The Economics of Smoking - Thesis Proposal Example

Cigarettes are Considered a Demerit Good. Should the UK Government Allow the Market to Operate Freely in the Allocation of Cigarettes, or Should the Government Intervene in an Attempt to Reduce the Consumption of Cigarettes Due to Market Failure. Discuss Table of Contents Introduction 3 Thesis Statement 4 Discussion 4 Analysis 12 Recommendations 14 Conclusion 17 References 18 Introduction In this era of globalisation and industrialisation, the demand of demerit goods has enhanced with a remarkable pace, acting as the front-liner for a few economies. This is primarily because the habit is considered to be luxurious which is further accumulated with imperfect information. However, the regular consumption and increasing purchases of demerit goods are also identified to have a sever consequence over the social stability of any economy, owing to which the UK government has been learnt to implement a few noteworthy strategies. For instance, government of diverse countries have imposed various types of taxes or statutory declarations against consumption of these products with the desire to reduce the utilisation of the demerit products. Demerit goods are described as those products and/or services, the intake of which may result in unhealthy or socially adverse impacts over the individuals of a country. There are varied types of demerit goods such as tobacco or cigarettes, alcoholic drinks, junk food items and recreational drugs among others. It is in this context that demerit goods, such as cigarettes are considered to be worse as it offers varied types of physical disorders to an individual as well as the society. With this due consideration, cigarette smoking is regarded as one of the key factors leading to negative externalities, which might hamper the social well-being within an economy by a large extent (Cancer Research UK, “Tobacco and Cancer Risk – Statistics”). Thesis Statement Based on these aspects, the primary objective of this assignment is to highlight the disadvantages of demerit goods for an individual as well as the society. Moreover, it also highlights, the policies adopted by the government of UK with the purpose of controlling the consumption ratio of these demerit goods by the individuals of the society. Discussion Negative externality takes place when demerit goods offer considerable amount of pessimistic impact over the society, thereby hindering the public health and its well-being. It mainly occurs when the societal cost increases than the private expenditures as a consequence of increasing purchases of demerit goods by the nationals. It leads to the failure of the market, due to surplus production of the product in comparison to the total requirement of the society. This results in the enhancement of the negative influence of these externalities within the society which ultimately amplifies the cost bore by the society of United Kingdom (Cancer Research UK, “Tobacco and Cancer Risk – Statistics”). Demerit goods such as cigarettes are considered as those products, with the regular consumption of which results in the hindrance for health development of an individual and that of the society as well. Even though the regular consumption of demerit goods such as cigarettes may also lead to negative externalities, the demand of these products are identified to be increasing at a rapid rate in the markets of UK, which can be apparently observed with reference to the diagram represented below (Cancer Research UK, “Intensity Of Smoking Within The Citizens Of UK”). Intensity of Smoking within the Citizens of UK Source: (Cancer Research UK, “Intensity of Smoking within the Citizens of UK”) The underlining reason, which results in the overall enhancement of the demand for such demerit goods or negative externalities, is mainly due to lack of perfect information within the customers of the UK society. Thus, due to lack of appropriate knowledge, tobacco consumption or cigarette smoking has currently emerged as one of the significant social factors to be considered by the UK government and social institutions. It is in this context that smoking was recorded to result in death of approximately 100 million individuals in recent years all across the world. It is mainly due to varied types of serious disorders caused by regular smoking, such as lung cancer, cardio-vascular disease, Chronic Obstructive Pulmonary Diseases (COPD), high blood pressure, asthma, ulcer, cerebral thrombosis and dementia among others (Cancer Research UK, “Tobacco and Cancer Risk – Statistics”). Among the above mentioned diseases, cancer is the severe-most inevitable risk of cigarette smoking. Within the UK society, in a single quarter, approximately 28 percent of individuals were recorded to die due to cancer in the year 2009. Moreover, about 87 percent of men and 83 percent of females are suffering from the chronic disease of lung cancer in