the straw man that Dr. Schafer attacks as being one of his own construction. In short, Walt, I found no meaningful evidence in Dr. Schafer's paper to challenge the basic understanding of smoking and illness with which the Panel has been proceeding;- neither have several Panel and staff inembers with whom i have spoken about the paper. I have suggested, and hope that the Panel will agree, that Dr. Schafer's paper be included in the appendices to the Panel's report alongside my original discussion paper. That way, others can read both papers and decide for themselves. Most of your October 1st letter was devoted to your review of -my analysis of the economic costs of smoking. In the remainder of this letter I will respond to your comments. I do so, however, in the hope that we are in agreement that the health effects of smoking are of paramount importance in the work of the Panel. A fundamental premise of your arguments-against my economic assessment is that I fail to distinguish between private costs and external or social costs. To the contrary, the problem is that we define social costs differently. I think of social costs as the sum of private costs and negative externalities. Social costs, in essence, are those-acc ruing to all members of society, including those which • individuals incur willingly and those (external costs) which are imposed on others without their willful action.. . Given this definition, I will address your points seriatim, beginning with the third paragraph of your letter. If you accept my definition, there is no double counting of cos-ts. In fact, I fail to see how there would be double counting even if we adopted your definition. You have not offered any explanation to which I can respond. Secondly, avoidable absenteeism and medical costs represent a deadweight productivity loss. Your assertion that they result merely in transfers is simply wrong. Consistent with your idea that opportunity cost i-s the correct concept for assessing true costs.in economics, absenteeism and medical resource consumption both have high opportunity costs because they consume scarce resources at the same time that the individuals involved fail to return a productive contribution. Thirdly, I do not recall having said that "smokers use more medical care over their lifetimes than nonsmokers." The medical costs of smoking are those attributable to treatment of smoking-related illnesses. To the extent that such illnesses could be avoided, presumably by cessation or avoidance of initiation of smoking, the associated medical costs could be avoided. Again, they represent a deadweight loss. Regarding the total lifetime stream of medical expenditures, personally I would find preferable a higher total experienced over, say, a healthy 85 years of life than a lower total experienced, say,-over a less healthy 60 years of life terminated prematurely due to smoking-related illness. I might add that I have never calculated such lifetime expenditure streams, but when one realizes that in the former case significant expenses occur in later years, discounting -271- 2 Ci' ~ h+ IPA m I I p I I I I I f I I 4

;alter ?. :faner iII October 6, 1980 i ~ I i I I r I i the costs to present value misht well -ake the SS year-old's present discounted ':al::e of costs lower. Of course, it is aertai nly : ossible that the total, without discoc..^zting, is lower, since diseases like lung cancer and heart disease can be cuite exDensive to treat. Fourthly, I agree with you that the way to evaluate a proposed smoking and health polic,v is to compare its costs and bene-'its. I disagree that we know nothing about the costs of "no smoking." To assert this is to deny the abundance of sound evidence an dif:erences between smokers and nonsmokers with which we are all _amiliar._ - - Fifthiy, I agree that many annoyance costs are private costs determined in private markets given defined property rights. I was surprised, however, by your use of this notion in the context of smoking restriction laks._ Bv definition, all deter:ninations of-property rights limit someone's freedoms. One of the most fundamental and conservative roles of the state is the definition and orotection of property rights. If the right to clean air is protected for nonsmokers, some smokers may feel their rights restricted. Conversely, if the right to air is protected for smokers, some nonsmokers will find their perception of their rights violated. I agree with you that the optimal state of affairs would be "a mutually agreed solution." (By this I assume you mean an unlegislated agreement. After all, legislation can be construed as a mechanism for defining agreement in a social context.) The perceived need for legislated solutions reflects an inability for mutual (unlegislated) agreement to satisfy all. I do want to emphasize that not all annoyance costs are simple one-on-one private costs. In congested public places, a few smokers can create a widespread annoyance. In effect, in the economic jargon, they are creating a "public bad." In theory and practice, this is a clear-cut case for collective or governmental intervention. Sixthly, I am aware of, but have not read, the new k'harton ARC study. I have read the previous study which, from what I have heard of the new one, is similar in substance. The one point I would make is that all significant industries generate large direct and indirect economic contributions. As I recall the previous study, the indirect contributions vastly outweighed the direct, as would be true of many industries. I find some of the numbers regarding these indirect contri- butions potentially conf,u ing and misleading. For example, take the 76,410 "full-time equivalent employees." Most of the indi,:iduals comprising this number wvsld, I 3sess, rely on tobacco for a livelihood in only a very minor way. I assume that this number includes thousands of people working in drug stores and the like in which -cigarette sales take place. Ztinat proportion (or number) of these people are dependent on tobacco for cont-:;.uation of their jobs? I would guess that it is relativel,v fe~:. I note, too, that the dollar-vol::,e measure of economic contribution is value- and content-free. ihe i:.:portant :oint, as you noted earlier in your letter, is the opportsni.}" cost: the value of opportunities . - :_re;oze ;..:e to use of resources in t::ts activ:_N In __osing my response to vour cor_ er.ts on -•• cost ana'-_•sis, : reiterate that ac':noWled7e the poss~~2litv ttat V Cost-o:-smo:.1P.; ---L'res •2v be off -_:- "t= .:11" by a substantial amount. _h e s e ._;~.r°_s are o.^.1y est.'.-tes.• r.nalysts, _ . - are .:or-kin; c::r.ant: to t:y :o est-rates, -272-

I I Walter P. Maner III October 6, 1950 by the way, could as easily be much higher as lower than current ones. Frankly, however, the precise magnitude of these figures strikes me as being of little practical importance. It is the qualitative story that matters. What difference would it make if the costs of smoking were $20 billion or $60 billion instead of $40 billion? For the record I would like to reiterate several points which we have dis- cussed orally and in writing. One, and the most important, is that the staff have considered your input into the work of the Panel to be of great importance from the outset. It is visible in such outcomes as the Panel's decision not to recommend a ban on vending machine sales of cigarettes. I for one found your input on this matter educational and useful. Similarly, my feeling that our model of a clean indoor air act should be put into an appendix as purely illustrative reflected concerns expressed by you and one other Panel member about our lack of appreciation of specific economic consequences of the model bill. I will admit to being disappointed that you did not choose to participate more actively in the subcommittee work which produced the draft proposal recom- mendations. You were asked to participate and decided not to. Similarly, I regret that you waited so long to submit your written contributions (your letters Dr. Schafer's paper, and other documents). You knew the timetable for the work of the Panel arid surely were aware of the difficulties all of us would have in dealing with new documents late in the process. Despite that lateness, however, I want to assure you that the staff have examined your documents carefully and considered them seriously. , t r i I I I I F I will repeat, also, my lack of understanding why Mr. Spaniolo and, I thought, you too originally described my background paper as "surprisingly balanced," yet now you express frustration that it is "one-sided." Finally, I am_sorry that you feel disheartened by your experience with the Panel. I sincerely believe that we have solicited your input in good faith; that we have considered it seriously and utilized some of it in writing the Panel's report; and that we,are giving you ample opportunity to express your view of the "other side" of the story by writing a minority report and by including Dr. Schafer's paper in the appendix of the Panel's report. Sincerely, KEtti : ab Kenneth E. Warner Project Director Citizens' Panel on Smoking and Health GD C!1 ~. ~ . Mr -273- O S