Illicit Tobacco and Nicotine Markets

UK and Dubai Customs seize 450 metric tons of illicit tobacco. Criminal gangs supplying illegal tobacco in Norfolk, UK. More than 1 million euros of smuggled cigarettes seized by Irish Revenue officials. Danish police arrest seven in raid on smuggling network. UK fake cigarettes: how to tell what’s real.

Malaysia is world’s largest consumer of illegal cigarettes. Malaysian man jailed for trying to smuggle millions of cigarettes into Australia. Australian authorities stub out illegal cigarette market. Policing the illicit trade of tobacco in Australia. Super big data and multi-stage information spatial system estimates of coastal tobacco smuggling in Taiwan. Philippines government cracks down on cigarette smuggling, counterfeiting.

The Western Balkan region is notorious for tobacco smuggling. Time to Quit: Tobacco tax increase and household welfare in Bosnia and Herzegovina.

South African Revenue Service seeks to track illegal cigarettes to their source. Tackling South Africa illegal tobacco trade could bring in 55% of recent tax shortfall.

A decade of cigarette taxation in Bangladesh: Lessons learnt for tobacco control. The myth of Pakistan‘s illicit cigarette trade. Philip Morris Pakistan closes factory due to rising illicit trade.

Menthol cigarette smokers react to Ontario‘s menthol cigarette ban. Ontario is finally ready to bust contraband tobacco. Here’s how Quebec did it. Japan Tobacco wins court protection in Canada over $1.32 billion smoking suit.

Economic determinants of smoking prevalence and regulation in high- to low-income countries: is corporate power the smoking gun?

Hong Kong Customs haul of illicit electronic smoking devices jumps 32% after announcement of ban.

Jordan charges 29 in fake smokes scandal.


The Brexit zombie apocalypse

A hard Brexit would be as bad as they say.

As every Brit knows, on March 29 2019, 109 days from now, the United Kingdom leaves the European Union. (Unless the remaining 27 member countries stop the clock, a well-used Brussels device). What happens if there is No Deal and the UK crashes out with no agreement in place with Brussels on anything? Inconvenience? A reduction in trade until new and better deals are made with say the USA?

Kent Council Council is responsible for the area leading to Dover docks and the Channel Tunnel. They are Tories but have studied the consequences.

A no-deal Brexit could cause major disruption across Kent, with gridlock on the roads around Dover, rubbish not being collected, children unable to take exams and rubbish piling up on streets [….] The registration service for weddings could also be affected and bodies could pile up in morgues because of traffic gridlock, Kent county council warned in an update on no-deal contingency planning.

So it’s more or less the zombie apocalypse, without weddings too. Their nightmare is that as the trucks (queuing for new customs checks at the ports) pile up on the two access highways, the M2 via Canterbury and the M20 via Maidstone, enterprising truck drivers will take to the side roads until these are jammed solid too. I suppose the council could buy electric bikes, so the plucky morgue staff can infiltrate past the stranded German trucks, in the 1940 spirit of Dad’s Army. That doesn’t help the garbage trucks, the hearses, or the wedding limousines though. Apocalypse it is.

What the council is trying to do with these horror stories is to get Whitehall to do some serious contingency planning for a truck rationing scheme that would cut in well before the vehicles reach Kent. What has Whitehall been doing these last two years? The excuse for general drift has been “we are too busy with Brexit”.

Why should the crash-out be so bad? Continue reading “The Brexit zombie apocalypse”

The art bubble

A David Hockney painting has sold for $90m , and it couldn’t happen* to a nicer guy. Actually I have no idea whether Hockney is nice, but he’s certainly an endlessly interesting, provocative artist with whose work I never tire of engaging.

*In fact it didn’t happen to him: I think he’s doing OK, but this sale was by a speculator/collector and it didn’t put this awesome sum into the artist’s pocket.

What, though, does this event mean? Philip Kennicott reflects on the event in WaPo. He explores two questions, one right and interesting (how can a painting be worth so much money?) and the other partly wrong (is it right to spend so much on a painting when there are homeless and all the other real needs?). Continue reading “The art bubble”

Stuff and nonsense

The dematerialisation of growth seems to be on track.

