Exercise 5 - 3 Diminishing Returns in Relation to Tobacco Legislation

The research article titled, "The Diminishing Returns to Tobacco Legislation" by Pierre Lemiex reports on reactions to different forms of government regulation. The major points outlined in this article have their merits and lessening points and the arguments give reasonable evidence demonstrating diminishing returns due to reformed smokers. Possible non cost solutions and the implications of tobacco's supply, demand and sin taxes are also explored in relation to the article.

The debated points with merit include:  

• The relationship of diminishing rate of sales due to smokers quitting with the increasing rate of government taxation.
• Smoking warning information overload has had a diminishing effect on quit rates and may be causing public complacency.
• Stringent government imposed regulations and taxation increase black market involvement.

The debated points without merit in the article include:

• Entrepreneurs in Quebec sell warning label pack covers for cigarettes which account for around 1% of cigarette sales. 
• Health bureaucrats addiction to power is involved in increasing tobacco regulations.

Increased government regulations are having a diminishing effect if a lot of ways. Most developed countries have had warnings for over a decade and government and private agencies have been educating the public for a longer period. The effectiveness  of these regulations are diminishing. Taxation on tobacco products has had a diminishing rate in regards to the numbers of smokers it reforms.

Solutions that would lessen diminishing returns on quit rates could include: 

• Increased prohibitive measures of the usage of tobacco in public and private areas.
• Dismantling private for profit tobacco companies
• Decreased taxes and susidies on quiting aids (patches, gum, smoking cessation medication)

Inelastic demand for tobacco products will result in only a small reduction in the quantity demanded in relation to a higher government imposed price increases. Higher taxation on inelastic products like tobacco result in higher tax revenues for the government.

The article clearly demonstrates the diminishing rate of return of quit rates with tobacco legislation and explores the issue of the governments role effecting the quit rate of smokers. The current rate of tobacco taxes and increasing  regulations are becoming ineffective.

Source: http://www.pierrelemieux.org/artdiminish.html