The Case Against Smoking Bans

n recent months, dozens of localities and a number

of states have enacted sweeping smoking bans. The

bans generally forbid smoking in “public” places,

which are defined to include not only publicly

owned facilities but also privately owned properties

to which members of the public are invited (e.g.,

bars, restaurants, hotel lobbies, etc.). Proponents of

the bans insist that they are necessary to reduce risks to pub-

lic health and welfare and to protect the rights of nonsmok-

ing patrons and employees of the regulated establishments.

Specifically, ban advocates have offered three justifications

for government-imposed bans: First, they claim that such

bans are warranted because indoor smoking involves a “neg-

ative externality,” the market failure normally invoked to jus-

tify regulation of the ambient environment. In addition, advo-

cates assert that smoking bans shape individual preferences

against smoking, thereby reducing the number of smokers in

society. Finally, proponents argue that smoking bans are jus-

tified, regardless of whether any market failure is present,

simply because of the health risks associated with inhalation

of environmental tobacco smoke (et s), commonly referred to

as “secondhand smoke.”

This article contends that government-imposed smoking

bans cannot be justified as responses to market failure, as

means of shaping preferences, or on risk-reduction grounds.

Smoking bans reduce public welfare by preventing an optimal

allocation of nonsmoking and smoking-permitted public

places. A laissez-faire approach better accommodates hetero-

geneous preferences regarding public smoking.

THE EXTERNALITY ARGUMENT

The conventional justification for regulation of the ambient

environment (i.e., outdoor air and water) is that it is necessary

Thomas A. Lambert is associate professor at the University of Missouri–Columbia

School of Law. He may be contacted by e-mail at [email protected].

to combat the inefficiencies created by negative externalities.

Negative externalities are costs that are not borne by the party

in charge of the process that creates them. For example, the

owner of a smoke-spewing factory does not fully bear the

costs associated with the smoke, stench, and health risks his

factory produces; many of those costs are foisted onto the fac-

tory’s neighbors. When conduct involves negative externalities,

participants will tend to engage in that conduct to an exces-

sive degree, for they bear the full benefits, but not the full costs,

of their activities. Quite often, then, government intervention

(e.g., taxing the cost-creating behavior or limiting the amount

permitted) may be desirable as a means of ensuring that the

cost-creator does not engage to an excessive degree in the con-

duct at issue.

Advocates of smoking bans insist that indoor smoking

involves negative externalities. First, ban advocates argue that

nonsmoking patrons and employees of establishments that

allow smoking are forced to bear costs over which they have

no control. In addition, smokers impose negative externalities

in the form of increased healthcare costs, a portion of which

is paid from the public fisc. Thus, taxpayers are required to

foot the bill for some of the costs associated with smoking in

general. Examined closely, each of these externality-based

arguments for smoking bans fails.

PATRONS AND EMPLOYEES Outdoor air pollution involves

the sort of negative externality likely to result in both an inop-

timal (i.e., excessive) amount of the polluting activity and a vio-

lation of pollution victims’ rights. When it comes to indoor

air pollution, by contrast, there is no such externality. That is

because the individual charged with determining how much,

if any, smoking is permitted in an indoor space ultimately

bears the full costs of his or her decision and is thus likely to

select the optimal level of air cleanliness. Moreover, non-

smokers’ “rights” are not violated, because they are compen-

34 REGULATION WINTER 2006–2007

RISK

Despite their popularity, government-mandated smoking bans

are not justified.

The Case Against

Smoking Bans

THOMAS A. LAMBERT

University of Missouri–Columbia School of Law

FT.Lambert.Final 12/20/06 11:48 AM Page 34

sated for the inconveniences and risks they suffer.

One might wonder how this could be. Because smokers in

a public space impose costs on nonsmoking patrons, who can-

not order the smokers to stop, will indoor smoking not entail

both the inefficiency (an excessive level of pollution) and the

injustice (an infringement of non-polluters’ rights to enjoy

clean air) associated with outdoor air pollution? In a word, no.

