What is the economic argument for banning smoking in public places?

Many people argue that smoking should be banned because of its obvious negative influence on smoker’s health. On the other hand people who want to smoke argue that it is their own right to smoke if they want and that the state should not encroach on their private lives. In a liberal society that I am very happy to live in, that argument sounds perfectly rational, but when we consider the market failure, and the externality costs, we might see that smokers do not only cause problems to themselves but also to others. Second hand smoke is extremely dangerous.

Market failure is the theory within some allocation of capital in free market that the liberal economy is not paying off society. It is caused when capital is invested for the benefit of one private person or small group but with the loss of society as a whole. This loss can be called externality cost, but it is important to remember that externality cost has a positive effect – it can also mean that society gains because of some private capital allocation.

Now I am going to discuss some of the externality costs with regard to the negative effects. The costs that society needs to sustain because of the tobacco industry. The most important externality is the cost of the health care for the people that have to be hospitalized because of their addiction. The statistics say that in the UK 2.7 billion pounds per year has to be spent by the National Health Service as a direct result of the health problems of smokers.

We also have to add the other externality cost of the smoking industry –second hand smoke. People who are regularly exposed to cigarette smoke can also suffer the same problems which smokers do and may cause similar problems to the Health Service as if they were smokers. Although it is not as easy to measure the amount of expenses caused by second hand smoke.

If we are considering the costs generated by the tobacco industry we have to take into accounts the taxes paid by the tobacco companies, and the taxes paid by the smokers themselves which is £9bn each year. In my opinion this is enough to cover both, the physical externalities (second-hand smoke) and the financial ones (related to the costs of healthcare, sick leave, etc.), which brings me to the conclusion that the further encroachments of the government and actions against the tobacco industry and smoking are against the idea of a liberal state and should be stopped, and banning smoking in all public places is not a good idea, as there should be at least some area were smokers are allowed to smoke. People who do not want to breathe second-hand smoke can just avoid those places.