UK where the regular smoking habit can be identified as a major cause. With due consideration to this, the UK government is deliberately attempting to offer more attention towards the preparation of varied types of laws, thereby reducing the intensity of cigarette smoking within the citizens of the economy (Cancer Research UK, “Tobacco and Cancer Risk – Statistics”). In this context, based on the below represented diagram, it can be avowed that lung cancer is the key reason for the deaths of maximum individuals who have been identified to pursue the smoking habit within the UK society. Proportion of Deaths Due To Smoking by Diseases in UK Source: (Rcplondon.Ac.UK, “Tobacco Smoking In Britain: An Overview”) Furthermore, due to cigarette smoking, a large number of individuals have been observed to enjoy a life span of less than 10 years in comparison to that enjoyed by the non-smokers. This variation is estimated to be caused due to the chemicals contained within tobacco. Due to the increasing rate of deaths of the individuals, as was discussed in the previous paragraph, the growth and expansion of the country might get hampered by a significant extent. It might lead to the reduction in the level of productivity of the industries, resulting in an adverse effect over the economic growth due to unavailability of skilled and experienced work forces. The underlining cause of this fact is due to the amplification of demises rather than births within the society. Moreover, it is quite likely to hamper the augmentation of Gross Domestic Product (GDP) growth rate of the economy leading to the downfall of living standards of the citizens in the long-run. With due regard to this fact, the level of poverty might also enhance, thereby hindering its position among other neighbouring economies all across the globe (Scribd, “Smoking”). Consequently, cigarette smoking also can lead to stomach and kidney failure along with leukaemia within the individuals pursuing the smoking habit. It was in this context that heart attacks and heart disorders killed approximately 120,000 individuals in UK in the recent years. Arteriosclerosis, strokes, gangrene, aortic aneurysms and high blood pressures are also certain underlining causes of fatalities that can be observed within the society of UK in present years (Scribd, “Smoking”). Thus, to reduce the rate of fatalities caused due to the regular consumption of cigarettes and other demerit goods, the UK government intended to impose varied legislatives and health policies by the year 2009 to discourage the purchases of such demerit goods. In addition, the coalition government also launched an inventive control programme in Wales as well as in UK to reduce the rate of adult smokings. It also implemented varied types of strategies within the society of UK, to diminish the passion of smoking from the citizens as a whole (Rcplondon.Ac.UK, “Tobacco Smoking In Britain: An Overview”). Advertising It is worth mentioning in this context that the advertisement of tobacco or cigarette smoking is expelled by laws within the economy of UK. For instance, the Tobacco Publicity and Promotion Act of 2002 attempts to prohibit the manufacturers of tobacco to advertise in billboards, online sites, newspapers and sponsorships to reduce the impact of smoking in UK. Moreover, the government of UK had also forbidden the display of tobacco goods in large and small sized shops as well. Along with this, the laws also restricted the display of cigarettes in the hypermarket as well to diminish the desire of smoking (Rcplondon.Ac.UK, “Tobacco Smoking In Britain: An Overview”). Protection of Children Apart from legislatives, the government of UK also imposed certain declarations for the retailers that the sale of tobacco products should not be commenced engaging the customers who are below the age group of 18 years with due concern to the fact that such transactions might result in major fines or other penalties (Rcplondon.Ac.UK, “Tobacco Smoking In Britain: An Overview”). Product Regulation and Labelling The UK government also implemented certain corrective measures focusing on the citizens’ intention to maintain their health as well as wellbeing. Moreover, these types of statutory warnings are printed within the packets of the cigarettes in order to channelize the awareness of the citizens regarding the demerits of smoking (Replondon.Ac.UK, “Tobacco Smoking In Britain: An Overview”). Tax and Smuggling To reduce the consumption of tobacco, the government of UK also attempted to impose a tax of 5 percent over tobacco products along with the implementation of anti-tobacco smuggling strategies. This was further identified to help the economy in reducing the production of such demerit goods by the suppliers (Replondon.Ac.UK, “Tobacco Smoking In Britain: An Overview”). Thus, from the above discussions, it can be avowed that governmental intervention is extremely essential in case of