Tobacco Documents Online

Messrs. Ave, Dey, Morgan, Nova, Rupp, Shinn, Sustana and Wyatt MEMORANDUM WILLIAM K~OEPFER, JR.. TO : FROM: I believe yon will be interested in the enclosed exchange of letters and I would like to pass along to you a caution raised by Wharton that because this is private correspondence it should not be used in any communication with the American Cancer Society or other anti-smoking groups. mss Enclosure CC: Mr. Bewley Mr. Greer Mr. Pepples Mr. Seidensticker Mr. Toti Mr. Zahn TI Senior Staff TI05390001

E R I CAN 777 THIRD AVENUE CANCER SOCIETY, INC. • NEW YORK. N.Y. 10017 • (212| 371-2900 October 30, 1980 ,'SEARCH )UCATION Mr. Peter Davis, Director The Wharton Applied Research Center 3508 Market Street Suite I00 Philadelphia, PA 19104 Dear Mr. Davis: We have seen a report summary of a study done by the ~arton Applied Research Center, and K%arton Econo~ metric Forecasting Associates, Inc., for Covington & Burling, a Washington law firm that represents the Tobacco Institute: and promotional brochure utilizing your study's findings by the Tobacco Institute. Your econometric analyses attribute to the tobacco industry a contribution of $57.6 billion to the gross national product in 1979, and a direct and indirect contribution by the same industry of 2,052,000 jobs to the U.S. economy, with a total annual compensation of $29.9 billion. These are impressive estimates. Do you, in your econometric models, allow for the equally impressive "costs to the nation for this imputed income and employ- ment related to tobacco? See the enclosed article #i "Smoking Reduces Gross National Product" by Ramstrom in WORLD SMOKING & HEALTH, Page 9, Vol. 2, No. 2, 1977. Specifically, do you balance tobacco income with tobacco costs, such as the direct cost of illness from tobacco-caused and tobacco-related disease? In a University of California study (page 27 of WORLD SMOKING & HEALTH #2, Vol. 3, No. 2, 1978) the d~rect health- related costs of smoking cigar@ties were estimated to be more than $27 billion a year in the United States alone, TI05390002

Mr. Peter Davis Page 2 October 30, 1980 including lung and other cancers, circulatory disease and non-cancerous respiratory disease. The-National Fire Protection Association identifies smoking and smok- ing materials as a major cause of fires with a total loss, in 1976, of $418.3 million. These fires are also a major cause of fire deaths; about 1,800 a year in this country. In your econometric models for multiplying income from tobacco, d.o you subtract the cost to society, fami- lies and employers of excess deaths of smoking workers, executives and heads of families? Do you include a debit for the gross national product lost because of the diseases and deaths of smokers? The majority of smoking deaths, estimated at some 346,000 excess or premature deaths per year in the United States, are in the 45-64 year ago group, the large majority among males. Thus, these deaths occur among the nation's most skilled and productive employees and executives. Do your models subtract the cost of training new personnel to take their places? Do you factor into your econometric calculations the damage caused by smoking at work, the lost work time re- lated to smoking on the job, the excess absenteeism among smoking workers as compared with nonsmoking workers of the same age? Do you calculate the excess cost of life, health and automobile insurance for smokers -- or the excess cost of protecting smokers in the premium costs of nonsmokers in companies where rates are not separated. These costs are, of conrse, related to excess morbidity, mortality and automobile accidents among cigarette smokers. Smoking on the job is also related to a higher rate of industrial accident and industrial illness. There are also-costs for cleanup of smoking materials in buildings, damage to public and private property from cigarette burns, and the increased of cleansing smoke from air {n o~ie~, factories, theaters and restaurants. Do you subtract these costs from your imputations of income to t/~e tobacco indus- try? T!05390003

Mr. Peter Davis Page 3 October 30, 1980 l'm sending this same letter to Dr. Lee R. Morris at the following address: Wharton Econometric Forecasting Associates, Inc. 3624 Science Center Philadelphia, PA 19104 since both of your organizations are listed as sources for the report. Sincerely yours, Editor WORLD SMOKING & HEALT~ WSR:uf Enclosures (2) T105390004

THE WHARTON SCHOOL of the UNIVERSITY of PENNS.YL VANIA PHILADELPHIA 19104 WHARTON APPLIED RESEARCH CENTER TB 3508 MARKET STREET - SUITE I{30 December 15, 1980 (215) 243-6320 Hr. Walter S. Ross. Editor World Smoking & Health -~,~erican Cancer Society, Inc. 77 l'hird Avenue Jew York, NY 10017 Dear T4r. Ross: Your letter of October 30, 1980, raised the question as to whether ~ had considered the direct health costs and imputed cost to society of smoking in our research. As we state in our report summary, "for the purposes of this report economic contributions are defined as the expendi- tures, and the effects of these expenditures, on goods and services attribu- table to the farming, manufacturing, distribution, and sale of tobacco or tobacco-related products." Our research was confined to economic contributions specifically connected with the above-named activities. The economic impli- cations of health issues associated with tobacco consumption neither fits the definition of an industry contribution nor do they fall within the sphere of activities of processing and distributing tobacco products. When we agreed to undertake this research on the' tobacco industry, we were aware of the possible criticism we would encounter upon completion of the v~)rk. Besides the types of issues raised in your letter, we have been confronted with such questions as to how one can trade off a human life for one job, two jobs, or two million jobs. If one's perspective is that a human being's health transcends everything else, .then the answe~ is simple--no such tradeoff can be made. However, the cost/benefit tradeoffs to our society are not so s.imp]e, as evidenced by the length and nature of the controversy on tobacco,, as wel| as many other products which present potential hazards to ~ne physical and mental health of a human being. Our .goal at the outset of this project was to develop and improve upon analytical methods to track direct contributions of an industry to the economy. In addition, methods were developed to relate direct economic activity to the resulting spillover effects on other segments of the economy, which was done in collaboration with ~harton Econometric Forecasting Associates, Inc. Finally procedures were developed to trace the direct and indirect effects to local areas. T!05390005

• Mr. Walter S. Ross -2- December 15, 198D Thus, our research agenda was accomplished through a real-world project which allov1~d us to develop and test these methods. A great deal of infor- mation is already available in the public domain regarding the health costs associated with tobacco. Our research focuses on economic contributions, .and its value to the public is an understanding of the potentlal economic disruptions that might occur if and when tobacco consumption is reduced abruptly. We are not trying to minimize the importance of information on the health costs; rather, we hope that by adding another dimension, the public will be able to make more informed decisions through the free flow of • information• Sincerely, Arthur Finnel Principal Investigator Robert Banker Principal Investigator AF, RB/mn Peter Davis F. G. Adams Karen Friedman T105390006