Are we doomed to drown in stuff, or run out of the raw materials to make it? After the midwinter potlatch I was ready for some good fire and brimstone on this well-worn theme. George Monbiot is usually a reliable Savonarola, but I found his latest Christmas diatribe against growth and consumerism disappointing.

Every Friday is a Black Friday, every Christmas a more garish festival of destruction. Among the snow saunas, portable watermelon coolers and smart phones for dogs with which we are urged to fill our lives, my #extremecivilisation prize now goes to the PancakeBot: a 3-D batter printer that allows you to eat the Mona Lisa or the Taj Mahal or your dog’s bottom every morning. In practice, it will clog up your kitchen for a week until you decide you don’t have room for it. For junk like this we’re trashing the living planet, and our own prospects of survival. Everything must go.

Personally, I’d have gone with the Great Pacific Garbage Patch, now twice the size of France. [Update: you can of course follow her on Facebook.] The trouble with anecdotes, however stomach-churning, is that they don’t tell you anything about the trend. Are Monbiot’s ghastly examples typical, or the reflection of the fact that most middle-class people in rich countries already have all the material possessions they need and most of what they want? In that environment, finding affordable presents the recipients will actually like is getting harder and harder, before we finally stop the pointless exercise.

For the trend, we need models and numbers. I’ve already written about solid research by Thomas Wiedmann et al that Monbiot pointed me to, showing that:

1. The material intensity of world GDP has been going down.

2. It is still coupled to GDP, and there is no complete dematerialisation of growth.

So far so so-so. Wiedmann’s data stop in 2009, and he hasn’t updated yet. To fill the gap, Monbiot pointed to a new paper by Australian economist James Ward et al, purporting to show that decoupling of economic growth from material inputs is an illusion. IMHO this is question-begging hothouse orchid-growing; a wearisome takedown below the jump.

To get an idea of what’s been happening recently, I had a go myself with rustic methods. I constructed indices of world consumption for five significant materials (steel, aluminium, copper, cement, paper and board), normalised to 2005, before the financial crisis. Global CO2 emissions from fossil fuels track their production. I couldn’t find world data for construction sand and gravel, so I threw in data for the USA: it’s interesting because these are very cheap and widely available, so consumption cannot be significantly affected anywhere by price or supply constraints. Here’s the result. A pretty chart; spreadsheet with working and data sources here. [Update 5 April: following a suggestion by commenter Nick at John Quiggin’s blog, I’ve added gross shipping tonnage to the charts and spreadsheet.]

This clearly suggests that the partial decoupling established by Wiedmann has got stronger recently. The inflection seems to have happened around 2013.

This is pretty crude, but it tells a clear story. Raw materials only lagged GDP by a little up to five years ago. Since then – and without any global recession – they are running at about half of GDP growth, and only a little faster than population. There is just one outlier in my basket, aluminium, which is still replacing steel as lighter and more durable. We have not yet quite reached Peak Stuff. But the strong dematerialising forces that created the moderation are still at work. It is a reasonable hope that we will pass the peak in the coming decade.

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Timeline of my posts on this topic, changing my mind twice (new information, you see, and no help from the stars of the economics profession):

June 3, 2014

January 14, 2016

February 21, 2016

Long comment on the James Ward paper below the jump.

Continue reading “Stuff and nonsense”

Annals of commerce: product downgrades

Not everything you buy is getting better. Here are a couple of pet peeves:

I. Unfinished cast iron cookware

Cast iron skillets have been popular for decades. Properly seasoned and cared for, they last pretty much forever, are easy to clean, and are especially good at browning meat owing to the Maillard reaction that is catalyzed by iron. They used to be made with two well established technologies. The first is sand casting, and it’s the same way the engine block of your car is made. First, a wood pattern is made in the shape of the desired pan, but larger by about 1/8″ per foot because the pan will shrink as it cools. This pattern is embedded in damp sand in a mold with two parts, removed without disturbing the sand, and molten iron is run into the space it leaves.

The result of this process is a (1) rough casting with a very scrabbly surface of mill scale, ready to machine to the required dimensions and finish (the second technology). Back in the day, the skillet was (2) put on a lathe and  the inside turned to a perfectly flat inner bottom and smooth sides. This removes the hard, sandy layer on top and exposes the cast iron. You can find these pans at garage sales and on Ebay, and if they’re not too old and used, you can still see the spiral track of the lathe tool on the pan.