demerit products such as cigarettes to avoid the circumstances of market failure. Market failure is a situation, in which the quantity of products manufactured by a producer is not equivalent to the demand of the consumers. This results in a negative impact on the society causing a severe impact on the overall stability of the socio-economic structure (Scribd, “Demerit Goods”). Market Failure Due To overconsumption of Demerit Products Source: (Scribd, “Demerit Goods”) In the above presented figure, it can be viewed that the demand of the demerit products such as cigarettes tends to increase rapidly even if adequate information is channelized among the prospective buyers regarding the disadvantages of these products. Such economic reactions ultimately result in the augmentation of negative externalities within the society with further consequences in terms of market failure. For these mentioned aspects, the government of UK has been identified to avoid offering free allocation of demerit products such as cigarettes within the society. The measure is fundamentally based on the fact that due to the free allocation of demerit goods, such as cigarettes, it might lead to over consumption which in turn is quite likely to hinder the well-being of the society (Scribd, “Demerit Goods”). Thus, in order to reduce the rate of consumption of demerit products and to prevent market failure, the UK government attempted to intrude varied types of regulations within the society. Furthermore, introduction of varied types of government rules and regulations with concern to the consumption of demerit goods was also intended to discourage the young citizens of the society from consuming of cigarettes and thus becoming a victim of its regular habit (Tobaccofreekids, “Smoke-Free Laws Encourage Smokers to Quit and Discourage Youth from Starting”). Hence, it can be avowed that the UK government should intervene and impose regulations, to reduce the consumption of cigarettes by the citizens through strict measures. Analysis With reference to the above mentioned facts, it can be described that permitting free allocation of cigarettes within the society of UK might prove extremely detrimental. This is because of the fact that it might lead to the overconsumption of demerit goods, resulting in the overall augmentation of negative externalities within the society. Thus, to reduce such negative effects, it is extremely essential on the part of the government, to intervene in the industry process and thus control the level of utilisation of demerit goods such as cigarettes. Although, the extent of current or regular smokers along with ex-smokers has been observed to reduce to a considerable extent by the year 2009 (as presented in the below figures), it resulted in augmentation of occasional smokers. This further led to the enhancement of social marginal costs rather than private marginal costs, causing hindrance in terms of the well-being of the society (UK National Statistics, “Adults with a Psychotic Disorder Living in Private Households”). Status of Cigarette Smoking In the Society of UK Source: (UK National Statistics, “Adults with a Psychotic Disorder Living in Private Households”) Negative Externality with Deadweight wellbeing Loss Source: (Economics help, “Demerit Goods”) From a theoretical perspective, as depicted in the above figure, social cost is greater than private cost for demerit goods due to negative externalities where, external cost (Q1 and Q2) are entirely ignored due to individual welfares. In addition, the gap within Social Marginal Cost (SMC) and Private Marginal Cost (PMC) portrays the regions of deadweight failure of wellbeing due to the overconsumption of demerit goods such as cigarettes, which can be quite detrimental for the UK society (Economics help, “Demerit Goods”). Therefore, in order to reduce the rate of consumption of demerit goods, such as cigarettes, the government of UK should make attempts to impose varied types of taxes to reduce the habit of smoking cigarettes among the citizens of the society. Recommendations In order to reduce the demand of demerit products, from the society, it is essential for the government to offer greater attention towards the introduction of regulations concentrating on its socio-economic structure. It might help in the enhancement of the prices of the tobacco products such as cigarettes, discouraging the increasing rate of demerit products consumption as subsequently it is quite likely that the demand of such commodities might also get reduced to a significant extent. Moreover, the UK government should also attempt to augment its promotional strategies mainly focusing on the demerits of cigarettes smoking, which might prove highly beneficial in reducing the passion of smoking amid citizens in the long-run (Scribd, “Demand of Demerit Goods”) as portrayed by the below figure. Imposition of Tax Reduces the Demand of Demerit Goods Source: (Scribd, “Demand of Demerit Goods”) Consequently, increased tax barriers may be imposed over the producers of cigarettes, which is quite likely to discourage the supply process of such products. This might further lead to lowering of the demand of the products with a steeply rising price, assuring the reduction in the consumption level of cigarettes by the citizens of UK. Additionally, the government of UK should also endeavour to offer varied types of training and educational workshops for both youths and adults in order to amplify their knowledge regarding the disadvantage from regular consumption of cigarettes. Apart from this, the government might also introduce the law of restricting smoking cigarettes in public places, which might assist the government in facilitating the dissuasion of smoking habits (UK National Statistics, “Adults with a Psychotic Disorder Living in Private Households”). With due consideration to this fact, the demand of alternative products might rise such as plastic cigarettes, electronic cigarettes or chewing of cinnamon sticks. From an overall perspective, this might facilitate the smokers in the gradual reduction of mental pressure resulting in the enhancement of the working capability of an individual. Furthermore, many smokers can also attempt to merge mint snuff with tobacco instead of cigarettes, to reduce stress and anxiety of the body and to attain a feeling of relaxation. In addition to the above mentioned substitutes, the citizens may also utilise certain other products as well as cigars and hookahs inspite of cigarettes, to reduce the habit of smoking to a significant extent (Scribd, “Demand of Demerit Goods”). Thus, in order to fulfil this objective, government of UK should endeavour to encourage the societal members as the contribution of the citizens is equally important for making the regulations effectual not only in the short-run, but also in the long-run. Conclusion Demerit goods are very harmful for the regular habituated smokers, which certainly affects the society at large. This is because of the fact that it results in augmentation of various types of physical disorders and premature deaths as well within the society. The highlighted causes of these types of premature deaths in UK are fundamentally identified as related with the over consumption of cigarettes. This apparently exhibits an alarming situation for the UK government owing to the long-run effects quite likely to be caused by smoking in the socio-economic environment. It is in this regards that the diminution of cigarette consumptions might offer varied types of advantages in the individual level in terms of improvements in the breathing procedure, circulation system, lessening of chest infections and enhancement of finances. This can be done with the utilisation of anti-smoking patches by the regular consumers. It might also help in reduction of death ratio from the economy at large. To accomplish this cause, the UK government is attempting to promote various types of educational training programmes and thus enhance the awareness amid citizens about the demerits of cigarette smoking. This might prove beneficial for the citizens to get rid of this injurious habit encouraging the overall social well-being. Along with this, citizens of UK might also attempt to switch over to alternative products to deplete the habit of cigarette consumption. Therefore, it can be affirmed that intervention of government for the decline of cigarette consumption is extremely essential to prevent the economy of UK from the severe drawbacks of demerit good consumptions including cigarettes. However, the government should consider the fact that irrespective of the citizens’ contributions, the regulations and the aims determined by the government shall provide disappointing results. References Action on Smoking and Health. ASH Briefing: UK Tobacco Control Policy and Expenditure. Policies Applicable To the Whole of the United Kingdom, 2012. Web. 30 May 2012. Cancer Research UK. Tobacco and cancer risk - statistics. Intensity of Smoking within the Citizens of UK, No Date. Web. 30 May 2012. Economics help. Demerit Goods. Market Failure, No Date. Web. 30 May 2012. Rcplondon.Ac.UK. Tobacco Smoking In Britain: An Overview. Proportion of Deaths Attributable To Smoking by Disease, 2007. Web. 30 May 2012. Scribd. Demerit Goods. Market Failure Due To Demerit Products, No Date. Web. 30 May 2012. Scribd. Demerit Goods. Market impact Due To over consumption of Demerit Products, No Date. Web. 30 May 2012. Scribd. Smoking. What You Need To know, No Date. Web. 30 May, 2012. Tobaccofreekids. Smoke-Free Laws Encourage Smokers To Quit And Discourage Youth From Starting. Effectiveness of Smoke-Free Laws for Reducing Adult Smoking, No Date. Web. 30 May 2012. UK National Statistics. Adults with a Psychotic Disorder Living in Private Households. Health-Of-The-Population, No Date. Web. 30 May, 2012. Read More