Smoke ‘Em If You Got ‘Em!

On Thursday, November 13, Lexington City Council added e-cigarettes (commonly known as vapes) to its already existing indoor smoking ban. Heeding to outcries of public health concerns, the City Council extended the idea that we citizens lack the competence and capability to make decisions regarding our health and property. Some are quick to argue the case for public health. To paraphrase a famous Vulcan, the need of fresh air to many is more important than the desire for clouds to a few. There is a host of fallacious arguments and rationale in the passing of this legislature though.

Individuals & Subjective Value

First and foremost, is the idea of the “public” being a singular collective unit; that the loudest voices dictate movement and control. Nothing could be further from the truth. The reality is, the public is made up of individuals. Individuals with their own names, identities, dreams, hopes, desires, needs, and wants. Frequently, these needs and wants overlap. This is how different social groups form. People who find Idea A more important than Idea B huddle together, and vice versa. Even more, these groups are not mutually exclusive. Person A can have 99.9% similar interests as Person B. Statistically speaking, any outlying differences are negligible and these people are one and the same. But because of subjective value, the 0.1% difference that separates Person A from Person B is viewed with different levels of importance. What is a mountain to one may be a mole hill to another.

Subjective value is exactly what you think it is. The value we, as individuals, put on an object, idea, place, etc. is different for every person because of the aforementioned needs and wants. It is completely separated from monetary price. Picture, if you will, a Lamborghini Aventador. Beautiful futuristic, and aerodynamic, styling. More horsepower than a bluegrass pasture. A stunning engineering marvel. The base price of this machine is just under $400,000. That number is objective, though it may change over time due to depreciation. It’s the same price regardless of who approaches it. But what is the VALUE of this vehicle? How much value would a family of five put on this? Considering its very low daily driver usability, the family of five may not put much value on said vehicle (except, maybe to sell it and collect the money for a more appropriate vehicle like a minivan). What about the value placed on it by, say, Bruce Wayne? Being a billionaire with money to spend, Bruce probably places great value on the machine as a means of pleasure and enjoyment. This is subjective value. 

What does this have to do with an e-cig ban? Much like the Lamborghini, people value the presence of e-cigs in businesses differently, as both business owners and customers. The bar owner, in an attempt to appeal to the “smoking” crowd, may find it advantageous to allow e-cigs in their establishment. The profit gain is valued more than any perceived health risks (or the profit gain offsets the health risks). Who might value the absence of e-cigs? What about family practitioners, yoga studios, or other health-oriented businesses? Wouldn’t these places possibly forbid the presence of e-cigs in the building regardless of legislature? That is the subjective value of the business owners. What about the subject value of the consumers? Instead of voting in polls on officials who will often make decisions that do no please everyone, consumers vote a different way: they “vote” as customers, casting dollars instead of ballots. This is why libertarians prefer market action over government action. With government action, there is always a guaranteed loser. And that loser is the minority of an election. In a free market, people are free to pursue their interests because of the presence of multiple businesses, and there is no “one size fits most” model. If there is no such business in place to appeal to a certain demographic, then people are free to start one. The customer benefits by having a demand for a need or want satisfied, which in turn enhances their quality of life. They value the product or service more than they value the money required to obtain it. Bruce Wayne values a Lamborghini in his garage more than he values $400,000 in his bank account, for example. The person(s) who start the business receive monetary gain from the sale of the product or service. This monetary gain enhances the quality of their life because it enhances their economic freedom; they now have the capital means to pursue their own needs and wants. This snowball effect is how capitalism raises the standard of quality for all people involved. This idea has been discussed numerous times by other professionals in the field, and will be mentioned again in later posts of mine.

