A Tale of Two Lungs and One Bad Decision

Vapes were once marketed to help smokers wean off their habit and were seen as a “healthier” alternative, according to the NHS (2023). However, recently there has been a more accessible and appealing type of vape - disposable ones. The affordability, colourful packaging, and abundance of flavours kindle memories of being in a sweet shop as a child. It's not difficult to see why younger audiences would be attracted to consuming such a good. Among 18–24 year olds, 57% of e-cigarette consumers use disposable vapes (Action on Smoking and Health, 2023). Alarmingly, this rises to 69% for ages 11-17 (Mediaofficer, 2024). The UK government has proposed banning the use of them completely by April 2025, but is this the best decision? It’s a question that ignites curiosity amongst many, and economists may have the answer.

The Problem with Vapes

The long-term health effects are unknown, and cases of ‘popcorn lungs’ have risen due to high nicotine concentrations, raising questions about the risks associated with vaping. This is where ‘internalities’ come into play. Economists describe this as a cost imposed on the consumer that is not considered during consumption; in this case their health (Reimer & Houmanfar, 2017).

Not only does vaping harm those consuming them, but also the rest of society. This is known as a “negative consumption externality,” whereby individuals not involved in the purchase of the goods are negatively impacted. When these externalities exist, we arise at a situation known as market failure, where the market fails to reach a resourceful outcome.

Vaping causes a number of negative externalities; second-hand smoke poses health risks to others and has health impacts on consumers, causing increased strains on NHS services, which further burdens the taxpayer. Finally, vapes release toxins into the environment, and with only 17% of disposable vapes being recycled, it is evident how vapes affect society as a whole (King, 2023). This is no surprise to economists since negative externalities depend on the existence of public goods - a good where your consumption doesn’t diminish another’s and that everyone has access to - in this case, the air that we breathe.

It’s easy to overlook the consequences of our vaping habits - it's a reality we currently face. Figure 1 demonstrates how economists depict this externality. The total cost society and individual firms face from producing one extra vape is the same (where marginal private cost equates to marginal social cost). However, consuming one extra vape awards consumers higher benefits than society (the marginal private benefit exceeds the marginal social benefit), demonstrating a failure for the market to meet societal needs (IMF, 2017). This means that current consumption is at point ‘A’, where only private benefits are considered. However, society would prefer to be at point ‘C’ where societal benefits are also considered. Without intervention, this destination is out of reach, leading to constant overconsumption due to people falling victim to nicotine addiction.

 Figure 1: a diagram showing the negative externality of consuming disposable vapes in a competitive market structure, depicting overconsumption and the societal optimum point. Source: original.

Is Government Intervention Necessary?

According to the Coase Theorem, the externality can be compensated to the “losers” (the rest of society) without government intervention if property rights are well defined between disposable vape users and non-users. Here is where the problem lies: it is difficult to assign property rights amongst the air we breathe, and it would be impossible to bargain between an innumerable amount of people. Since private solutions fail to address externalities, it is clear why government intervention is needed.

Whilst acknowledging the necessity of government intervention, you may think a ban is excessive. One alternative is for the government to impose a tax on firms, spilling over to consumers as a price increase, in hopes that the usage of vapes will fall.

Yet, economists assume people make logical decisions, which may not hold true for those dealing with addiction. Due to their addictive nature, consumers may be less responsive to a price increase. To make things worse, the government has difficulties measuring the monetary value of externalities, which makes it challenging to implement.

An alternative is informing the public of vaping risks, presumably leading to reduced production and usage. However, as economists assume that firms maximise profits, they are unlikely to dwindle production in light of this information. Ideally, consumers should care about their health enough to respond to these risks. Yet economists affirm that people tend to prioritise present satisfaction over future consequences.

It can be easy to see why the government would introduce such drastic measures by proposing a ban on the sale of them altogether.

Is Government Intervention Effective?

So, as we have discovered, vaping’s negative externality and the irrationality fueled by addiction both seemingly justify government intervention. But is the benefit of a ban really that black-and-white?

One consequence of a ban on disposable vapes is the emergence of black markets, where scarce or illegal goods are traded. As black markets are unregulated, these products are sold without quality assurance, potentially posing worse health risks than before. Counterfeit vapes that were confiscated from a UK school contained dangerously high levels of lead, amongst other toxic chemicals (Watkinson, 2023). It gets worse: black markets, driven by organised crime, often target lower-income communities, escalating economic vulnerabilities and heightening the impact of crime. Policymakers face the daunting task of maintaining a balance between addressing immediate public health concerns and minimising long-term risks.



Another consequence we will see emerge from a ban on vapes is both job losses and profit reductions in a growing industry that could contribute to steady economic growth. In 2021, the vape market reached £1.325 billion, showing a 25% surge over the preceding four years (Griffin, 2022). Not only would this mean thousands of households out of jobs, but it would also reduce tax revenue for the government, increasing the trade-off of the ban.

Considering the complexities surrounding the issue of vaping: balancing public health concerns, market freedoms, and the risk of black-market consequences—what stance do you take in banning disposable vapes?

Bibliography:

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