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KING PA. ER THE POLITICAL ELEMENT IN SCIENCE AND TECHNOLOGY: SAMMEC II AND THE ANTI-SMOKING LOBBY CENTER FOR STUDY OF PUBLIC CHOICE DEPARTMENT OF ECONOMICS GEORGE MASON UNIVERSITY TIMN 445029

THE POLITICAL ELEMENT IN SCIENCE AND TECHNOLOGY: SAMMEC II AND THE ANTI-SMOKING LOBBY by Richard W. Ault and Robert B. Ekelund, Jr. Auburn University March 1993 TIMN 445030

TABLE OF CONTENTS Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Introduction ........................................ 1 II. SAMMEC and Economic Cost Computations ................... 3 What Is SAMMEC II? ................................. 3 How SAMMEC Has Been Used ........................... 4 Economic Project Evaluation and the Concept of Cost .............. 5 III. The Methodology of SAMMEC II .......................... 10 Indirect Mortality Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . • • • • • 12 Direct Morbidity Costs ................................. 16 Indirect Morbidity Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . • • • • • . . 24 IV. Technical Flaws in SAMMEC II Methodology. .................. 27 V. Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . • . . . 34 Footnotes .............................................. 37 References ............................................. 39 Attachment A ........................................... 42 Section I .......................................... 42 Section II ......................................... 43 Section III ......................................... 44 Section IV ......................................... 45 Section V ......................................... 46 i TIMN 445031

LIST. OF TABLES Table 1 Diagnosis Set .................................. 11 Table 2 Relative Risk Elements ............................ 14 Table 3 Smoking Prevalence Rates .......................... 15 Table 4 Years of Potential Life Remaining Relative to Life Expectancy: Males .............................. 17 Table 5 Years of Potential Life Remaining Relative to Life Expectancy: Females ............................. 18 Table 6 Present Value of Future Earnings (4%) .................. 19 Table 7 Present Value of Future Earnings (6%) .................. 20 Table 8 Present Value of Future Earnings (10%) .................. 21 Table 9 Relative Rates for Hospital Days Per 100 Persons and Physician Visits Per 100 Persons by Smoking Status ................. 23 Table 10 Relative Rates for Work-Loss Days Per 100 Employed Persons Per Bed-Disability Days Per 100 Females Keeping House by Smoking Status ................................. 25 11 TIMN 445032

EXECUTIVE SUMMARY Software with the acronym SAMMEC II (Smoking-Attributable Mortality, Morbidity, and Economic Costs) was developed in 1990 for purposes of evaluating populations (state, city, and national) in order to determine the so-called "social costs" of smoking. The software SAMMEC II, developed initially by James M. Schultz as SAMMEC in 1985 and 1986 in conjunction with the Minnesota Department of Health, has been used primarily in one well publicized nationwide study -- the National Status Report on Smoking and Health, 1990 (the "Sullivan Report") -- and in various states in the United States. The purpose of this research paper is to evaluate the second generation software (based on the initial SAMMEC) from the related perspectives of logic and statistical adequacy. We note, from the outset, that any "costs" of smoking (to the extent that such costs may exist beyond the price of the product) are all rzp 'vate in nature -- that is, they are borne and internalized by individuals in private actions. We also note that, in any generally accepted methodology, both "benefits and costs" must be evaluated. All rational individuals, in making choices, evaluate both the benefits of consumption and the putative costs. Property rights and property dispositions belong to the individual alone in voluntary exchange. As Ezra Mishan, an authority on economic cost-benefit analysis, who is misinterpreted by SAMMEC II developers, argues, "Insofar ... as additional risks associated with the service or facility [or product] are all voluntarily assumed, there is no call for ui TIMN 445033

intervention in the allocative solution to which the market tends" (see pp. 8-10 of our report). The fact that individuals actually purchase tobacco products means that perceived, calculable benefits flow to individuals as they do from tobacco production and sale. Any such benefits are totally ignored in SAMMEC II's calculations, however, further vitiating their implied warranty as to having produced a scientific impact study. While the exclusion of benefits is a critical omission in SAMMEC II, our critique evaluates SAMMEC II chiefly on its own grounds -- that is, by its assumption that the "social costs" identified do actually exist. Within the framework of the SAMMEC II estimates, three broad categories of "social costs" for smoking are said to exist: (1) indirect mortality costs consisting of lost income resulting from "premature" deaths; (2) direct morbidity costs, including all costs of hospitalization and health care due to illnesses which are claimed to be associated with smoking; and (3) indirect morbidity costs which encompass productivity losses due to worker absenteeism. At the heart of all of these tripartite cost estimates is what SAMMEC II developers call the Smoking Attributable Fraction (SAF) which is a function of: (a) smoking prevalence and (b) "risk ratios." Even assuming that smoking prevalence data are accurate, the SAMMEC calculation of SAF is rendered unreliable by its calculation of risk obtained from a 1989 Surgeon General's Report (Reducing the Health Consequences of Smoking: 25 Years of Proaress. A Report of the Surgeon General, 1989) for the following two reasons: (1) Reported disease incidence among smokers and nonsmokers is based upon no other factors besides sex, age, and smoking history. These data cannot explain any systematic differences in disease incidence since it does not control for factors such as health history, prior medical care, exercise and food intake, or genetics that are all iv TIMN 445034

