– September 20, 2019
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Vapiing Regulation

Vaping is making people sick, and doctors aren’t sure why. A mysterious condition apparently linked to both nicotine- and THC-based e-cigarettes has killed seven people and hospitalized several hundred since July. These incidents come amidst controversy over the appeal to minors of flavored nicotine devices such as Juul.

Since I criticized the FDA’s grandstanding on the matter last year, local and state governments have begun taking action. San Francisco banned the sale of e-cigarettes this summer, before the panic over the unexplained illness erupted. This week, New York State enacted a rather incoherent half-measure, banning the sale of e-cigarettes with flavors other than tobacco and menthol.

In today’s rapid-fire online debates, free-market advocates sometimes respond by decrying the public panic and touting the virtues of the product at hand. To be sure, e-cigarettes give smokers an option healthier than their old habit, while politicians and the media have been quick to stoke fears of the mystery illness for votes and ratings.

The more important point isn’t about vaping; it’s about bans themselves. Government bans are costly to enforce, carry unintended economic consequences, stifle innovation, provide powerful incumbent business interests with the means to manipulate government power, and prevent us from developing more robust and less intrusive methods to improve public health.

Costs of Prohibition

Governments of relatively free countries have a virtually winless record when trying to eradicate things that their citizens want. Prohibition failed. The war on drugs has resulted in a decades-long quagmire. In places where gambling is illegal, people gamble. We must therefore remember that banning vaping does not mean eliminating it–not even close. The market for THC-based products is just beginning to emerge from the shadows, and the black market will be happy to pick up the slack for nicotine devices too.

Enforcement costs taxpayer money and too often the freedom of regular people with no malicious intent. They also shut down entrepreneurs in an innovative new industry. A spokesperson for the industry in New York predicted that every single vape shop in the state, mostly family-owned small businesses, would be shuttered within a month of the ban taking effect.

Killing Tomorrow’s Innovation Today

Fear of the unknown often leads to overregulation, but such measures are particularly damaging as new technologies evolve in the marketplace. A decade ago few would have imagined the existence, let alone the popularity of vaping. If allowed to develop, products a decade from now will be healthier and higher-quality in ways we can’t foresee.

Such innovation happens when large numbers of entrepreneurs and consumers transact, bargain, experiment, fail, and ultimately succeed. Arbitrary bans on product attributes such as fruity flavors in the case of vaping block many of the paths this process of innovation can take. The power of decentralized markets to inform, allocate, innovate, and evolve is likely the single greatest contributor to growing prosperity in recent human history. We should approach interventions that interfere with this process, even those that seem small today, with great caution.

Rent-Seeking Behind the Counter

When I first wrote about the vaping controversy last year, I noted that alongside e-cigarettes, the typical convenience store sells items like tobacco, alcohol, and junk food:

In 2017, the alcohol, food and beverage, and tobacco industries each spent over $20 million on lobbying. It’s hard to get an exact number for e-cigs, but Juul, said to control a whopping 70 percent of the industry, spent a much smaller $450,000.

Based on data from recent years, it’s likely that excessive alcohol consumption killed over 20,000 Americans in the past three months while smoking killed over 150,000. As far as we know, vaping killed seven people during that period.

We must judge government regulations based on outcomes rather than intent. Virtually without fail, regulation allows more powerful interests to gain an advantage over less-powerful ones. This isn’t the result of a few bad apples that can be rooted out, it is an inescapable consequence of larger and more established businesses having greater access to officials.

A War on Bans

All of these problems with government bans do not necessarily mean we as a society should ignore issues of public health. Like so many other issues we face, debates over direct government action preoccupy us and prevent conversations and bottom-up action that is less intrusive and likely more effective in our modern world.

People can both receive and convey information with volume and speed unimaginable through most of human history. When something goes wrong with a product on the market, the assumption that government must be the primary actor would be quaint were it not so destructive.

Deaths and illnesses from vaping in the past few months are tragic and should not be minimized or ignored. But by the numbers, there are multiple public health crises greater by orders of magnitude unfolding behind the counter at any 7-11.

What if we let our response to vaping be a laboratory for new ways to think about these types of problems? What if instead of debating government bans, we explored new ways to inform consumers and discipline makers of dangerous products? All too often, alternatives to government bans are difficult to name offhand not because they don’t exist but because we haven’t asked. Perhaps this is our opportunity to do better.

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Max Gulker

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Max Gulker is an economist and writer who joined AIER in 2015. His research focuses on two main areas: policy and technology. On the policy side, Gulker looks at how issues like poverty and access to education can be addressed with voluntary, decentralized approaches that don’t interfere with free markets. On technology, Gulker is interested in emerging fields like blockchain and cryptocurrencies, competitive issues raised by tech giants such as Facebook and Google, and the sharing economy. Gulker frequently appears at conferences, on podcasts, and on television. Gulker holds a PhD in economics from Stanford University and a BA in economics from the University of Michigan. Prior to AIER, Max spent time in the private sector, consulting with large technology and financial firms on antitrust and other litigation. Follow @maxgAIER.
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