Listener 21 June, 1997.

Keywords Health

New figures released this week indicate that tobacco and alcohol abuse cost the nation far more than hitherto thought. In my report The Social Costs of Tobacco Use and Alcohol Misuse, I estimate that the abuse of licit drugs costs the nation $38.6b(illion) in 1990. Some $22.5b is attributable to the costs of the use of tobacco, while $16.1b arises from the misuse of alcohol.

What do such large numbers mean? There will be many who will quote the totals to indicate that licit drug abuse is major blights on society, and that we should do our best to eliminate the abuse. Others will want to have an understanding of the figures in order to avoid misusing them. Here is a brief introduction: tobacco first because it is easier.

We know active (and passive) smoking is bad for one’s health. All tobacco consumption generates bad effects. But how bad? To answer questions about the costs of tobacco use we have to have a “counterfactual scenario” – that is an alternative situation – for one of the most basic rules of economic analysis is that costs must always be measured relative to some alternative. So suppose we ask what New Zealand would have been like had tobacco never been introduced here, and so there never had been any smoking.
* The population would be bigger, as people lived longer.
* It would be healthier, because smokers are less healthy than non-smokers.
* There would be more production, because smoking worker’s poor health means they take more time off, and their productivity is lower when they are working.
* The health system would not have to treat a variety of illnesses caused by smoking.
* There would be less litter and fewer fires (which also use resources).
* The sums spent on cigarettes and other tobacco products could be used for other purposes. (There is a tricky problem here about what to do about the benefits from smoking tobacco. Because of the addictive nature of tobacco these benefits appear to be small.)

Over the years researchers have measured the costs of the various components. I brought together the estimates of the loss of production, and the resources used for medicine and elsewhere, updated them, filled in some gaps, and added them up. The total costs of lost or diverted resources because of smoking came to $1.2b, or about 1.7 percent of GDP.

This is not the total of the social consequences, because smoking also shortens life and causes poorer quality of life among the living. Can we put a value on that? Public policy has to. If it did not, then it would either ignore the consequences of policy decisions on life, or it would only consider the implications for life and ignore everything else. When roads are designed we could ignore safety and build roads that kill, or we could design them so safe the traffic could not move. In practice we trade off loss of life and injury against the resources needed to prevent accidents. Surveys of New Zealanders show us willing to spend about $2 million to preventing a traffic accident that would end a life 35 years early. This figure, equivalent to spending $200,000 to prolong life for one year, is used in road design, and is the official “value of life”.

That value can be applied to the delaying death if there had never been smoking. In 1990 there would have been an extra 70,000 people alive had no tobacco been smoked in New Zealand. Since 70,000 times $200,000 equals $14.0b, the `mortality’ effect of tobacco at $14b for 1990. I also allowed for those alive who suffer as a result of smoking: a hacking cough, general ill health, aggravated asthma, emphysema, or endstage cancer. The figure I came up for 1990 was $7.3b. Although subject to a wide margin of error, it indicates the `morbidity’ effects of tobacco are substantial. The total value of the effects of death and illness from tobacco came to $21.3b.

It would be wrong to compare the $21.3b with Gross Domestic Product (GDP) which only measures material output. It is better to compare it with what might be thought of as the total value of life in 1990, which comes to about $630b (the population of 3.15 million times $200,000). Thus tobacco reduces our quality of life and living by about 3.2 percent, as well as reducing material output by 1.7 percent.

The cost of alcohol misuse is based on an alternative counterfactual scenario, since not all alcohol consumption is bad for health. (Moderate drinking can give modest health gains to some people.) So to calculate the social costs of alcohol abuse it was assumed that there is no misuse of alcohol: no excessive drinking, no violence arising from alcohol misuse, no alcoholism, no accidents, no resulting deaths, and so on. The effects listed above of a bigger and happier population and more production, and resources wasted on tobacco broadly apply to alcohol. Although fewer people die from alcohol misuse, they die younger and there are bigger production losses.

