The Impacts of Politics on The Business of Tobacco Regulation in Hawaii

In a capitalistic society where competitive markets are encouraged and plentiful, like in the United States, the government still has the ability to influence behavior of the markets by way of legislative policy. These influencers can take many forms including passing laws that restrict access to certain products. This is the case in Hawai’i County’s recent decision to change the legal age to purchase tobacco products from eighteen, the status quo for most of the country, to twenty-one.[1] Such a change in policy has economic impacts on the tobacco market in Hawai’i County which include a decrease in overall demand and social surplus.

A simple economic model is used to represent these impacts on the tobacco market. The model includes the supply and demand curves of tobacco products at the original, status quo with the legal age of consumption being eighteen and the adjusted demand curve to represent the demand for tobacco at the new legal age of consumption of twenty-one. The model relies on a few basic assumptions, the first being that the new restrictive law will actually be enforced. If the new consumption age is not enforced, the same number of consumers will purchase tobacco and no economic change can be identified in the market. Secondly, it must be assumed that no large change in population occurs in Hawai’i County. A large change in population may lead to a shift in demand that is not caused by the implementation of the new law. In order to show general trends a specific price and quantity for tobacco products was omitted.

The shift in demand to the left, represented by D2, is caused by the removal of all tobacco consumers ages eighteen to twenty from the market. The shift is small because of the relative inelasticity of tobacco demand due to its addictive nature. Because of the addictive nature of tobacco, many underage consumers may find ways to continue buying tobacco in the market through other, legal buyers or by use of fake identification. Others may purchase their tobacco in another market with less restrictive laws such as a neighboring county or an unregulated black market, again producing a shift in demand of the Hawai’i County tobacco market. The demand shift results in a loss in social surplus, mostly effecting the consumers, which is indicated by the shaded portion of the graph. The overwhelmingly negative effect on the consumer makes sense considering a portion of the consumer population is completely restricted legally from the market by this law.

The model shows that the new Hawai’i County tobacco policy, which changes the legal age to purchase tobacco from the status quo, eighteen, to twenty-one will have an overall negative effect on the tobacco market as a whole. This is due to the decrease in number of total buyers in the market. This model cannot, however, predict the long term effects of the policy which are much more open to speculation. Underage consumers may find new ways to buy tobacco in the market or tobacco sellers may choose to not abide by the law in order to sell more. Both actions would drive demand closer to its levels before the implementation of the tax. Whether or not the new Hawai’i County policy will last is also up for debate. Backlash from angry consumers or pressure from firms may influence policymakers to repeal the law and go back to the status quo. For the time being, Hawai’i County and its tobacco market remain a unique example of political influence over economics.