externalities, smoking, and the DMCA

Responding to Joe Gregorio : Joe, I don’t think giving tobacco companies a “safe harbor” is realistic in this case. People will still smoke. A better approach may be to tax the companies producing cigarettes. Cigarettes have a very inelastic demand so the companies should be able to push most of those costs onto the consumers. If the tax is set at an optimal level (that’s the difficult question to answer), it should somewhat reduce the amount of cigarettes consumed and not stimulate much of a black market. The government can then use that money to improve access to merit goods and education related to cigarette consumption. Essentially, the idea would be to raise the marginal social costs of cigarettes and use that money to close the gap (i.e. reduce the externa...