WHY DO PEOPLE SMOKE?

This raises the question of why people still smoke. If one observes apparently self-defeating behavior, there are some standard reactions of economists.

There will be those who claim that it is not irrational to smoke. Perhaps the preferences of smokers are such that this behavior maximizes their utilities. This is the view of the economics Nobel Prize laureate Gary Becker, who in his famous paper “A Theory of Rational Addiction” (Journal of Political Economy 96, 1988, pp. 675-700) makes exactly this point. In his view, preferences are exogenously given, and behavior is rational whenever it is in line with those preferences. Thus, we can hardly know whether an observed behavior is really irrational – as long as there exist potential preferences for which it would be optimal to behave in that way, we cannot rule out that the behavior is rational. Only if the behavior is internally inconsistent, when there are no possible preferences that would be compatible with that behavior, we can conclude that it must be irrational. Trivial examples for this are difficult to find, but one might imagine someone cleaning their floor while wearing dirty shoes (knowing that the shoes are dirty). Then the cleaned areas are getting dirty again in the ongoing cleaning process, and it would be difficult to find preferences consistent with such behavior.

If smoking is indeed an optimal adjustment to the smoker’s preferences, we should observe that smoking is reduced when cigarette prices rise. This is indeed the case. In one recent study (Kostova, Ross, Blecher, and Markowitz (2010), “Prices and Cigarette Demand: Evidence from Youth Tobacco Use in Developing Countries”, NBER Working Papers 15781) it is estimated that in developing countries the price elasticity among smokers is –1.2. This means that if cigarette prices go up by 1%, the average smoker reduces their consumption of cigarettes by 1.2%. Yet if prices go up by 1%, the probability that somebody who is not yet a smoker will start smoking just goes down by 0.63%.

Other economists would take the observed self-defeating behavior as genuine evidence for irrationality. Indeed, many biases (i.e. systematic mistakes) in human decision-making have been identified in experimental economics and psychology. For example, the time preference, the rate at which future consequences are taken into account when making decisions, maybe distorted in a way that would qualify as irrational. This so-called present bias has been identified in many studies (see the survey by Frederick, Loewenstein, and O’Donoghue: “Time Discounting and Time Preference: A Critical Survey”, Journal of Economic Literature 40, 2002, 351-401), though it is questionable whether Gary Becker would accept such the present bias to be proof of irrationality.

Finally, some economists would argue that the inclination to smoke may be influenced by the information available to a person. This is an issue also discussed in the cited paper by Kostova et al. – they find that the likelihood to become a smoker increases if one is frequently exposed to tobacco advertisements, and it decreases the more widespread the anti-smoking sentiment in society is.

EVIDENCE FROM POST-SOVIET COUNTRIES

Without offering a conclusive answer, I want to contribute to this debate by looking at evidence from post-Soviet countries, in particular those in the South Caucasus. Smoking habits in these countries have several characteristics that are rarely found elsewhere, for example, there is an extreme excess of male smokers (source: WHO “Smoking Patterns in Europe”), a phenomenon possibly driven by cultural idiosyncrasies. The traditional view on women in countries like Armenia or Georgia is that they should not indulge in bad habits such as smoking and drinking, while for men there is much more leniency. Although tobacco consumption is not encouraged among men either, women are judged much more strictly, often based on arguments like: “Smoking women jeopardize not only their health but also their future children” (as fathers are role models for their children, smoking men will arguably have a similarly negative influence on children).

Another distinguishing feature of smokers in former Soviet countries is the dramatically large number of cigarettes they smoke per day. Spending much time with a smoker from Armenia I was regularly stunned by the short amount of time he needed to consume a full package of cigarettes. Yet supporting this anecdotal evidence with numbers turns out to be difficult. While there is abundant statistical data available regarding the proportion of smokers and per capita usage of tobacco in various countries, I could not find data about the number of cigarettes per smoker. Thus, I made my own estimations of the number of cigarettes per smoker based on 2007 data from the ERC World Tobacco Atlas and other freely available sources. I started with the number of cigarettes per capita and obtained the number of cigarettes per smoker by dividing this number by the percentage of smokers in each country. For example, in Armenia, the annual per capita consumption of cigarettes is 1,620 and 25% of the population smokes. So, it can be concluded that the average smoker consumes 6480 cigarettes per year (1620/0.58). The table presents my calculations for five former Soviet Union countries (Russia, Ukraine, Belarus, Georgia, Armenia) and five European countries (Germany, France, Netherlands, Poland, UK) for the year 2007.

Therefore, if smoking is a rational decision, the relentless taxing policy of European countries could be one of the most important reasons for reducing smoking. For testing this empirically, we compare the prices of cigarettes in four countries, namely Armenia, Russia, Germany, and France. According to the International Business Times, the respective prices for one package of Marlboro are $1.45, $1.73, $6.79, and $8.83. Taking a demand elasticity of -1.2, as reported in the Kostova et al. paper for developing countries, we can compare the demand in Armenia and Germany, for example, for understanding how much of the difference in consumption can be explained by the price difference. Prices being 468% percent higher in Germany, consumption should be 561% higher in Armenia. It is, however, just 30% higher. In France, prices are 510% higher than in Russia, and if the difference in consumption would be driven primarily by the prices difference, we should observe 610% more smoking in Russia than in France. The actual difference is just 205%, again showing that the difference in consumption is much less than what would be explained by price differences. Hence, price differences seem not to explain the difference in consumption between post-Soviet and Western countries.

Then what about the information availability, i.e. the awareness of the negative impact of tobacco smoke on health. To evaluate the attitude of people towards health risks of smoking I conducted a little survey in Armenia and Poland (45 participants in each country). Participants, all of whom were smokers, were asked two questions:(1) “How much higher is the chance of a smoker to die from a lung cancer, compared to a non-smoker? (in %)” and (2) “The chance of a male non-smoker to reach age 73 is 78%. What is the respective probability for a person who smokes?”

The mean number given by the Polish smokers to the first question was 69%, while Armenian smokers on average answered 34%. The average answer to the second question was 47.5% for Polish smokers and 64% for Armenian smokers. The results of the survey show that people in Poland tend to be more pessimistic and realistic regarding the effects of smoking, as the answers Polish smokers gave were closer to the real numbers, which are 2100% for the first question and 42% for the second question. Armenian smokers, on the other hand, are unaware and optimistic about the impact of smoking on health.

CONCLUSION

If smoking was primarily an irrational behavior, one would not expect these huge differences between countries. Why, in the end, would an Armenian or Russian be less rational than a Western European?

Nevertheless, price differences cannot explain well the differences in consumption between post-Soviet and Western countries, contradicting the view that these different behavioral patterns result from sober cost-benefit analyses on part of smokers. However, there seems to be a difference in the information and awareness of the health risks of smoking, possibly explaining the differences in the amount of smoking. To sum up, the exercise I have done here, even if it is very rough and does not live up to academic standards, could be seen as weak support for the classical “rational man paradigm” – at least for the very limited domain of smoking decisions (while it has to be emphasized, however, that many empirical findings, both from economic experiments and from the real world, clearly contradict this paradigm).

From a policy point of view, if one wants to reduce smoking rates in countries like Georgia and Armenia, providing more information about the risks of smoking may be more effective than raising cigarette prices.

Aram Grigoryan is a student in the second year of the ISET master's program who will graduate this year. He aims to continue his education in a Ph.D. program in Europe or the USA.