3. Types of Smoking Costs The economist's definition of cost uses the concept of opportunity cost-the value of the resource in its best alternative use. The total costs of smoking to the community as a whole (social costs) can be split up into the costs borne by the smokers themselves (private costs) and the costs borne by the rest of the community (external costs). Thus: Social cost = private cost + external cost Total costs can also be divided into tangible costs (resource costs) and intangible costs (for example, pain, suffering and loss of life). In examining the total costs of smoking the concept of marginal cost should be utilised. This is the change in total community costs attributable to smoking, taking into account both increases and decreases. It is important to distinguish between real costs and pecuniary costs. Real costs represent a subtraction from community welfare. Pecuniary costs borne by some people are exactly matched by pecuniary benefits received by others, so that there is no change in total community welfare. There has, however, been a redistribution of that welfare. To count both real and pecuniary costs would involve double counting. Budgetary costs are the costs of smoking which are borne by the government sector. They may be real or pecuniary. The economist's definition of cost is based on the concept of an alternative use for scarce resources, known as opportunity cost. Opportunity cost is the benefit which would be derived from the best alternative use of a particular resource. For example, the alternative use of land which is currently used for growing tobacco is the next most valuable crop which could be produced on that land. In the unlikely event that there were absolutely no alternative use for the land, its opportunity cost would be zero. If there exist alternative crops, the most valuable of these will represent the opportunity cost of the land. It is important to clarify various other cost concepts. Perhaps the most important of these are private and social costs. It is generally recognised that the total costs of abuse include private costs and external costs. If the costs of smoking are knowingly and freely borne by the smokers, they constitute private costs, but if they fall on the rest of society they are referred to as external costs. In the conventional terminology, the social costs of smoking to the community as a whole (both smokers and non-smokers) consist of the costs borne by smokers (private costs) and the costs borne by the rest of the community (external costs). Thus: Social costs = private costs + external costs In estimating the costs of drug abuse, other types of costs which require definition include tangibles and intangibles. Tangible costs can be defined as those costs which, when reduced, yield resources which are then available to the community for consumption or investment purposes. For example, if public health care costs are reduced, resources become available for governments to spend elsewhere. Intangible costs, which include pain, suffering and loss of life, when reduced or eliminated do not yield resources available for other uses. Much of the efforts of the health care system are focussed on the reduction of these intangible costs, so it is apparent that they are considered to be very important by public policy makers, even though they are often difficult to quantify. Also important is the concept of marginal cost, which is the increase in total cost attributable to tobacco use after allowing for the costs which would have otherwise been incurred in the absence of smoking. In other words, this is a net cost concept. For example, in costing health care, net costs include both actual health care costs and potential savings. The health care costs which are attributable to smoking should be set against the saving in health care costs which have resulted from the premature deaths of smokers. Had the smokers not died from smoking-related causes they would in many cases still be alive, suffering from other diseases and so imposing health care costs on the community. If abusers were not sick from smoking-related causes they would, in many cases, be sick from other causes. However, available evidence suggests that these "savings" in health care costs are substantially outweighed by the health costs attributable to smokers. Another important distinction is between real and pecuniary costs. Real costs represent a subtraction from the community's welfare. Pecuniary costs represent costs borne by some individuals which are entirely offset by gains accruing to other people, so that there are no net costs (or benefits) to society as a whole. For example, smoking generates considerable tax revenues for governments. However, these revenues do not represent the creation of resources for the community as a whole. They merely represent a redistribution of resources from smokers to the rest of the community. Failure to distinguish between real and pecuniary costs can lead to double-counting of costs. Consider the example of a worker who, as the result of a smoking-caused illness, is forced to stop work, receiving instead a sickness pension from the state. Industry has lost the value of the worker's production and, at the same time, the cost of the government's welfare bill has increased. The real cost is the loss of production. To count both production losses and increased welfare costs would involve double-counting of costs. Finally, the concept of budgetary costs should be clarified. These are costs borne by government, which are therefore a charge against the public purse. Whether they are pecuniary or real costs depends upon their particular circumstances. The welfare costs in the example immediately above are pecuniary costs. On the other hand, if the smoker in this example had required treatment in a public hospital, the resultant public expenditure would have represented a real cost.