 7. Estimating the Social Costs of Smoking There are two broad approaches to estimating the social costs of smoking-the human capital and demographic methods. The two approaches are complementary rather than competitive since they present the cost information in different ways. Both rely upon knowledge about the causal links between tobacco consumption, on the one hand, and mortality and morbidity, on the other. If these physical links can be quantified it is usually possible to estimate the relevant smoking costs. A considerable amount of such epidemiological information exists, although it very largely has been produced for developed rather than developing countries. Smoking cost studies also draw on such information as national accounts data, and budgetary and workforce statistics. It should be possible to produce smoking cost estimates for most developing nations. The preceding sections of this report have identified the types of social cost associated with smoking. How might the social costs of smoking be estimated? These issues are dealt with in substantial depth in a publication of the Canadian Centre on Substance Abuse (see CCSA, 1995), two of whose authors wrote the present document. Part of the ensuing discussion is closely related to the CCSA work. Two significant issues are considered here:
Two broad approaches have been adopted to the estimation of the costs of substance use in general, and of tobacco use in particular-the widely adopted "human capital" approach and the more recent "demographic" approach. Both approaches relate to the valuation of the loss of production arising from the tobacco-related deaths of otherwise productive members of society. Both approaches compare production and abuse costs in the actual situation with those in a hypothetical alternative situation which would have existed had there been no past or present tobacco abuse. The difference between the two approaches relates to the way in which the production costs of premature mortality are treated. The human capital approach is to estimate the value of the worker's future production stream, brought back to present day values by the use of an appropriate discount rate. A thousand dollars received this year is worth more than a thousand dollars received next year (even if there is no inflation) because this year's resources become available for investment purposes a year earlier and so produce interest receipts or profits a year earlier. The use of a discount rate acknowledges this fact and adjusts for the difference between present and future values. Two major problems arise in the human capital approach-how to forecast future production levels and how to choose the appropriate discount rate. The demographic approach compares the actual population size and structure with the size and structure of a hypothetical alternative non-smoking population. From this comparison the actual and hypothetical outputs are compared to yield the production costs in that year of past and present tobacco use. The major problem in this approach is the estimation of the alternative population structure. The essential difference between the two approaches can be summarised in the following way. The human capital approach calculates the present and future production costs of smoking-induced deaths which occur in the present year. The demographic approach calculates the present production costs of smoking-induced deaths which have occurred in past and present years. Which approach should be adopted depends, therefore, upon which type of information is needed. The two approaches are complementary rather than competitive. In order to be able to produce estimates of the social costs of smoking it is necessary to identify two types of information, relating to: Information on causality is in large part epidemiological-identifying and quantifying the causal relationships between tobacco consumption, on the one hand, and mortality and morbidity, on the other. This causal information is, however, not confined to epidemiology. For example, the relationship between tobacco use and workplace productivity is a matter for several related disciplines, including industrial relations. The quantification of abuse costs relies upon the prior quantification of the causal relationships discussed above. If causal relationships can be identified and quantified, the costs of drug abuse can almost always be estimated (although with varying degrees of accuracy). A very considerable amount of information exists about the effects on mortality and morbidity of smoking. For example, Peto, Lopez et al (1994) have produced a comprehensive survey of smoking-attributable mortality in developed countries. Many developed countries have studied attribution factors (that is, the extent to which the incidence of particular diseases can be attributed to smoking) in great detail. In Australia, for example, English, Holman et al (1995) have estimated smoking attribution factors for all conditions for which they were able to identify quantifiable relationships with smoking. The list in Table 1 is impressive. The attributable fractions in relation to tobacco consumption are almost all positive. In other words, there are only very minor protective effects of tobacco consumption. The consumption of tobacco, even at low levels, appears to be damaging to health. Unfortunately, few developing countries have produced comprehensive epidemiological surveys, which require detailed literature reviews for each condition potentially associated with smoking. Attributable factors relevant to one country may not may not always be transferable. In every country that has been able to comprehensively study the relationship between smoking and ill health, the results have shown that tobacco is a significant cause of premature death and disease. No race or culture has proven to be immune to the deleterious effects of tobacco use. Causes of Mortality and Morbidity Associated with the Consumption of Tobacco * indicates negative association Source: English, Holman et al (1995) Once the causal relationships have been established and quantified, the assignment of tangible costs is relatively straightforward. The major types of information used here are: The quality of data will inevitably vary from country to country but reasonable tangible cost estimates should be feasible for any country once the background epidemiological information has been established. Valuing the intangible costs of pain, suffering, bereavement and loss of life is more difficult than for tangible costs but reference to studies for developed countries should provide the basis for reasonable estimates. |