The external cost of guns v. smoking

A quick post on the cost of smoking v. cost of guns, given the intuitive notion that second hand smoke and violence might be (conceptually) similar. I am not an expert on guns, and this is a quick post, given as food for thought.

I have done work on the social cost of cigarette smoking, and we estimated the cost per pack in $2000 to be ~$40

• $33/pack was private costs, mostly borne by the smoker through shortened life
• $5.50/pack was quasi-external costs, borne mostly by the spouse through shortened life via second hand smoke (and smaller amounts for children, who are exposed for shorter periods)
• $1.50 of external costs net of excise taxes which is the summation (positive and negative) of many sources: third party health insurance, Social Security, private life insurance markets, etc.

My colleague at Duke Phil Cook (along with Jens Ludwig at Chicago) have done work on the cost of gun ownership, and estimated what they call the social cost of a an additional household acquiring 1 gun to range from

• $100-$1,800/year per gun

Note that they use the term social cost, but I understand what they have done to focus on external costs only. Key to their sensitivity analysis is whether and how you value fear, worry, etc. related to gun violence, which has certainly been heightened this past week. If you include that, you get to the high end, and if not nearer the low end (there are other things going on in the sensitivity analysis, including findings from the literature that the value of life years lost of those most typically killed with guns is lower than the average death, controlling for age).

A few points about Cook and Ludwig’s analysis.

• framed against the smoking work above, Cook and Ludwig focus on external costs as I say. This misses the internal costs associated with suicide, or quasi-external costs if a gun is used by a family member for suicide. As we conceptualized smoking, domestic violence homicide would also be a quasi-external cost, which I don’t think could be teased out from what they did. I am sure there are some complicated factors of attempted v. completed suicide, and the choice of method is endogenous, etc.
• They use percentage of suicides via a gun in a county as a baseline proxy for gun ownership, and look at changes in gun ownership and changes in murder; they are assigning the cost of an additional household becoming a gun owning household
• They find that increased gun prevalence increases murder, but not other violent crimes (more guns add lethality)
• The larger estimates above include gun injuries, which have larger social costs than deaths given how the literature values lost life years due to gun homicide [see Viscusi 1998 on this issue]
• Murders among persons age 15-19 are more sensitive to increased gun supply, which they surmise increases illegal guns (for example, bought by gangs on the streets)

Summing up, the external costs of smoking for a 2 pack per day smoking in $2000 would be ~$1,000, near the midpoint for the estimate of external costs of a marginal gun that Cook and Ludwig identify. In smoking, the private costs overwhelm via the value of shortened life, and in gun deaths lost life is also the major cost. Smoking is the leading preventable cause of death in the U.S., and results in ~ 10 times more death annually than do firearms (435,000 v. 30,000 in year 2000) so the costs of smoking would be expected to be much larger than the cost of guns, with the magnitude of this calculation being sensitive to how one values lost years of life.

You could think about how to convert the cost per pack in smoking and the cost of an additional gun per year, but I am not going to do it now.

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PJ Cook, J Ludwig. The Social Cost of Gun Ownership. Journal of Public Economics 2006;90:371-390.

Frank A. Sloan, Jan Ostermann, Gabriel Picone, Christopher Conover and Donald H. Taylor, Jr. The Price of Smoking. MIT Press: 2004. The Price of Smoking is available as an ebook.

Viscusi, WK. 1998. Rational Risk Policy. Oxford University Press, New York.

The cost of smoking

A new paper in Health Affairs estimates the impact of smoking cessation on future health care costs among persons covered by TRICARE, taking account of changes in life expectancy.

The last column on the right shows the net impact by gender accounting for the expected increase in weight gain that is associated with cessation (slight reduction in lifetime medical costs for younger women; slight increase for men). The focus of the analysis is health care costs paid by third party insurers and you can follow the calculus of the cross subsidies above (lower costs while alive, higher costs from living longer,with the net depending on gender and age at cessation).

This table focuses only on part of the external cost of smoking (that cost that might be shifted outside of the household). The social, or total cost of smoking includes external costs, but also private ones and quasi-external costs that accrue within the household. I explored a complete assessment of the social cost of smoking (private, quasi-external and external costs) with colleagues in The Price of Smoking (MIT Press, 2004).