Property Rights

Whenever a proposed ban is introduced, the word “rights” gets thrown around by a lot of people. In this case, with the e-cig ban, there are three main groups claiming rights infringement:

  1. The rights of the people who use e-cigs
  2. The rights of the people who wish to breathe air that is free of e-cig vapor
  3. The rights of the business owners who are affected by the ban

So who has proper claim to their rights? First, we establish that there are two different kinds of rights: positive rights and negative rights. These have nothing to do with the conventional definitions of positive and negative, or good and bad. Instead, they describe an obligation to action or inaction. A positive right requires action to be made by someone else. In the legal system, these are usually referred to as entitlements. When someone claims a right to food, shelter, or healthcare, this is an example of a positive right. Someone must act to provide the food, shelter, or healthcare. A negative right is the right to inaction; to not be subject to the actions of another person. If I say “I have the right to pursue (blank),” what I am referring to is the pursuit of whatever idea, object, or service I desire. I have the right to make an attempt. No one else has the right to stop me from making an attempting. Dr. Aeon Skoble, professor of philosophy at Bridgewater State University, does a much better job of explaining this concept.

For the e-cig users, they own their e-cigs. That’s their property. As such, they are free to pursue usage of their property. Thus, they’re in the clear. For the non-users, they are free to pursue businesses whose air is free from the vapor. No one has to supply it. Thus, they are in the clear as well. Business owners, like the e-cig owners, are free to pursue whatever they like with their property. If they want, they can allow e-cig usage on their property or forbid it. They, too, are also in the clear. So whose rights trump whose? It ultimately goes to the business owners. They own the property and premises (or rent and use within the binding terms of their lease) while customers are merely passing through. It is no different than someone having rules and guidelines for their personal house. They own the house. They call the shots. The same is true for a business. If a person invites you to their house, and one of the conditions of that visit is that you don’t smoke in the house, yet you light up anyways, what’s going to happen? You’ll be asked to stop, leave, or will be forcibly removed. This logic holds true for businesses. When you go into Kroger, it is implied that you are there to purchase food goods. If you begin throwing produce on the ground and destroying it, what is going to happen? The produce is the product of Kroger. They own it until a customer agrees to pay the desired price. When you destroy that, you destroy property AND potential profit gain. You’ll be asked to leave, if not arrested for property damage. In the case of Lexington’s City Council ruling, business owners are allowed to do whatever they want with their property – EXCEPT allow the usage the e-cigs. This turned the negative right of patrons pursuing cleaner air at a business into a positive right. It dictates that someone else (in this case, business owners) must take action in order to provide the clean air. This infringes on not only the rights of the business owner to provide an e-cig friendly establishment, but also the e-cig users who normally would have entered a business agreement with the aforementioned e-cig friendly business owners.

Enter market action again. All three groups could easily co-exist. If e-cig users value the e-cigs that much, they can “vote with their dollars” at businesses that allow e-cigs or other vapor devices. If non-users value vapor free air that much, they can “vote with their dollars” at businesses that forbid e-cigs. If there is truly a public health concern over e-cigs (like lobbyists claim), then the business that forbid it will thrive and the others will not. That is the flip side of property rights: you are free to do with your property whatever you wish. You are not free from the economic consequences as a result of those decisions.

Unseen Consequences

For my final critique, I’m enlisting the help of Henry Hazlitt. Mr Hazlitt was a prolific figure in Austrian theory economics, contributing to such publications as The Wall Street Journal, Newsweek, and The New York Times, and writing numerous books and articles. His most famous work would have to be Economics In One Lesson. It is a fantastic, short, easy to read book that lays out economic lessons in such a way that anyone, of any discipline, can easily understand. To jump ahead, and offer as a spoiler, I refer to the lesson as suggested by the title, which is:

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

To paraphrase, any economic action has both seen and unseen consequences, for intended and unintended groups. Majority of the time, when a governing body seeks to make a ruling similar to what has transgressed with the Lexington City Council, the elected officials only see the obvious effects and the obvious targets. In this case, the target was business owners and the effect was to appease the demands of the anti e-cig lobby. “Our intent was not to put anyone out of business,” says Vice Mayor Linda Gorton (from the article). While it might be a stretch to say that this will put people out of business, what about unintended consequences though? This is difficult, perhaps even impossible, to measure because it involves what could have been. From the article:

Bill Anderson at Precision Vapor on Southland Drive, said business has been growing. Precision Vapor was the first electronic cigarette store in Lexington when it opened two years ago. Now there are at least a half-dozen stores dedicated solely to electronic nicotine-delivery systems in Fayette County.