There is a crucial difference between outdoor and indoor air,

and that difference alleviates the inefficiencies and rights-

violations normally associated with air pollution.

The crucial difference is property rights. Whereas outdoor

air is common property (and thus subject to the famous

Tragedy of the Commons),

the air inside a building is, in

essence, “owned” by the

building owner. That means

that the building owner, who

is in a position to control the

amount of smoking (if any)

that is permitted in the build-

ing, has an incentive to per-

mit the “right” amount of

smoking — that is, the

amount that maximizes the

welfare of individuals within

the building. Depending on

the highest and best use of

the space and the types of

people who patronize the

building, the optimal level of

smoking may be zero (as in

an art museum), or “as much

as patrons desire” (as in a

tobacco lounge), or some-

thing in-between (as in most

restaurants, which have

smoking and nonsmoking

sections). Because patrons

select establishments based

on the benefits and costs of

patronage, they will avoid

establishments with air poli-

cies they do not like or will, at

a minimum, reduce the

amount they are willing to

pay for goods and services at

such places. Owners of public

places thus bear the full costs

and benefits of their deci-

sions regarding air quality

and can be expected to select

the optimal level of air clean-

liness. Moreover, customers

who do not like the air policy

a space-owner has selected

will patronize the space only

if they are being otherwise

compensated by some positive attribute of the space at issue

— say, cheap drinks or a particularly attractive clientele. They

are, in other words, compensated for any “rights” violation.

The de facto property rights that exist in indoor air, then, pre-

vent the inefficiencies and injustices that accompany out-

door air pollution.

But what about workers at businesses that permit smok-

ing? Is there not an externality in that they are forced to bear

costs (and assume risks) over which they have no control?

Again, the answer is no. Workers exercise control by demand-

ing higher pay to compensate them for the risks and unpleas-

antries they experience because of the smoke in their work-

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FT.Lambert.Final 12/20/06 11:48 AM Page 35

RISK

places. Adam Smith theorized about such “risk premiums”

when he wrote in The Wealth of Nations:

The whole of the advantages and disadvantages of the dif-

ferent employments of labor and stock must, in the same

neighborhood, be either perfectly equal or tending to equal-

ity…. [T]he wages of labor vary with the ease or hardship,

the honorableness or dishonorableness of employment.

He was right. A vast body of empirical evidence, including

most notably that produced by economist W. Kip Viscusi,

demonstrates that employers do in fact pay a premium for

exposing their workers to risks and unpleasantries. Such

risk/unpleasantry premiums motivate employers to select the

optimal amount of smoke in their restaurants. They also alle-

viate any injustices occasioned by what might otherwise appear

to be a violation of employees’ rights. Thus, smoking in pub-

lic establishments does not, in any meaningful sense, impose

genuine negative externalities in the form of risks and unpleas-

antries to the patrons and employees of such establishments.

Any externalities produced are merely “pecuniary” externalities

— that is, externalities that are mitigated by the price mecha-

nism and thus do not create inefficiencies and injustices.

PUBLIC COSTS Ban advocates also seek to justify prohibitions

by pointing to externalities in the form of public healthcare

expenditures. The argument here proceeds as follows:

■ Smokers face disproportionately high health care

costs.

■ A portion of such costs is borne not by smokers

themselves but by the public at large.

■ Smokers thereby externalize some of the costs of

their behavior and thus will tend to engage in “too

much” smoking.

■ Therefore, smoking bans are justified as an effort to

cut back on the level of smoking that would otherwise

exist.

This argument suffers from several weaknesses. First and

most importantly, the initial premise is unsound. According to

a comprehensive study in the New England Journal of Medicine in

1997, smoking probably has the effect of reducing overall health

care costs because smokers die earlier than nonsmokers. The

study’s authors concluded that in a population in which no one

smoked, health care costs would be 7 percent higher among men

and 4 percent higher among women than the costs in the cur-

rent mixed population of smokers and nonsmokers. The

authors further determined that if all smokers were to quit,

health care costs would be lower at first, but after 15 years they

would become higher than at present.