The estimated costs in material output terms, either gained (such as from higher work productivity) or avoided being spent (such as on medical care and road accidents) comes to $2.9b, or about 4.0 percent of GDP, in 1990. The population would have been about 30,000 larger, worth $6.0b in 1990. My estimate for the reduction of the quality of life of the living (including suffering non-drinkers) is $7.2b. Thus the mortality and morbidity effects come to $13.2b in 1990, a reduction of 2.0 percent of the total value of life. With material costs the total is $16.1b.

In total then, licit drug abuse reduces the material resources available to us for other purposes by 5.7 percent of GDP, and reduces the measure of human welfare by 5.2 percent. Without the material loss would fund an extra fortnight’s holiday: the population loss is equivalent to another town the size of Dunedin.

The obvious policy implications are that tobacco use is a major cost to society, and should be discouraged. Public policy has been increasingly committed to that goal over the last two decades. Public health specialists talk about the “tobacco epidemic”, insisting that ending smoking is the single best means we have of improving the population’s health. The $21.3b annual social costs of tobacco use support their diagnosis.

The efforts to reduce smoking seem to be paying off in terms of individuals giving up smoking. The just released 1996 census statistics have 609,297 people saying they were regular smokers, compared to 721,116 who said they were regular smokers in 1981 when the question was last asked. Given the population has increased by about 15 percent over the fifteen years and given also that individual smokers are smoking less. Recent policies have had some success. But the young are still starting smoking. Their puffing for a typical 30 odd years before giving it up will impact on the nation’s health, welfare, and medical services through to the middle of next century. The social costs of tobacco use are coming down, but slowly.

A second policy conclusion is that the social cost of alcohol misuse is not much smaller than that of tobacco use. Yet perhaps we have not been as socially committed to dealing with this epidemic. Still, there have been gains in public education and understanding, in the host responsibility program, and the elimination of drink driving. The data tends to suggest that again youth misuse remains severe, although it would be foolish for the oldies to say only the young misuse alcohol. (Where did the young drinker (or smoker) learn bad habits?)

Let me add, although this does not come out of the statistics, that while there are major issues of public policy they are also, in my view, matters of personal responsibility. Smoking parents are not only damaging the growth of their young children through their passive smoking (fatally in the case of some foetuses), but they (and other adults) are setting a bad example for their adolescent children even if later they give up. Unfortunately many are so addicted they cannot give up, but at the very least they need to say to the young “dont make the mistake I did.” Similarly good drinking behaviour will best arise from each of us setting a good example. (And if that involves drinking less than the rate, which maximises brewery profits, so be it. Better the alcoholic beverage producers and vendors who are actively encouraging good drinking habits. In the long run that will do more for their profitability, and the nation’s welfare.)

Other work I have done demonstrates that the smoking epidemic has been much more damaging to the Maori, who tend to smoke more and are more reluctant to give it up. It is especially heartening to see the Maori have in recent years taken personal responsibility to heart and are running their own campaigns.

Especially interesting in any research is the new findings it generates (as well as the old ones it confirms). I was surprised by the size of the morbidity effects of smoking and drinking abuse. They suggest that the destruction of life quality is not insignificant. The quadriplegic from a drunken road accident may be only marginally better off than someone killed; nor should we ignore the battered and traumatised women and children from bouts with drunks.

Another surprise was that while data does not exist to carry out the same quantitative exercise on the social costs of illicit drugs such as cannabis and narcotics, comparable Australian work suggests that the drug problem we face is tobacco use first, alcohol misuse second, and the illicts a long way behind. That is not always the public perception.

The third surprise, was that while the alcohol gains are a little smaller, and perhaps harder to obtain because the distinction between misuse and sensible use is harder to make, the gains are likely to be much quicker than from the elimination of smoking.
The policy implications of this study, and the many which underpin it, are still being worked upon. At issue is whether we continue with past policies, or whether new initiatives are required. We should not ignore the big gains to the nation’s health, welfare, and economy from cutting out all smoking, and eliminating drinking misuse.

Those who would like greater detail may obtain the report from the Department of Public Health, Wellington School of Medicine, Box 7343, Wellington South, for $15. The study was funded by the Alcohol Advisory Council of New Zealand, the Health Research Council, the Public Health Commission, and the Wellington School of Medicine (none of whom are responsible for the findings).