Asymmetrical Information - Megan McArdle

03.18.13

Bloomberg to Cigarette Vendors: Out of Sight, Out of Mind

The Mayor says vendors will be forbidden to display the cigarettes they sell. Will this actually work?

Last week, a judge struck down the Bloomberg Administration's attempt to ban sugary drinks sold in larger than 16-ounce sizes.  The administration appears undaunted; they have not only vowed to keep fighting for the right to ban supersized sodas, but also announced that they will compel vendors to put their cigarettes out of sight. Even if you oppose the Mayor's initiatives, you have to kind of admire the undaunted courage.

But what of this latest initiative?  We leave aside the question of legality, because I Am Not a Lawyer; in the interests of blog harmony, we also toss the question of liberty lightly to the winds.  Which leaves us with one remaining question:  will it work?

I doubt it.  This is one of those little nudge-type operations, like changing the placement of dessert in the cafeteria line, that aims at every-so-subtly changing the psychology of smoking.  But speaking as a former smoker, the psychology of smoking is not subtle.  Cigarettes are not like candy bars or celebrity mags; you don't buy them because of a sudden craving triggered by seeing your favorite guilty pleasure right there in front of you in the checkout line.  Cigarettes generate their own cravings, which you walk into the store intending to satiate.  You're going to get your cigarettes whether they're above or below the counter.  

And as nudges go, this one is particularly weak: we're talking about some sort of ultra-indirect effects, like subtly signalling social disapproval.  But we're already not-so-subtly signalling disapproval by making all the smokers huddle outside in a filthy alley to indulge their habit.  The incremental value of hiding their smokes underneath a counter seems slim.  

Moreover, the power of these sorts of nudges may not be quite as powerful as some studies would lead you to expect.  Take 401(k)s.  There was a lot of excitement over the finding that having 401(k)s enroll employees by default, rather than asking them to opt-in, raised enrollment substantially.  But what are we to make of another recent study showing that offering tax-free accounts causes barely any increase in total savings?  Well, one possibility is that tax free savings are simply substitutes for other forms of savings.  In other words, we're not necessarily "nudging" people to save more; we may just be nudging them to switch their savings to 401(k)s from other accounts.  

Or how about calorie labelling?  The logic of calorie labelling is impeccable: if people have more information, they can make better decisions.  You're not keeping people from buying that donut; you're just making sure they know its calorie "cost".  All fine except that when New York actually implemented such a policy (which has substantial costs for the restauranteur), multiple studies found that calorie labelling caused zero decrease in the amount of calories consumed. Indeed, in one study, consumption actually rose slightly.

To be sure, Bloomberg has succeeded in decreasing smoking in New York City since he took office.  It's hard to say how much, because smoking was falling nationwide over that time, and New York itself experienced a significant demographic shift towards younger, wealthier residents who are less likely to smoke.  But I think that there's no question that Bloomberg's policies have had an effect.  

However, it also seems clear that the largest effect came not from "nudges" but from broad, crude measures: banning smoking in bars, and jacking up the average price of a pack of cigarettes to more than $10.  This isn't subtly changing the culture or psychology of smoking; it's using the power of the state to turn smoking into a freezing, expensive, pain in the tuchus.  

The latest move strikes me as likely to have the same impact as calorie labelling, which is to say none, at substantial cost to the merchants.  On the other hand, it's not all bad: if it goes through (and I expect that it will), non-smoking non-New-Yorkers will have another fun natural experiment in behavioral economics to study.