Even if smoking were shown to increase public health care

expenditures, the argument here would seem to prove too

much. If increased healthcare costs could justify government

imposition of a smoking ban in privately owned places, could

they not similarly justify governmental regulation of menus

at fast food restaurants or mandatory exercise regimens? Seri-

ous liberty interests would be at stake if a government were to

make its citizens “be healthy” so as not to impose health care

costs on others.

Finally, the assumption that public smoking bans reduce

the incidence of smoking seems suspect. As discussed below,

widespread smoking bans may actually increase the incidence

of smoking among young people. Externalities in the form of

increased public health care costs, then, likely cannot justify

widespread bans on smoking in public spaces.

THE PREFERENCE-SHAPING ARGUMENT

The argument above concludes that smoking bans are unnec-

essary because market processes will ensure either that

patrons’ and employees’ preferences regarding smoking are

honored or that those individuals are compensated for not

receiving their preferences. That argument assumes, though,

that individuals’ preferences are unaffected by the legal rule

itself. A number of scholars have disputed the notion of

“exogenous preferences.” Instead, they claim that individuals’

preferences regarding activities like smoking are influenced by

the background legal rules themselves. Some theorists have

therefore sought to justify smoking bans on grounds that they

make smokers less likely to want to smoke and/or make non-

smokers more likely to appreciate smoke-free environments

and thus more willing to pay a premium for such environ-

ments. In the end, neither preference-shaping argument can

justify widespread bans on public smoking.

SHAPING ATTITUDES In recent years, legal scholars have pro-

duced a voluminous literature on the role of law in indirect-

ly controlling conduct by shaping social norms and individ-

ual preferences. Smoking bans provide one of the favorite

“success stories” of those who laud the use of legal rules to

change norms and preferences. According to these scholars,

smoking bans affect behavior, even if under-enforced, because

they change the social norm regarding smoking in public.

With the advent of smoking bans, nonsmokers who previously

felt embarrassed about publicly expressing their distaste for

ets are speaking up. By providing a de facto community

statement that public smoking is unacceptable, the bans

embolden nonsmokers to confront smokers who are incon-

veniencing them. Facing heightened public hostility toward

their habits, smokers are likely to revise their preferences

regarding smoking. Thus, by making smoking more socially

costly, the theory goes, bans reduce the number of smokers.

Of course, this is a good thing only if actual social utility

is increased by reducing the incidence of smoking. Ban advo-

cates assume that reducing smoking is welfare-enhancing for

the obvious reason that smoking carries serious health risks.

But ban advocates generally are not in a position to judge the

cost side of reducing smoking because they do not know the

degree of utility smokers experience by smoking. Smokers

themselves, who these days are aware of the risks of smoking,

appear to believe that the benefits they experience from the

activity outweigh the costs. It is thus not at all clear that elim-

inating smoking will enhance social welfare.

But even if it were clear that society would be better off with

36 REGULATION WINTER 2006–2007

FT.Lambert.Final 12/20/06 11:48 AM Page 36

less smoking, attempting to use smoking bans to influence

social norms may not represent wise policy. Sweeping smoking

bans may actually increase the incidence of smoking. A large per-

centage of smokers acquire the habit at a young age, and they

frequently do so because smoking is “cool.” Smoking is cool, of

course, because it is rebellious. The harder anti-smoking forces

work to coerce people into quitting smoking, and the more they

engage the government and other establishment institutions in

their efforts, the more rebellious — and thus the “cooler” —

smoking becomes. Even advocates of the use of smoking regu-

lation to alter social norms acknowledge that overly intrusive

regulations may result in this sort of “norm backlash.” As an

empirical matter, then, it is not clear whether sweeping smok-

ing bans — highly intrusive regulatory interventions — actual-

ly reduce the incidence of smoking in the long run.

