Baptists, Bootleggers & Electronic Cigarettes

Abstract

Electronic cigarettes pose a competitive threat to the makers of cigarettes and other tobacco products, as well as to nicotine replacement therapies such as nicotine gum and patches. A common response to such a threat is support for government regulation to suppress competition. Predictably, cigarette manufacturers and other threatened producers, as well as the governments that earn revenue from tobacco taxes, are supporting greater regulation of electronic cigarettes that would replicate the cartel-supporting rules of the Master Settlement Agreement. These efforts are aided by anti-smoking organizations that would like to prevent the growth of demand for electronic cigarettes. This episode allows application of the Bootlegger and Baptist theory of regulation. Groups with divergent interests have aligned in support of cartelizing regulation of electronic cigarettes. As with other episodes of Bootlegger and Baptist coalitions, it is unclear whether the resulting policies will serve the public interest. There is evidence that electronic cigarettes pose substantially lower health risks than traditional cigarettes and may help smokers quit or reduce their tobacco consumption. Therefore, insofar as regulation restricts electronic cigarettes, it may undermine public health.

Keywords: tobacco regulation, electronic cigarettes, Baptists and Bootleggers, health regulation

JEL Classification: K23, K32