Countervailing Effects: What the FDA Would Have to Know to Evaluate Tobacco Regulations

60 Pages Posted: 25 Feb 2015 Last revised: 9 Jul 2015

See all articles by Mark Kleiman

Mark Kleiman

University of California, Los Angeles (UCLA) - Department of Policy Studies

James E. Prieger

Pepperdine University - School of Public Policy

Jonathan Kulick

Marron Institute

Date Written: February 25, 2015

Abstract

The Family Smoking Prevention and Tobacco Control Act [P.L. 111-31] gives the US Food and Drug Administration (FDA) the authority to regulate tobacco products, including placing restrictions on product composition, sale, and distribution. A complete accounting of the costs and benefits of any tobacco regulation includes harms from possible illicit trade in tobacco products (ITTP): costs of enforcement, violence, incarceration, etc. Indeed, the law instructs the FDA to take into account the “countervailing effects” of regulation on public health, “such as the creation of a significant demand for contraband or other tobacco products that do not meet the requirements.”

While the law’s narrow focus on public health may limit the scope of an inquiry by the FDA compared to a full benefit-cost analysis, aspects of ITTP such as violence and incarceration have substantial health impacts. Illicit markets in drugs such as cocaine, heroin, and methamphetamine, not to mention the grand experiment of alcohol Prohibition in the early 20th century, illustrate the substantial risks of unwanted side effects of drug prohibition. But taxes, product limitations, access restrictions, and narrowly defined product bans constitute “lesser prohibitions,” and are subject to the same kind (if not degree) of risks. All tobacco policy-making should therefore consider ITTP.

This article sets forth a research agenda for the FDA to consider in order to estimate the effects of contemplated tobacco-product regulation and ITTP. We argue that, to carry out fully its legislative mandate, the FDA would have to determine the current size and impact of ITTP, analyze how these may be expected to change under new regulations, and look for interdependencies among tobacco-product markets that may complicate single-product regulation. A more challenging element of the research agenda would be to develop a better theoretical groundwork for the prediction of the emergence, size, and side effects of illicit markets.

Keywords: regulation, tobacco, cigarettes, illicit markets, black markets, tax evasion, smuggling, counterfeiting, enforcement cost, unintended consequences

JEL Classification: K42, I18

Suggested Citation

Kleiman, Mark and Prieger, James E. and Kulick, Jonathan, Countervailing Effects: What the FDA Would Have to Know to Evaluate Tobacco Regulations (February 25, 2015). Available at SSRN: https://ssrn.com/abstract=2569700 or http://dx.doi.org/10.2139/ssrn.2569700

Mark Kleiman

University of California, Los Angeles (UCLA) - Department of Policy Studies ( email )

Los Angeles, CA
United States

James E. Prieger (Contact Author)

Pepperdine University - School of Public Policy ( email )

24255 Pacific Coast Highway
Malibu, CA 90263
United States
3105067150 (Phone)
3105067494 (Fax)

HOME PAGE: http://sites.google.com/a/pepperdine.edu/jprieger/

Jonathan Kulick

Marron Institute ( email )

196 Mercer St.
New York, NY 10012
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
101
Abstract Views
651
rank
276,295
PlumX Metrics