WILLINGNESS TO PAY The preference-shaping argument

analyzed above focuses on the potential for smoking bans to

shape the preferences of smokers (and potential smokers) by

manipulating social norms. Insights from cognitive psychol-

ogy suggest that smoking bans might similarly influence the

preferences of nonsmokers, making them more willing to pay

a premium for smoke-free environments and thereby encour-

aging more business owners to adopt no-smoking policies.

Advocates of a laissez-faire approach to the issue of indoor

smoking maintain that an unregulated market will produce

an optimal number of smoking and smoke-free establish-

ments as business owners respond to the demands of patrons

and employees. If patrons and employees are willing to pay

more for a smoke-free environment (via, respectively, higher

prices for the business’s goods and services, or lower wages)

than smokers are willing to pay for the right to smoke, then

business owners will be motivated to ban smoking. Otherwise,

they will not. Thus, there is no need for the government to

force establishments to go nonsmoking; the market will pro-

vide an optimal number of nonsmoking facilities.

This argument assumes, though, that nonsmokers’ will-

ingness to pay for smoke-free environments is unaffected by

the smoking laws themselves. If the laissez-faire approach

depresses the amount nonsmokers are willing to pay for a

smoke-free environment, then intervention in the market in

the form of smoking bans may be justified.

So why might the background rules on when and where

smoking is permitted affect nonsmokers’ willingness to pay

for smoke-free environments? In recent decades, cognitive

psychologists have conducted a number of experiments pur-

porting to demonstrate an “endowment effect,” whereby an

individual’s valuation of an asset is determined, in part, by

whether or not she owns that asset. The general finding is that

people attach a greater value to things they own than they

would attach to those things if they did not own them and had

to purchase them. In other words, ownership enhances sub-

jective value.

With regard to smoking bans, ban advocates may argue that

legal prohibitions effectively endow nonsmokers with the

right to smoke-free air, causing them to value it more than they

would if they had to “buy” it. If that is indeed the case, then

the laissez-faire approach to indoor smoking appears trou-

bling, for it is not, as its advocates maintain, merely a neutral

policy that facilitates satisfaction of existing preferences.

Rather than providing a level playing field on which private-

ly adopted nonsmoking and smoking-permitted policies can

compete, it biases the outcome of competition in favor of

smoking-permitted policies. Because a truly neutral market

solution is really impossible, ban advocates may call for the

government to weigh in on the side of public health and force

the no-smoking policies that will be under-produced by the

inherently biased free market.

There are several problems with this analysis. First, there is

a great deal of debate over the extent to which the endowment

effect really exists and the extent to which it applies to owner-

ship of intangible rights (e.g., the right to smoke-free air) as well

as to ownership of tangible property. In addition, given the num-

ber of public establishments that have already gone smoke-free,

thereby “endowing” their patrons with the right to smoke-free

air, the argument is a little out of date. Nonsmokers have now

been exposed to enough facilities in which they have been

endowed with the “right” to smoke-free air that they likely have

adjusted upward their subjective valuation of that commodity

(assuming endowment would, in fact, occasion an upward

adjustment). Finally, the endowment effect argument would

support, at most, temporary smoking bans — i.e., bans that per-

sisted long enough to move the amount nonsmokers would be

willing to pay to avoid smoke from a “willingness to pay” meas-

ure to a “willingness to accept” measure. If the justification for

the bans is a need to enhance nonsmokers’ valuation of smoke-

free spaces so as to encourage market creation of such spaces,

then the bans need not be permanent.

THE RISK ARGUMENT

The first two arguments for smoking bans focus, to some

degree, on citizens’ preferences: the externality argument focus-

REGULATION WINTER 2006–2007 37

There is no need for government to force

establishments to go nonsmoking; the market will

provide an optimal number of nonsmoking choices.

