With the recent release of the very entertaining “Thank You for Smoking,” we are again faced with a decades-old question: Should cigarette companies be held legally responsible for the negative health effects of their products?
Many liberals would probably say something like, “The companies should be liable because they knowingly sell a harmful product and therefore should have to pay for the damage it causes.” Conservatives, on the other hand, would probably say something like, “On the contrary, no one forced these people to smoke cigarettes. They knew smoking posed a health risk and they decided to smoke anyway. Therefore, they alone should be held responsible.”
I think that both of these ways of thinking are wrong. Liberals are wrong because they act as if smoking cigarettes is irrational. The choice to smoke entails both costs and benefits. The benefits include the nicotine high, suppressed appetite and the devil-may-care image. The costs include both production costs (raw materials and labor) and the cost to the smoker’s health in the form of reduced quality and length of life and future medical treatments. Only people for whom the benefits outweigh the costs should smoke.
If this is the case then, are conservatives correct? No, conservatives are wrong because they act as if consumers have full information. Cigarettes have both health costs and manufacturing costs, but only one of these costs is accessible. Consumers know the manufacturing cost of a pack of cigarettes because it is printed on the pack in the form of the price; however, there is no precise indication of the health costs.
This is problematic for the conservative position. If a pack of cigarettes gives me $20 worth of pleasure, and the price of the pack is $5, should I buy the pack? Well, only if the cigarettes do not cause more than $15 worth of damage to my health. But how can I possibly know this? Short of engaging in an extensive empirical study, I can’t.
This is the problem with the conservative position. Because consumers do not know the hidden health cost of cigarettes, they might end up making purchasing decisions they would regret if they knew precisely how harmful cigarettes are.
Now consider the effect of holding cigarette companies legally responsible for the health effects of cigarettes. Under this regime, cigarette companies would have to pay for both the manufacturing of cigarettes and the health damage they cause. This means that the cost of production, and therefore the price, would include the expected health damage as well as the manufacturing cost. This would in turn inform consumers of the true danger of cigarettes and help them make efficient purchasing decisions.
Furthermore, holding cigarette companies liable would also give them efficient incentives to innovate. Absent liability, companies only have incentive to minimize the manufacturing cost of cigarettes because this is the only cost they have to bear. From a policy perspective, though, we would like companies to minimize the total social cost of cigarettes, which includes both health costs and manufacturing costs. Liability forces companies to pay the entire social cost, and therefore gives them incentive to minimize it.
Given this argument, should manufacturers of all potentially dangerous products be held legally responsible for the damages their products cause, or is the cigarette case unique? Cigarettes are unique, because other than the decision of whether to purchase cigarettes, consumers do not have to make choices that effect efficiency. Suppose, however, that this were not the case. Suppose there were a particularly dangerous but pleasurable way to smoke a cigarette. If companies were held solely liable, consumers would have no incentive to avoid smoking cigarettes in this manner. But there is only one way to smoke a cigarette, and so this issue does not arise. However, in the case of, say, gun manufacturer liability, we do have this problem. If gun manufacturers were held strictly liable for gun injuries, consumers would have no incentive to exercise caution when using guns.
In analyzing other product liability cases, then, we should not appeal to fear of corporations, as liberals do, or rely on an imprecise notion of personal responsibility, as conservatives do. We should bear in mind that the efficient legal rule depends on the nature of the product and the incentives it generates for manufacturers and consumers.
Tom Lehman is a senior in Pierson College.