The skillet you will find today at your hardware store is probably Lodge, a company that used to make its wares correctly, but they have discovered a wonderful way to cut corners: just skip step (2), give the rough casting a coat of black paint, and call it “pre-seasoned”!  Here is what a new skillet made this way looks like.

You might make this smooth trying to get your fried eggs off it with metal spatulas–after a century or so.    Continue reading “Annals of commerce: product downgrades”

One good aspect of the irresponsible, mean-spirited, and regressive tax bill

Overall, the tax bill is terrible for all the obvious reasons. It does have one redeeming aspect: Reducing the tax system’s bias in favor of owner-occupied housing. The mortgage interest deduction and related provisions in the federal tax code unwisely favor home owners over renters, encouraging families to buy more expensive homes–using larger mortgages–than is wise from any economic perspective.

Reducing this bias by capping the mortgage interest deduction and enlarging the standard deduction is good policy. Maybe this is the only good aspect of this dog’s breakfast of a regressive and irresponsible bill.

Democrats should junk virtually everything in this tax bill if they take over the federal government in January 2021. They should keep these two provisions–even if Republicans enacted them in a mean-spirited effort to hammer wealthy blue states.

If someone in your life needs help getting their finances in order…

Our index card book may be helpful to young people starting out. it may also be helpful to others buying a first home, and to others trying to get the basic essentials right while avoiding bad mistakes such as trying to beat the market or day trade. It’s about ten bucks. We think it’s useful.

Continue reading “If someone in your life needs help getting their finances in order…”

Enforcing laws against interstate tobacco smuggling

Cigarette taxes protect health by reducing smoking.

But tax disparities across states create a multi-billion-dollar annual market in smuggled tobacco products. Current enforcement efforts are inadequate and ill-organized.

As a result, the illicit trade in tobacco products (ITTP) is growing, and the larger the market grows, the harder the problem of controlling it. (That’s the usual positive feedback problem in violation rates due to enforcement swamping.) So inaction now has long-lasting costs.

Tax equalization would solve the problem, but isn’t likely to happen. Feasible changes in enforcement strategy could protect health and revenue while reducing crime.

Further thoughts on this from Mike DeFeo and me now up on SSRN.

More on Health Policy Considerations

Today’s New York Times has an op-ed piece extolling some of the virtues of the Republican plan for health insurance; one take-away from it (featured by the NYT) is that “5 percent of Americans generate more than 50 percent of health care expenses.”

So what? Before I retired in 2002, my medical expenses were minimal. Since then, however, I have had  a number of medical problems. In other words, the smug feeling I used to have about others who populated the health care system has given way to the reality of (what I should have known, as a statistically savvy person) the difference between cross-sectional and longitudinal analyses. Cross-sectionally, 50 percent is pretty scary, unless you realize that that 50 percent is primarily populated by the likes (and age) of me. Longitudinally, however, the data may show a different story, with perhaps 10 percent of the population never having major problems throughout their life, and have paid (as insurance should) for the difficulties that they luckily never experienced.

The author of the op-ed noted that his 93-year-old father “just received a $50,000 catheter-inserted aortic valve, which was covered by Medicare.” Is he suggesting that his father should have just sucked it up and lived in pain or in a wheelchair for the next few years of his life? Doesn’t he realize that Medicare is just what he recommends, that his father and those like him are using Medicare to “save their own money for just this sort of rainy day,” with the proviso that we may not all need that umbrella? Insurance, whether for cars or homes or health, is meant to spread the risk.

Tom Schelling’s monument

This Monday the friends, colleagues, family, students, and disciples of Thomas C. Schelling gathered at the Kennedy School to honor his memory. The speakers included his eldest son (Andrew Schelling), the current dean of the school (Doug Elmendorf) two former deans (Graham Allison and David Ellwood), and an academic all-star cast including Mort Halperin, Richard Zeckhauser, and Glenn Loury. Somehow I was also asked to speak.

I didn’t speak from a text, but what follows is a version of what I said, “revised and extended,” just like the Congressional Record.