FT.Lambert.Final 12/20/06 11:48 AM Page 37

RISK

es on a purported market failure that allegedly prevents the sat-

isfaction of preferences regarding smoking, and the preference-

shaping argument focuses on the law’s inevitable role in shap-

ing those preferences. By contrast, the third common argument

for smoking bans ignores citizens’ smoking preferences alto-

gether. That argument asserts that smoking should be banned

in public places, regardless of individuals’ smoking preferences,

because the health risks it presents are simply too great. In

other words, smoking bans are justified on risk-based grounds

even if there is no need to remedy a market failure or to correct

a preference-shaping bias in the law.

Policymakers frequently invoke excessive risk as a sufficient

ground for regulating an activity, even when that activity does

not involve a market failure or reflect preferences that have

been skewed by the background legal rules. Consider, for

example, mandatory seatbelt laws. There is not much of an

externality involved in the failure to wear a seatbelt because the

costs of the conduct are borne by the person deciding to

engage in it. While mandatory seatbelt laws may have the

effect of altering preferences, there is no reason to think that

the background legal rule had previously biased preferences

against wearing seatbelts, and risk-avoidance is the sole rea-

son for altering citizen preferences in the first place. Thus, the

predominant justification for mandatory seatbelt laws, which

have been enacted in every state except “Live Free or Die” New

Hampshire, is risk-reduction — not externalities or a need to

shape preferences for some end other than risk-reduction.

Similarly, ban advocates argue, public smoking bans may be

justified solely on grounds of risk-avoidance.

But a purely risk-based argument likely cannot justify a

sweeping smoking ban. While risk, standing alone, is some-

times deemed sufficient to justify government prohibition of

private conduct, such prohibition seems appropriate only

when the harm avoided is relatively great and the regula-

tion’s intrusion on personal liberty is relatively small. Again,

consider mandatory seatbelt laws. The risk associated with

not wearing a seatbelt is huge, and the regulation’s intrusion

on personal liberty is minor — no more than a slight incon-

venience. Hence, the laws may be justifiable on risk-reduction

grounds. Consider, by comparison, whether the government

could invoke risk as a legitimate basis for banning driving

after 1:00 a.m. Such behavior certainly presents a heightened

risk (late-night drivers are far more likely to fall asleep at the

wheel), but the magnitude of risk presented does not justify

the degree of liberty intrusion occasioned by the regulation.

Smoking bans look more like late-night driving bans than

mandatory seatbelt laws and thus likely cannot be justified

solely with reference to risk.

To see why this is so, we must first isolate the relevant risk.

Because public smoking bans do not prohibit smoking alto-

gether and may not even reduce its incidence, the risk the bans

aim to avert is not the risk to smokers themselves. It is instead

the risk to nonsmokers — i.e., the risks associated with inhala-

tion of ets. The key question, then, is whether these risks are

of sufficient magnitude to justify a significant intrusion on the

personal liberty of private business owners and their customers.

If one were to rely on the stated conclusions of federal

agencies (and/or the media reports discussing those con-

clusions), one might conclude that the risks associated with

ets inhalation do justify significant liberty restrictions.

First consider the Environmental Protection Agency’s 1992

report, Respiratory Health Effects of Passive Smoking: Lung Can-

cer and Other Disorders. That study, which concluded that ets

is a Class A (known human) carcinogen, purported to show

that inhalation of ets causes 3,000 lung cancer deaths per

year. Not surprisingly, the study fueled efforts to impose

smoking bans.

As it turns out, the study hardly amounted to sound sci-

ence. A congressional inquiry into the methods the epa used

in the study found that “the process at every turn [was] char-

acterized by both scientific and procedural irregularities,”

including “conflicts of interest by both Agency staff involved

in the preparation of the risk assessment and members of the

Science Advisory Board panel selected to provide a supposedly

independent evaluation of the document.” The congression-

al inquiry further concluded that “the Agency ha[d] deliber-

ately abused and manipulated the scientific data in order to

reach a predetermined, politically motivated result.”

