There's Probably More Than One Road to Serfdom

Four days of R&R gave me time nearly to finish Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming by Naomi Oreskes and Erick M. Conway. I was prompted to read it by this book review in the June 17 Economist and by some previous work I have done that required me to investigate documents contained in the Legacy Tobacco Documents Library, particularly as they related to US tobacco farmers.

I will confess that I came to tobacco research with a pretty open attitude regarding consumer sovereignty. I assumed (this was around 2004) that everyone who smoked understood that they were elevating their risk for lung and other cancers and cardio-vascular disease; that they had evaluated the trade offs and had made a fully-informed, rational decision to smoke. One study, done before the link between second hand smoke and negative health outcomes among "innocent bystanders" had been established, found that most of smoking's costs fell on the smoker, that smokers imposed few costs on non-smokers, mainly because smokers tended to die old enough to be on the downside of their productive output, but young enough to pay into things like Social Security, but not collect from them. I'm embarrassed to say that as an economist, I found a certain efficient beauty in this. However, as a person with mild allergic reactions to cigarette smoke, I wasn't convinced that all the externalities were adequately internalized.

It didn't take long to recognize how naive I was. It seemed reasonable to assume that all smokers were fully informed about the contents and risks of the product they were consuming. The link to lung cancer had been pretty well established since the mid 1950's (see here and here, for example). Then I read David Kessler's book, A Question of Intent: A Great American Battle with a Deadly Industry . Imagine my shock (yes, really) when I discovered that tobacco manufacturers had lied about the risks of smoking, deliberately attempted to cast doubt on consistent scientific findings of those risks, added substances to cigarettes that were designed to increase nicotine delivery and thereby addiction, understood that they were marketing an addictive substance, and were deliberately attempting to recruit younger people to smoke.(For a good review of tobacco industry documents pertaining to marketing and pricing strategies, see this article.)

Issues of consumer sovereignty and "personal freedom" become more difficult when information provided by a manufacturer about the potential harms associated with consumption of a good is intentionally distorted or when the good is addictive. Marketing an addictive substance to youth (who are notoriously myopic when it comes to evaluating potential future (bad) states of the world) surely deserves a special place in hell, yes? 

Talk about roads to serfdom.

The Oreskes and Conway book provides even more detail about the concerted efforts by tobacco companies to distort and obscure (in self-serving ways) information about health risks in order to maintain profits. Tobacco companies obscured risk primarily by exploiting the uncertainty inherent in population-based statistics when applied to individual outcomes. What do I mean by this? Let me give you a real world example.

Several years ago, a friend was diagnosed with cancer. His oncologist (at a leading medical center always at the top of the US News and World Report rankings) announced that my friend needed to know his "odds of survival." My friend, trained in biostatistics and epidemiology, interjected that there was virtually no individually relevant information in his "odds of survival" because the odds ratio is a population statistic. My friend was interested in whether or not he would be alive, say, one year from the time the conversation was taking place. He was not interested in how many out of 100 people with exactly the same type of cancer he had would be alive at the end of the year. He knew that his individual probability of survival was either zero or one (dead or alive). The population statistic told him nothing about his individual probability of survival.

The doc gave my friend very low (population) odds of survival. Eight years later, my friend is still disease free. You see the point? Population statistics do not perfectly predict anything about a single individual. Tobacco companies used this feature of population statistics to cast doubt on a causal link between smoking and lung cancer.

Practically speaking, risk that is elevated in combination with the lethality of most smoking-induced lung cancers represents the potential for significant individual harm. Most rational, risk-averse individuals, if given the correct information, would probably opt to avoid the elevation in risk. Correct estimates of the population odds can be very informative when making decisions about engaging in risky behavior prior to exposure.

Intentionally distorting information about risk seems like a road to worse than serfdom for those expected to make rational decisions based on the information.

Commercial exchange in transparent markets usually results in benefits to all parties. It is something every society should desire. However, tobacco is almost certainly an exception to this. I won't dispute Angus Deaton's point that smokers may well benefit in ways that offset (for them) their increased risk of a shorter life. I also agree that it is preferred, all else equal, that the individual be free to make such decisions. But, therein lies the rub, IMHO. The liberty of tobacco manufacturers, the liberty of smokers, and the liberty of people with asthma for whom tobacco smoke can be life threatening in more immediate ways than aggressive carcinomas all matter. There is almost certainly no way to assure unfettered, unprincipled liberty to all of these actors at all times.

Oreskes and Conway quote Isaiah Berlin: "Liberty for wolves means death to lambs." In their book, it's pretty clear that money and power directed by self-interest have worked overtime to confuse issues of risk and health with issues of freedom, liberty, and personal choice. Such efforts will almost assuredly give the "wolves" an advantage in any discussion about the merits of regulation. It's not unlike discussions about financial reform and regulation, consumer financial product protections, or corporate "free speech."  

Liberty (or consumer sovereignty, which seems often to be the sole embodiment of liberty in some discourse) is not so straightforward. Am I free and sovereign if I'm acting on manipulated, distorted information provided by the manufacturer of a (harmful) good?  Am I free and sovereign to impose costs on my neighbors, my community, and my nation by failing to purchase health insurance or by repealing health reform, and then expecting to be treated, at the expense of taxpayers or individuals who did purchase health insurance, when I show up at the emergency department? To what extent do ethical constraints restrict liberty and do such restrictions represent a loss of freedom or a gain? If individuals and corporations have a right to free political speech, do they also have ethical obligations or may they simply pursue single-minded, self-interested ends with little regard for the long-term consequences to the rest of us? What does profit represent? Is it a return to the ability to dupe amateurs or is it a return to the ability to provide expert information about a product and to help amateurs to identify the product that best fits their preferences, their budget constraint, and their long-term goals?

The last is the commercial exchange that I grew up with. It did not require regulation. We understood that we were the experts and that our expertise was why our customers were paying us a mark up above costs: not to dupe them, but to help them achieve that maximum of utility our economics textbooks extol.

The above are all questions that we as a society, as a nation, and as a discipline must start to ask and to answer (in more than the 25 word sound bites that play well at MSNBC and Fox news). Economics and economists understand better than most the impossibility of a Paretian liberal. We as a discipline must advance this dialogue in ways that move us ahead in resolving the necessary conflicts of a society that values individual freedom and choice, the social benefits of efficient allocations and prices, and some necessary, yet to be determined, level of collective well-being that enhances those same freedoms, choices, and efficiencies.

Comments

[steve]

I think I should read your blog more often. My working thesis is that something in our economy changed in the 1980s. I am not sure what that something or somethings was, but it seems that morality, perhaps as a function of sheer size is part of the answer.

Steve

[marcel]

I love the RSA cartoon, never saw it before, thanks. In re your friend with cancer, SJGould wrote a wonderful piece decades ago about statistics and his (1st) experience with a deadly cancer. I suspect your friend is aware of it, but you may enjoy it:

http://www.cancerguide.org/median_not_msg.html

[Maxine Udall (girl economist)]

Thanks for the link, Marcel. I had not seen it.