*****

SCHELLING’S MONUMENT

The dome of St. Paul’s cathedral marks the center of the City of London – a cathedral, and a city, both rebuilt after the Great Fire thanks largely to the energy and genius of Christopher Wren. On the floor directly below the dome appears Wren’s obituary, which concludes: “Si monumentum requiris, circumspice” – “If you’re looking for his monument, look around you.”

Here in the Forum of the Kennedy School, one can say the same thing of Thomas C. Schelling: his monument is all around you. Not the buildings, but the school itself as an institution, the idea it embodies, and all of us and all the others who came together around that idea are Schelling’s monument. The city of Cambridge, among many other cities, also forms part of that monument, since without Schelling’s wisdom about how to avoid nuclear war it might well be a heap of rubble glowing in the dark.

As to the more local monument: Schelling did not re-form the Littauer School of Public Administration into the Kennedy School of Government all by himself. A whole catalogue of giants in that founding generation – Richard Neustadt, Francis Bator, Howard Raiffa, Fred Mosteller, Phil Heymann, and Edith Stokey – helped to start the work. The second and third generations, home-grown or recruited, who carried on the project here and elsewhere, included – in addition to those who have spoken here today – Mark Moore, Mike Spence, Mike O’Hare, Al Carnesale, Ronnie Heifetz, Bob Leone, Michael Nacht, Bill Hogan, Bill Clark, Dutch Leonard, and Ash Carter.

But though Schelling did not act alone, the power of his mind and the force of his personality were indispensable in convoking this community.  To cite my own example among many: as a college senior, I was interrupted on my way to law school by reading “On the Ecology of Micromotives,” which introduced the “tipping” idea with its famous checkerboard model of how residential segregation could emerge, almost inevitably, in a population where everyone prefers integration but no one wants to be part of a small local minority. I went to Holland Hunter, the chair of the Haverford economics department and my mentor, and said “I have to learn how to do that.” Ho chuckled and said, “Well, Schelling teaches at the Kennedy School.” I said, “The where?”  And I’ve never looked back.

Among the giants of his generation, Schelling was foremost in creating the idea of public policy analysis as a discipline of thought, distinct both from public administration and from the social sciences: a pragmatic discipline focused on the question “What course of action, in these circumstances, would best serve the public interest?”

Of course, Schelling wasn’t only a policy analyst: he was a social scientist of towering stature, the sort of person whose Nobel Prize led people to say not “Really?” but “About time!” Others today have mentioned his contribution to the understanding of strategic interaction, and the role his concepts of imperfect self-command and strategic self-management played in starting what became “behavioral economics.” But the Schelling idea that hit me hardest was the tipping model, and the more general principle of paying attention to the importance of positive feedbacks in the choice of problems to work on.

Reading Schelling on micromotives teaches you to avoid the Sisyphean problems – where, once you’ve pushed the stone up the hill, the power of negative feedback will roll that stone right back down over you on the way to its equilibrium – and to choose instead the exciting positive-feedback situations where a nudge might get the stone over the crest and moving of its own accord down to a much better place on the other slope, or the dangerous positive-feedback situations where a little effort in the right place and at the right moment might keep the stone from rolling irretrievably over the brink. All of my work on focused deterrence in law enforcement is the application of that bit of insight; the book that resulted forms part of Tom’s monument.

In the economics course Tom and Francis taught us as first-year MPP students, we learned many important things explicitly: for example, that an obviously pro-consumer ban on surcharges for using credit cards and an obviously anti-consumer ban on discounts for cash are, in fact and in truth, identical policies. That pointed to the general rule: Ignore the label on a policy, and ask instead about its results.

But Tom taught us even more vital things by his example:

  • to use models without being used by them;
  • to see the humor in serious situations, and look for the apparent paradox that might make sense of a situation and point toward a solution;
  • to be prepared, and willing, to be surprised by the way the analysis comes out, or by the way the real-world situation stubbornly refuses to behave as the analysis says it ought to behave; and
  • to embody clear thought in clear speech and clear writing.