identified as significantly related to disease (see Attachment A, Section I); and (2) Reported differences in disease incidence between smokers and nonsmokers are biased since data come from death certificates on which physicians systematically bias reportage (see text, p. 22). This means that the smoking-attributable impact estimates are calculated by mathematical formulae and are not based on actual disease incidence or actual costs. While these problems riddle the entire SAMMEC II study, other key difficulties pertain to specific calculations. Three of the most significant include: (1) The use of mean income to estimate claimed future losses in calculating indirect mortality and morbidity costs. Assuming any losses to be social (which they are not), a mean income calculation must bias the result since a higher percentage of smokers have been widely reported to be found in the lower-income groups (see Attachment A, Section II); (2) The lack of data on health care expenditures which forces SAMMEC II to treat all forms of health care as perfect complements. Where statistics do not exist -- as in nursing home care -- SAMMEC II makes apparently unsupported assumptions and uses a proxy. The application of meaningless disease incidence data (see 1 above) to several biased health cost data creates multiplicative errors in SAMMEC II estimates; and (3) The calculation of indirect morbidity costs also is unreliable and useless since it is based on relative differences in absenteeism rates between smokers and nonsmokers that do not account for age, health, worker status, or income (see Attachment A, Section V). These problems mean that, evaluated on its own, cost evaluations based on SAMMEC II software are unreliable. This conclusion applies to the Sullivan Report and to state (and city) studies of the costs of smoking and to any other investigation that uses the SAMMEC II program as its foundation. When the data show what the SAMMEC II authors expect, they accept it; v TIMN 445035

when the data fail to show what they expect, they make ad hoc adjustments to the data. This makes a mockery of scientific inquiry. Finally, we note difficulties in SAMMEC II's cost calculations which are central to our evaluation and critique and which, incredibly, are recognized by SAMMEC II developers as well. Apparently, recognizing the scientifically inconclusive nature of their own methodology, SAMMEC II authors note that the technology implied by SAMMEC II software "enhances the credibility and perceived authority of disease impact estimates" while on the same page of the studv (Schultz, Novotny and Rice, p. 9) they admit that ". . . the issue of whether smokers cost nonsmokers money, or vice versa, is unresolved." Earlier, on page 8 of their study, the authors argue that the net economic effect of cigarette smoking is "speculative." The dangers inherent in such "politically correct science" should be obvious to all. This manuscript was produced under a grant from the Tobacco Institute. The views expressed are those of the authors and not necessarily those of the Institute or its member companies. vi TIMN 445036

I. INTRODUCTION Politics and science are more interrelated now than at any time in human history. A vast arsenal of modem science is directed and totally or partially funded by local, state, and federal s governments and millions of small donations. Much of this so-called scientific activity comes from not-for-profit entities such as the American Lung Association, the American Heart Association, the National Institutes of Health (NIH), the Centers for Disease Control, 50 state departments of health and public health services, and myriad local health organizations. Obviously, the profit motive is the driving force for profit-maximizing entities while non-pecuniary (for example, "religious") motives may explain organizational characteristics of purely voluntary activity. The behavior of not-for-profit entities -- like those enumerated above which pay salaries and benefits, and are directly financed by government or rely on government subsidies and donations -- are the most difficult and interesting to analyze. These entities are widely perceived to be in the public interest. However, they may actually lack clearly identified ownership and control, providing management and employees with less incentives to use resources in an economical, socially desirable manner.' One of the most important aspects of such ill-defined accountability assignments in "goodwill entities" is the encouragement of such entities and organizations to use or mold science into politically popular (and politically "sellable") projects and activities. Science is then used to expand "expense preference behavior" -- expanded bureaucracies, higher managerial and 1 TIMN 445037

employee salaries, and so on -- and to form the basis for direct political activities by the goodwill entities themselves or by the politicians that support and nurture them. These activities may be at the expense of science and at the cost of the public interest. Indeed, the aims of science and economic calculation may be twisted to political ends. One example of such questionable activity is the development, dissemination and spreading use of a spreadsheet software that purportedly estimates the so-called "social cost" of smoking in a population. The software, which operates within Lotus 1-2-3, is called the Smoking-Attributable Mortality, Morbidity, and Economic Costs (SAMMEC II) Computer Software and Documentation, authored by project staff James M. Schultz, Thomas E. Novotny, and Dorothy P. Rice (henceforth SNR).2 SAMMEC II and periodic updates of the program are maintained by the Office on Smoking and Health of the U. S. Department of Health and Human Services. The central purpose of this research is to critically evaluate the scientific and economic foundations of SAMMEC II methodology. We explore both conceptual issues and methods of calculation which show that the developers and users of the software appear to be virtually inventing an economic "cost" of smoking -- and are developing exaggerated estimates of the so-called cost. After a more detailed discussion of SAMMEC II and what it is used for in Section II, we will evaluate the methodology of SAMMEC II in Section III, present conceptual and calculation biases in Section IV, and estimate the size of these biases and draw conclusions concerning the role of science in politics and the role of politics in science in a concluding section (Section V). 2 TIMN 445038