Health Economics Letter
ESTIMATING THE BENEFITS OF PUBLIC HEALTH POLICIES THAT REDUCE HARMFUL CONSUMPTION
Article first published online: 25 FEB 2014
Published 2014. This article is a U.S. Government work and is in the public domain in the USA.
How to Cite
Ashley, E. M., Nardinelli, C. and Lavaty, R. A. (2014), ESTIMATING THE BENEFITS OF PUBLIC HEALTH POLICIES THAT REDUCE HARMFUL CONSUMPTION. Health Econ.. doi: 10.1002/hec.3040
- Article first published online: 25 FEB 2014
- Manuscript Accepted: 20 JAN 2014
- Manuscript Revised: 6 JAN 2014
- Manuscript Received: 22 MAY 2013
- consumer welfare;
- cost-benefit analysis;
- policy intervention;
- time inconsistency
For products such as tobacco and junk food, where policy interventions are often designed to decrease consumption, affected consumers gain utility from improvements in lifetime health and longevity but also lose utility associated with the activity of consuming the product. In the case of anti-smoking policies, even though published estimates of gross health and longevity benefits are up to 900 times higher than the net consumer benefits suggested by a more direct willingness-to-pay estimation approach, there is little recognition in the cost-benefit and cost-effectiveness literature that gross estimates will overstate intrapersonal welfare improvements when utility losses are not netted out. This paper presents a general framework for analyzing policies that are designed to reduce inefficiently high consumption and provides a rule of thumb for the relationship between net and gross consumer welfare effects: where there exists a plausible estimate of the tax that would allow consumers to fully internalize health costs, the ratio of the tax to the per-unit long-term cost can provide an upper bound on the ratio of net to gross benefits. Published 2014. This article is a U.S. Government work and is in the public domain in the USA.