Though he never would have put it in these terms, Tom taught us policy analysis not merely as a discipline in the academic sense but as a yoga, an intellectual and moral self-discipline requiring difficult feats of non-attachment: to self-interest, to group interest, to factional loyalty, to received opinion, to one’s own policy prejudices, and – most of all – to the need to have been right in one’s earlier views. No force in the world – not greed, not envy, not party spirit, not even cruelty – does as much damage as the inability to say, without too much discomfort, “I was completely wrong about that; good thing I’m smarter now.”

By his example, Tom also taught us to pursue questions not for their abstract interest but for their practical significance. He was disappointed when I chose to write my dissertation on cannabis policy – where I was convinced I could see the right answer – rather than on cocaine policy, where the stakes were much higher but the right set of policies seemed much harder to find.

That principle led him to choose smoking as the new focus of his attention once his insights about preventing nuclear war had largely been incorporated into the thinking of decision-makers. Tobacco wasn’t a “Schellingesque” problem, ready to fall apart at the touch of a brilliant insight. There is no analogy in tobacco policy to second-strike capacity or focal points or the threat that leaves something to chance. No, Tom chose tobacco simply because it was and is the leading preventable cause of death in the developed world, and a growing problem in the developing world, with tens of millions of lives at stake, and he was convinced that thinking hard about it would help point policy in the right direction.

The same was true of global warming. As Tom freely acknowledged, economic and strategic analysis were only two among the two dozen disciplines needed to address that question. He picked it up not because he saw the answer but because the problem was interesting and hard, and because the consequences of getting it wrong – either ruinously over-investing in fending off what might be a phantom threat, or under-investing and failing to control warming before it becomes self-sustaining, or combining the two errors by adopting expensive but ineffective control policies – might be so disastrous.

In both of those cases, he demonstrated his willingness to follow the analysis where it led, even if it led him away from his old allies. With respect to tobacco, he followed Nietzsche’s advice to “depart from one’s cause when it triumphs.” Having labored mightily to put the health harms of smoking front and center in policy discourse and to break the political power of the tobacco industry, and having helped demonstrate the futility of low-tar-and-nicotine cigarettes as harm-reduction measures, Tom later formed part of a distinct minority willing to speak out against what had become a rigid tobacco-control orthodoxy on behalf of the less dangerous non-combustion forms of nicotine administration, including “vaping.”

On global warming, he started out in the camp of the skeptics: not skeptical about the human contribution to climate change, but somewhat skeptical about what seemed alarmist views of how bad things might get and deeply skeptical both about the capacity of initiatives such as the Kyoto Protocol to control the problem and about the feasibility, constrained by international politics, of mounting the massive coordinated effort that might be required to keep greenhouse-gas levels below what some climate scientists regarded as intolerably dangerous levels.  He hoped that geoengineering approaches and measures to adapt to whatever climate change did occur might reduce the magnitude of the required economic adjustments.

But as the temperature data continued to come in, and as sailboats began to ply the Northwest Passage through waters once utterly ice-locked, Tom parted company with the “Copenhagen Consensus” group and started to call for more vigorous action, on the theory that changes in relative prices – especially if phased in – were likely to be easier adjust to than rising sea levels and shifting and rainfall patterns.

From the outside, it was hard to see the influence Tom Schelling wielded over those of us who followed him, without ever handing out orders. Once, in a conversation with Mark Moore about something Mark wanted me to do or not to do, contrary to my inclination – I can no longer remember the original topic, about which Mark was probably right – I defended my intentions by saying, “Mark, you don’t understand; I always wanted to be Tom Schelling when I grew up.” He replied, “What you don’t understand is that everyone in this building wants to grow up to be Tom Schelling.”

Well, Tom is no longer with us, and neither is that unforgettable smile. So it’s time for the rest of us to grow up and get back to building the monument.

Footnotes

Here’s an earlier tribute to Schelling, from the memorial service at the University of Maryland.

And here are some of his thoughts on climate change and what to do about it.

 

Schelling’s most famous book, and the one most likely to be read 500 years from now, is The Strategy of Conflict.  Micromotives and Macrobehavior is a  similarly stunning achievement, centering around “tipping” phenomena. The best introduction to Schelling’s thought for the non-specialist is probably the collection of essays called Choice and Consequence; the two essays on “self-command” reflect his role in founding behavioral economics.