17.0 Introduction
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The manufacturing and retailing of tobacco products in Australia is very big business. Declining sales means lower profits for tobacco companies. Should the shareholders and proprietors of the supermarkets, tobacconists, independent grocers, petrol stations, newsagents and convenience stores that still sell cigarettes be worried that this might also reduce their profits?
Taxes on tobacco products are also a major source of revenue to governments. Could reduced smoking in the community result in reduced revenue to government and therefore reduced funds for service provision and less scope for tax relief?
Treatment of diseases caused by smoking imposes substantial costs on both governments and individuals. Reduced productivity of people incapacitated by or dying early from illness caused by tobacco use also results in significant costs to employers, households and to the community as a whole. On the other hand, many of the measures known to reduce smoking—such as those outlined in the preceding chapters—also impose some costs on government programs and the health care system. Further, many of the diseases caused by smoking emerge only after many years of continued smoking, and many of the benefits that result from reduced smoking are also only realised after many years. How do these short-term costs compare to the short-, medium- and long-term savings that can be gained from reductions in illness and premature deaths due to smoking?
Are governments justified in intervening in the tobacco market? Exactly what are the social costs of smoking in Australia? Who benefits from and who is adversely affected by smoking and by efforts to reduce it? How realistic are fears that reduced smoking would result in reduced employment and profits in the retail sector, and reduced government revenue? Are some interventions more effective than others in reducing the costs imposed by smoking? How cost-effective are interventions to reduce smoking compared to other medical treatments and other public policies? How much should be invested in tobacco control?
Economic theory, economic studies and methodologies commonly applied in the field of health economics are helping to answer each of these questions.
Table 17.1
Frequently used terms that appear in this chapter
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Private costs = |
those costs freely borne by individual consumers in full knowledge of any negative consequences of consumption |
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Social costs, also known as external costs or externalities = |
costs that are not private costs but, rather, fall on the rest of society including on users of tobacco products who are not freely choosing to use tobacco in full knowledge of consequences |
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Total costs = |
private costs plus social costs |
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Terms used by Collins and Lapsley in their series of analyses estimating the social costs of drug abuse in Australia 1–4 |
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Economic costs of drug abuse = |
'The value of the net resources which in a given year are unavailable to the community for consumption or investment purposes as a result of the effects of past and present drug abuse, plus the intangible costs imposed by this abuse' |
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Tangible social costs = |
costs which, when reduced, release resources for other uses |
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Intangible social costs = |
These can be thought of as adverse effects on the experiences, perceptions and feelings of individuals; such costs, when reduced, do not release resources for other uses |
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Other technical terms and acronyms used in this chapter |
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CEA = |
cost-effectiveness analysis, a form of economic analysis that compares the relative expenditure (costs) of two or more courses of action in order to achieve a given objective or outcome |
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ICER = |
incremental cost-effectiveness ratio, the ratio of changes in costs of a therapeutic intervention (compared to the alternative, such as doing nothing or using the best available alternative treatment) to the change in effects of the intervention |
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DALY = |
disability-adjusted life years, years of life lost due to premature death as well as years of 'healthy' life lost due to disability |
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QALY = |
quality-adjusted life years, years of life lost due to premature death as well plus number of years affected by illness, disability, pain etc, weighted somewhere between 0 and 1 depending on how severely each factor affects quality of life |
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