In $2000 we found that the cost of a pack of cigarettes was around $40/pack, but that most of the cost was borne by smokers (private cost ~$33/pack) and family members (quasi-external cost ~$5.50/pack) via shortened life span. The purely external costs (including flows like those above, but accounting for many other sources of potential cross subsidy like Social Security and private life insurance) were around $1.50/pack net of excise taxes. The new paper is a nice analysis, but focuses only on one aspect of the true, or societal cost of smoking and in doing so likely greatly underestimates the benefits of cessation.

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Wenya Yang, Timothy M. Dall, Yiduo Zhang, Shiping Zhang, David R. Arday, Patricia, W. Dorn and Anjali Jain. Simulation Of Quitting Smoking In The Military Shows Higher Lifetime Medical Spending More Than Offset By Productivity Gains. Health Affairs, 31, no.12 (2012):2717-2726.

After Tobacco

Sarah Kliff has a post on a new book After Tobacco: What Would Happen if Americans Stopped Smoking (by Peter Bearman, Kathryn Neckerman and Leslie Wright; Coumbia Univ. Press, 2011). I haven’t read the book but will try and get to it soon. Kliff highlights a few of the outcomes in a post-Tobacco world that may seem counterintuitive to some:

The economic effect on public programs, however, would be more of a mixed bag. States’ Medicaid costs would noticeably decrease: lower-income populations have higher rates of smoking and the negative health outcomes that follow. But states would also lose revenue from cigarette excise taxes, which amounted to $13.75 billion in 2006. If Americans stopped smoking altogether, states could see a 1.4 percent decrease in revenue, according to a chapter from Hunter College’s Howard Chernick.

A similar, spilt-effect would be true for Social Security. With Americans living longer, Social Security would bear the increased cost of supporting people for a longer time. But those costs are slightly offset from an increase in healthy workers, who “tend to earn more and retire later,” leading to higher contributions. On balance, “After Tobacco” estimates the end of smoking means a slight, 1.58 percent increase in Social Security outlays.

We found similar cross subsidies in The Price of Smoking that I have blogged about. I will be most interested in the methods they used and hope to blog about them in the next few weeks.

 

The Cost of Smoking-V

In June I did a four part series on the cost of smoking that showed that the social cost of cigarettes was $40 per pack ($2000):

• $33/pack in private costs borne by the smoker mostly through shortened life span
• $5.50/pack in quasi-external costs borne by the household (spouse and children) primarily via increased morbidity and mortality
• $1.50/pack in pure external costs that represent the net effect of smoking on things like Medicare, Medicaid and Social Security

Yesterday I posted on the substantial life extension benefits that accrue from smoking cessation even as late as age 65. I am going to write more about the methods used in that study, but first wanted to revisit the cost series briefly to amplify on a type of cost that we didn’t include in our estimates of the cost of smoking.

Working on the book The Price of Smoking was great fun, because we had a large project team that discussed and debated many issues. One that was particularly contentious was whether to include intangible costs such as the cost of my son not knowing one of his grandfather’s and the anguish that this fact causes my wife. We decided to not include such intangible costs in order to stick with conservative estimates as well as difficulty in assigning a cost. We did of course provide a dollar estimate of the cost of shortened life span, the primary cost of smoking. This paper by Viscusi and Hersh estimated the private mortality cost (assumed to be borne by the smoker) of $222/pack for men and $96/pack for women (in 2006$). Cutler (2002) $22/pack and Gruber and Koszegi (2001) $30/pack had private mortality costs per pack that were more similar to our estimate ($33/pack in 2000 dollars).

Attaching a dollar value to a statistical life is plenty controversial, but accepted, and there are different methods and approaches that can be compared. In the end, intangible costs such as a child not knowing his grandfather are real, but we thought it better to not provide a dollar value for them and leave that up to the reader, in part because of how many sources of intangible costs we could identify as a project team. If you start including such costs, where do you stop? In any event, our estimate of the social cost of smoking at $40/pack in 2000 dollars is a lower bound estimate and there are harms not accounted for in this figure.

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Papers/Works Cited

Frank A. Sloan, Jan Ostermann, Gabriel Picone, Christopher Conover, Donald H. Taylor, Jr. The Price of Smoking. MIT Press, 2004.

W. Kip Viscusi, Joni Hersch. The mortality cost to smokers. Journal of Health Econmomics 2008;27:943-58.

Cutler, D.M., 2002. Health care and the public sector. In: Auerbach, A.J., Feldstein, M. (Eds.), Handbook of Public Economics. Elsevier Science,
North Holland, pp. 2145–2243.

Gruber, J., Koszegi, B., 2001. Is addiction rational? Theory and evidence. Quarterly Journal of Economics 116 (4), 1261–1303.