The findings of the epa’s 1992 study have also been under-

mined by court opinion. Charged with evaluating the agency’s

risk assessment in determining that ets constitutes a Class A

carcinogen, a federal district judge in the case Flue-Cured Tobac-

co Coop. Stabilization Corp. v. U.S. EPA criticized the agency’s

analysis in terms that can best be described as scathing. The

court concluded:

[The EPA] publicly committed to a conclusion before

research had begun; . . . adjusted established procedure and

scientific norms to validate the Agency’s public conclusion[;]

. . . disregarded information and made findings on selective

information; did not disseminate significant epidemiologic

information; deviated from its Risk Assessment Guidelines;

failed to disclose important findings and reasoning; and left

significant questions without answers.

Thus, the epa’s purported finding that ets poses a serious

cancer risk — a “finding” that has been extremely influential

in motivating state and local smoking bans throughout the

United States, should be discounted.

Apparently undeterred by these congressional and judi-

cial reprimands, the U.S. surgeon general recently released a

report entitled The Health Consequences of Involuntary Exposure

to Tobacco Smoke, which purports to settle once and for all the

debate over the risks of ets inhalation. In releasing the report,

Surgeon General Richard Carmona confidently proclaimed:

The scientific evidence is now indisputable: secondhand

smoke is not a mere annoyance. It is a serious health hazard

that can lead to disease and premature death in children

and nonsmoking adults.

In presenting the report, the surgeon general’s office

emphasized to the news media that even brief exposure to ets

poses immediate and significant health risks. The press release

38 REGULATION WINTER 2006–2007

FT.Lambert.Final 12/20/06 11:48 AM Page 38

accompanying the report stated that “there is no risk-free

level of exposure to secondhand smoke” and that “even brief

exposure to secondhand smoke has immediate adverse effects

on the cardiovascular system and increases risk for heart dis-

ease and lung cancer.” In his remarks to the media, the sur-

geon general stated, “Breathing secondhand smoke for even

a short time can damage cells and set the cancer process in

motion.” In a “fact sheet” accompanying the report, the sur-

geon general explained, “Breathing secondhand smoke for

even a short time can have immediate adverse effects on the

cardiovascular system.” These and similar statements, faith-

fully repeated by the news media, create the impression that

science has determined that simply being in a smoke-filled

room exposes one to significant health risks.

Examined closely, the surgeon general’s report established

no such proposition. The underlying studies upon which the

surgeon general’s report was based considered the effects of

chronic exposure to ets on individuals, such as long-time

spouses of smokers. The studies simply did not consider the

health effects of sporadic exposure to ets and thus cannot

provide empirical support for the surgeon general’s state-

ments about short-term ets exposure.

Moreover, those statements are theoretically unsound, for

they conflict with the basic toxicological principle that “the

dose makes the poison.” According to a study published in the

New England Journal of Medicine in 1975, when many more

individuals smoked and there were much higher ets concen-

trations in public places, exposure to an hour’s worth of pre-

vailing levels of ets was equivalent to smoking 0.004 ciga-

rettes. Put differently, one would have to breathe smoke-filled

air for 4,000 hours in order to inhale as much tobacco smoke

as a smoker inhales in a single cigarette. Given those concen-

tration levels, it seems implausible that short-term exposure

to ets poses serious health risks. Possessing neither empiri-

cal foundation nor theoretical plausibility, the Surgeon Gen-

eral’s public statements about the health risks of brief expo-

sure to ets were misleading.

But what about the actual findings of the surgeon gener-

al’s report, as opposed to the hyperbolic (and widely report-

ed) accompanying statements? Those findings — even taken

at face value — do not provide a risk-based rationale for high-

ly intrusive smoking bans. The report concludes that chron-

ic ets exposure increases the risks of lung cancer and heart

disease by 20 to 30 percent. While those numbers sound fair-

ly large, one must remember that the underlying risks of lung

cancer and heart disease in nonsmokers are quite small to

begin with. A 20 percent increase in a tiny risk is, well, really

tiny — certainly too tiny to justify the substantial liberty

infringement involved in smoking bans. Indeed, risk alone has

not justified a ban on smoking itself, an activity that increas-

es the risk of heart disease by 100 to 300 percent and that of

lung cancer by 900 percent. How, then, could a much small-

er risk justify highly intrusive regulation of the voluntary

actions of individuals gathered on private property?