Anderson said he hasn’t heard whether e-cigarette stores are exempt under the ban that prohibits smoking in workplaces that are open to the public. But if tobacco stores are exempt, electronic cigarette stores should be as well, he said.

First off, this legislation was passed just last Thursday and already e-cig suppliers are worrying about the future of their businesses. Preliminary assumptions indicate that they should be safe. Emphasis on should. Unintended consequence #1: possible lost sales and/or possible lost businesses in the e-cig industry. This is especially damning considering the emphasis put on small businesses and the “buy local” tendency of Lexington citizens. Feel free to start to a business! Just hope that busybodies don’t find some hidden “hazard” whilst, at the same time, blatantly ignoring the idea of individual choice and autonomy, and that no one is forcing them to use said product (cough like health insurance cough cough).

Aside from the obvious damage done to the local economy and small businesses who would be hurt, all products sold related to e-cigs are subject to the 6% sales tax imposed by Kentucky. Unintended consequence #2: reduced sales tax revenue related to the e-cig industry. I mention this not as an advocate for the sales tax, but as a reminder that the sales tax exists to generate revenue for the government. This is not the first time that legislature conflicts with itself. First, you have a tax that exists to collect revenue. Then a new product is on the market which is subject to this tax. Win for the state, right? Then, because of secondary regulation, that revenue is lost because their regulation cut into the sales of the previously mentioned product. So what do they value more: revenue or the protection of “public health”?

Remember my previous example of a bar owner who might benefit by catering to e-cig users? The sales tax example expands even further. There is a sizable “I smoke when I drink” crowd out there. If that demographic is negatively affected, then we come to unintended consequence #3: reduced profits for the bars, and unintended consequence #4: reduced alcohol tax revenue. Wash, rinse, and repeat of my previous statements about small businesses being harmed since nearly all bars are small businesses. The bar example has a particularly interesting domino effect so I’ll illustrate a scenario:

Diane owns a bar in downtown Lexington. It’s quite the hot spot. She opened her doors after Lexington’s first smoking ban. Diane is also an e-cig/vape enthusiast. She regularly hosts meetings for other enthusiasts and is happy to allow e-cigs in her establishment. Essentially, she has created a niche market. In addition, her bar operates under the concept of “no crap on tap.” Twenty beers are on tap and all are of exquisite quality in the craft beer world. Even better, half of which are local brews; West 6th, Country Boy, Blue Stallion, etc. This bar is a haven for locavores. Now it’s safe to say that Diane will retain a large chunk of loyal customers. after the e-cig ban, but here is what is unknown –

  • How many customers will she lose because of the e-cig ban?
  • How much will the customer loss translate to profit loss?
  • Will the profit loss affect what she can keep on tap?
  • If so, will this affect how much she buys and keeps on hand? Thus, affecting sales with West 6th, Country Boy, Blue Stallion, etc.
  • Imagine there are ten more bars just like Diane’s. How much will this affect West 6th, Country Boy, Blue Stallion, etc. as businesses?

I understand what you’re thinking. Braaaaaad…. You don’t know any of this for fact. I never claimed to, but that doesn’t rule out these possibilities from ever happening. That’s the point that Henry Hazlitt was trying to make. Every economic decision… Every policy… Every move in the market has seen and unseen consequences. It creates a ripple effect. When businesses act, they act with caution because every step made has to be met with customer approval. Losing customers means you lose profits. Losing profits means you shut down if you can’t recover and/or adjust. Politicians do not act with such caution. To politicians, “getting stuff done” is what earns you votes. Gone are the days of government protecting your property and rights. People have realized that you can use government force to get what you want; possibly even affecting the market in such a way that benefits you financially. I cannot say with certain who benefited from Thursday’s ruling, but it wasn’t the citizens of Lexington.

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