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Politics & Policy

The Perils of Restricting E-Cigarettes and Nuclear Power

Two papers of interest from the latest batch put out by the National Bureau of Economic Research.

One looks at what happened when Minnesota hiked taxes on e-cigarettes:

That state was the first to impose a tax on e-cigarettes by extending the definition of tobacco products to include e-cigarettes. This tax . . . is 95% of the wholesale price. . . . We assess how this large tax increase impacted smoking cessation among adult smokers. . . . Our results suggest that in the sample period about 32,400 additional adult smokers would have quit smoking in Minnesota in the absence of the tax. If this tax were imposed on a national level about 1.8 million smokers would be deterred from quitting in a ten year period. The taxation of e-cigarettes at the same rate as cigarettes could deter more than 2.75 million smokers nationally from quitting in the same period. The public health benefits of not taxing e-cigarettes, however, must be weighed against effects of this decision on efforts to reduce vaping by youth.

The other checks in on Germany’s decision to shut down half its nuclear capacity after the Fukushima incident:

We find that the lost nuclear electricity production due to the phase-out was replaced primarily by coal-fired production and net electricity imports. The social cost of this shift from nuclear to coal is approximately 12 billion dollars per year. Over 70% of this cost comes from the increased mortality risk associated with exposure to the local air pollution emitted when burning fossil fuels. Even the largest estimates of the reduction in the costs associated with nuclear accident risk and waste disposal due to the phase-out are far smaller than 12 billion dollars.

The common thread: panicking leads to bad policy.

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