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Economics of smoking ban

Economics of smoking ban
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First Published: Wed, Oct 01 2008. 10 27 PM IST
Updated: Wed, Oct 01 2008. 10 27 PM IST
The prohibition of smoking in public places 2008 rules seem to be an unfitting gift to M.K. Gandhi on his 139th birthday. Non-violence is passé; cops, income-tax or any other government officer can from today on hunt down smokers in offices and other private premises including cafes. Although offenders pay a petty fine of Rs200, a very real threat of police raj is undeniable. Sadly, the ban relies on flawed economic reasoning.
The underlying law, the Cigarettes and Other Tobacco Products Act, 2003, defines “public place to mean any place to which the public have access”, as opposed to economic theory where “public property” is that which is owned by the state. Ironically, however, the 2008 rules don’t restrict smoking on roads and parks that are truly “public property”.
The ban intends to reduce the negative externality of smoking (that smokers don’t consider the impact of passive smoking on others). But, the infringement on cafes and offices is contradictory to its very purpose. Harold Demsetz, professor emeritus of economics at University of California, in a paper titled Towards a Theory of Property Rights, argues that private property arose precisely to internalize externalities. Both the smoker’s willingness to pay (WTP) for a hookah, and the non-smoker’s WTP for a mist-free environment enter the entrepreneur’s profit-loss calculations. This had led to separation of smoking and non-smoking spaces even before legislative action. In India, the market for pubs and cafes is highly regulated and discourages entrepreneurial initiatives to cater to non-smokers’ preferences.
Moreover, under the draconian 2008 rules, owners of offices and restaurants may be booked under “criminal liability” (typically reserved for murder, theft, and other horrific crimes), if people smoke on their premises. As per section 4 of the Act and Rule 2(e), restaurants can house smokers in enclosed and ventilated rooms, but not serve their clients there. Though high-end hotels might well afford such facilities, many bars and cafes might be hit severely.
Should smoking be banned on “private property”? Write to us at views@livemint.com
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First Published: Wed, Oct 01 2008. 10 27 PM IST
More Topics: Ourviews | Smoking | Harold Demsetz | Views | OurView |