Whenever the topic of negative externalities is taught the example of smoking is resurrected. The usual analysis is that smokers fall ill and demand NHS treatment and, given that the NHS is funded by taxpayers, we all foot the bill for their decision to smoke. This then usually leads to a discussion of taxation and this argument is used as a justification for the very high taxes on cigarettes. So far, so predictable. However, this article from The Daily Telegraph, suggests we need to think again.
The overall external cost of smoking to wider society is, therefore, less clear than we might think and now that smoking is banned in public places there might be few negative externalities. How do we now justify all that tax on a packet of cigarettes? Over to you, Mr Osborne…..