Analysis of the smoking ban effect

Analysis of the smoking ban effect â€Å"On the 26th March 2006, smoking was banned in enclosed public places in Scotland.† This essay will consider different aspects of this ban, including a consideration of the extent to which the theory of externalities can be used to justify government legislating on smoking, an analysis and explanation of the short run impact of the smoking ban on market for alcohol sales in pubs and clubs, the market for cigarettes and the market for chewing gum and, finally, an explanation on whether the smoking ban would have any effect on the production possibility curve. All of this will create an economic insight into the effects of the 26th March 2006 smoking ban. Firstly, the theory of externalities will be considered as externalities are seen in almost every area of economic activity, therefore are also important to analyzing the effects of the smoking ban in enclosed public places. Garratt and Sloman (2010, p.517) define them as â€Å"costs or benefits of production or consumpt ion experienced by society but not by the producers or consumers themselves. Externalities are likely to cause market failure if the full social costs and social benefits of production and consumption are not taken into consideration. Social cost includes all the costs of production of the output of a particular good or service. We include the external costs arising, for example, from pollution of the atmosphere. It is therefore important to consider how this theory of externalities justifies the government legislating on smoking. Cigarettes in the UK have an enormous taxation rate – in 2009, 10.5 billion pounds were raised in tax revenue from tobacco for the UK government. People usually tend to smoke a lot when they are drinking so if they are not allowed to smoke inside the clubs and bars, there is not as big as a demand as if people were allowed to smoke in bars and clubs. This means that the government loses the money it could have raised from the tobacco taxation if the re was a bigger demand. The money that has been raised from putting taxation on tobacco is usually invested in healthcare as a public good so it can be perceived as an external benefit. However, government this way avoids the damage of issues that are caused by smoking, such as less productive workforce and the vast amount of money that has to be put into healthcare because of the health issues caused by smoking. Therefore it can be argued that the government loses money but at the same time invests in the long-run welfare and healthcare of the people who are living in Scotland. Some benefits might include women smoking less, therefore living longer or having healthier babies. These benefits of the government legislating on smoking might seem insignificant now because it could be argued that people who smoke, will find a way to smoke anyway, especially with bars and clubs investing in comfortable outdoor smoking areas, but the external benefits of the smoking ban are much more impor tant – the reduction of secondary smoking health costs (non-smokers now do not have to suffer from other people smoking indoors), especially when the smoke that accumulates indoors only contributes to damaging health to people who are inside enclosed places. Also, not being able to smoke inside discourages more people from smoking or they smoke less frequently because a lot of people just can’t be bothered to go outside. This is the case especially amongst young people where smoking is still considered a social activity so if they can’t smoke in bars and clubs – they won’t. Also people are discouraged from smoking in a way that doesn’t affect the black market which is good because then the government does not have to spend extra money on dealing with the black market while spending huge amounts of money improving the health of the people. Taking all these arguments into account, the theory of externalities can be used to justify government l egislation on smoking.