This analysis even assumes that the conclusions of the sur-

geon general’s report are accurate. In fact, they probably are

not. The report is a meta-analysis, meaning that the authors

did not collect their own epidemiological data but instead

combined the results of previously published ets studies.

Meta-analyses are useful analyses, but they are no more com-

pelling than the underlying studies upon which they are based.

In this case, the meta-analysis rests on findings from a num-

ber of discredited studies, including the 1992 epa study. More-

over, the analysis treats all studies equally, regardless of their

scope and rigor. A number of the underlying studies pur-

porting to document correlations between chronic ets expo-

sure and cancer or heart disease were quite small, and most

employed “case study” methodologies in which individuals

with diseases were polled regarding spousal smoking habits

or the presence of ets at their workplaces. A superior study

would involve a large number of subjects — some routinely

exposed to ets, some not — and would follow them over time.

This sort of “cohort study” is more difficult to perform than

after-the-fact case studies, but it is also more accurate.

In fact, an extremely large cohort study has recently been con-

ducted. In 2003, James Enstrom of UCLA and Geoffrey Kabat

of the State University of New York, Stony Brook, published a

study of the health histories of more than 35,000 never-smok-

ing Californians who were married to smokers. Using infor-

mation gathered by the American Cancer Society, the

researchers collected data on the never-smokers for 39 years

(from 1959 to 1998). Their investigation revealed no heightened

lung cancer risk among study subjects. In fact, the authors

found no “causal relationship between exposure to [ets] and

tobacco-related mortality,” though they acknowledged that “a

small effect” cannot be ruled out. Enstrom and Kabat’s massive

study, which has been vociferously criticized by anti-smoking

forces, was not even included in the surgeon general’s meta-

analysis, which covered only studies published through 2002.

The bottom line is that the research on ets reveals, at

most, that even chronic ets exposure creates only a negligi-

ble absolute risk of cancer and heart disease. Advocates of

REGULATION WINTER 2006–2007 39

The question is whether the risks of secondhand

smoke justify a significant intrusion on the personal

liberty of business owners and their customers.

FT.Lambert.Final 12/20/06 11:48 AM Page 39

RISK

smoking bans must therefore base their risk arguments on

non-disease risks.

Some have acknowledged that the purported link between

ets and cancer or heart disease is dubious but have nonethe-

less maintained that other health risks justify sweeping bans.

For example, Dr. Elizabeth Whelan of the pro-ban American

Council on Science and Health chastised her fellow ban advo-

cates for “threaten[ing]” their cause with “hyperbole about the

likely effects of ets” — i.e., claims that ets causes cancer and

heart disease. Maintaining that the advocates should have

“simply stated that ets caused irritation of the eyes, nose

and respiratory tract and aggravated preexisting asthma,” she

insisted, that “surely that is enough of a reason to justify the

protection of all workers” via a sweeping smoking ban.

Surely it is not. As noted above, paternalistic regulations

aimed solely at reducing risks, not at correcting a legitimate

market failure, are justifiable only when the risk is relatively

serious and the liberty intrusion occasioned by the regulation

is relatively minor. Here, the potential harms at issue (a greater

number of watery eyes and runny noses, and aggravation of

complications among asthmatics who voluntarily patronize

establishments where smoking is permitted) do not seem

great enough to justify a governmental command that private

business owners force their invitees to refrain from an activi-

ty that affects only other invitees. Hence, widespread smok-

ing bans are not justifiable solely on risk-based grounds.

THE SUPERIORITY OF LAISSEZ-FAIRE

Controversies over smoking in public places are ultimately

controversies over property rights. Does a smoker have the

right to fill the air with his or her smoke, or do nonsmokers

have the right to smoke-free air? In other words, who “owns”

the air? A smoking ban effectively gives nonsmoking patrons

the right to the air. By contrast, the laissez-faire approach effec-

tively permits the owner of the establishment to determine the

proper allocation of air rights within his or her space. The

owner may choose to give the rights to smoking patrons (by

permitting smoking), nonsmokers (by banning smoking), or

to try to accommodate both by designating some parts of the

establishment nonsmoking but permitting smoking else-

where within the space.

However owners allocate the right to air among smokers

and nonsmokers, there will be some “winners” whose preferred

policy is adopted and whose happiness is therefore increased,

and some “losers” whose preferred policy is rejected and whose

happiness is therefore diminished. There is thus, as Ronald

Coase explained, an unavoidable reciprocal harm inherent in

any allocation of the right to the indoor air at issue. Adoption

of a smoking-permitted policy harms nonsmokers, but adop-

tion of a no-smoking policy harms smokers.

In light of this unavoidable, reciprocal harm, social welfare

would be maximized if smoking policies were set to favor the

group whose total happiness would be most enhanced by

implementation of its favored policy. So, if smoking cus-

tomers value the right to smoke in a particular place more

than nonsmoking customers value the right to be free from

such smoke, that place should allow smoking. Conversely, if

nonsmoking patrons value an establishment’s clean air more

than smoking patrons value the right to light up, the estab-

lishment should ban smoking.

It should thus be clear why a laissez-faire approach of per-

mitting establishment owners to set their own smoking poli-

cies will create more welfare than a ban on smoking in public

places. Under the laissez-faire approach, a business owner,

seeking to maximize his or her profits, will set the establish-

ment’s smoking policy to accommodate the patrons who most

value their preferred policy (and thus are most willing to pay

a premium to be in the proprietor’s space). This will result in

a variety of smoking policies at different establishments, as

business owners respond to the preferences of their customers.

Under a smoking ban, by contrast, business owners are

not permitted to cater to smoking patrons’ demands even

when those patrons value the right to smoke more than non-

smoking patrons (and employees) value the right to be free

from smoke. A smoking ban, then, is less likely to maximize

social welfare than a laissez-faire approach, which ensures

that the right to any particular public place’s air is allocated

to the group that values it most.

CONCLUSION

Government-imposed smoking bans are unwise. Considered

closely, the arguments used to justify them falter. The exter-

nality argument fails because indoor smoking creates, at worst,

a pecuniary externality that will be mitigated by the price

mechanism. Preference-shaping arguments are weak because

heavy-handed government restrictions create a substantial

risk of “norm backlash.” Risk-based arguments are insufficient

because the slight risks associated with ets cannot justify the

substantial privacy intrusion occasioned by sweeping smok-

ing bans. In the end, a laissez-faire policy that would permit

private business owners to tailor their own smoking policies

according to the demands of their patrons is most likely to

maximize social welfare by providing an optimal allocation of

both smoking and smoke-free establishments.

40 REGULATION WINTER 2006–2007

■

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A Little Known Aspect of Public Health in

Germany, 1933–45,” by Robert N. Proctor.

British Medical Journal, Vol. 313 (1996).

■

“Concentrations of Nicotine and Tobacco

Smoke in Public Places,” by W. C. Hinds and

M. W. First. New England Journal of Medicine,

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■

“Environmental Tobacco Smoke and

Tobacco-Related Mortality in a Prospective

Study of Californians, 1960-98,” by James E.

Enstrom and Geoffrey C. Kabat. British

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■

“Gentle Nudges vs. Hard Shoves: Solving the

Sticky Norms Problem,” by Dan M. Kahan.

University of Chicago Law Review, Vol. 67 (2000).

■

“The Health Care Costs of Smoking,” by

Jan J. Barendregt et al. New England Journal of

Medicine, Vol. 337 (1997).

■

“Willingness to Pay vs. Willingness to

Accept: Legal and Economic Implications,”

by Elizabeth Hoffman and Matthew L.

Spitzer. Washington University Law Quarterly,

Vol. 71 (1993).

Readings

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