1. Tobacco Industry Works to Block Rules on E-Cigarettes
By ERIC LIPTON
SEPT. 2, 2016
New York Times
September 2, 2016

2. Proposed FDA Regulation of E-cigs
WASHINGTON — The e-cigarette and cigar industries have enlisted high-profile lobbyists and influential congressional allies in an attempt to stop the Food and Drug Administration from retroactively examining their products for public health risks or banning them from the market.
The campaign targets a broad new rule that extends F.D.A. jurisdiction to include cigars, e-cigarettes and pipe and hookah tobacco.

3. Pro and Con
With its army of more than 75 lobbyists, tobacco-aligned companies have argued that the F.D.A.’s so-called Deeming Rule could hurt public health by forcing a large share of e-cigarette companies out of business.
F.D.A. officials acknowledge that e-cigarettes, made out of tobacco-derived nicotine, are potentially less harmful than cigarettes.
But they insist they must examine whether the electronic cigarettes or the liquid nicotine juices might contain toxic chemicals like diethylene glycol, an ingredient also used in antifreeze, or candy-like flavors contributing to the surge in the numbers of teenagers using e-cigarettes. They also want to examine the safety of the e-cig devices themselves after reports of battery-related burns.

4. Who’s in the Game?
Americans for Tax Reform, a conservative group, and National Center for Public Policy Research, a pro-free market think tank, have come out against the F.D.A. rules, even as they receive funding from the e-cigarette and tobacco industry, including Altria and R.J. Reynolds, records show.
Jeff Stier, a scholar at the National Center for Public Policy Research, and Grover Norquist, from Americans for Tax Reform, both said they opposed the F.D.A. rule as bad policy.
The American Lung Association, which has spoken out in defense of the rule, accepts contributions from pharmaceutical companies like Pfizer and GlaxoSmithKline, which sell smoking-cessation products that could lose sales if e-cigarettes continue to gain market share, Mr. Stier added.

5. Reinforcement and Tolerance
Addictive behavior is usually assumed to involve both “reinforcement” and “tolerance.”
Reinforcement means that greater past consumption of addictive goods, such as drugs or cigarettes, increases the desire for present consumption.
But tolerance cautions that the utility from a given amount of consumption is lower when past consumption is greater.

6. Consider instantaneous utility
(1) U(t) = u[c(t), S(t), y(t)]
U(t) = Utility at time t
c(t) = Consumption of addictive good at time t
S(t) = “Addictive capital stock” that depends on
past consumption of c.
Tolerance implies that dU/dS < 0. Greater past consumption of addictive goods lowers current utility. Stated differently, Higher c(t) lowers future marginal utility by raising future values of S.

7. Consider instantaneous utility (2)
(1) U(t) = u[c(t), S(t), y(t)]
U(t) = Utility at time t
c(t) = Consumption of addictive good at time t
S(t) = “Addictive capital stock” that depends on
past consumption of c.
Reinforcement implies that dc/dS > 0. Greater past consumption of addictive goods raises MU of current consumption.
Myopic users – condition above is sufficient.
Rational maximizers – Also consider the future harmful
consequences of the current behavior.

8. Consider instantaneous utility (3)
(1) U(t) = u[c(t), S(t), y(t)]
U(t) = Utility at time t
c(t) = Consumption of addictive good at time t
S(t) = “Addictive capital stock” that depends on
past consumption of c.
Rational maximizers – Also consider the future harmful
consequences of the current behavior.
For rational maximizers , reinforcement requires that the + effect of an increase in S(t) on the MU of c(t) exceeds the - effect of higher S(t) on the future harm from greater c(t).

9. Implications
It is not surprising that addiction is more likely for people who discount the future heavily since they pay less attention to the adverse consequences.
Addiction to a good is also stronger when the effects of past consumption depreciate more rapidly, for then current consumption has smaller negative effects on future utility.
The harmful effects of smoking, drinking, and much drug use do generally disappear within a few years after a person stops the addiction unless vital organs, such as the liver, get irreversibly damaged.

10. Addictive Stock and Consumption
Steady State!
C = δS
Consumption, C
Initial Stock = S2
Depends on past consumption and life-cycle.
C*1 A1 A2
C*2
When A is above the steady state line, both C and S grow.
Both fall, when A is below the steady state line C2
Stock, S C1 S0 S1 S2
S*2
S*1

11. Addictive Stock and Consumption
Steady State!
C = δS
Consumption, C
C*1 A1
C** A2
C*2
If S0 is below S1, a rational consumer eventually stops.
If S0 is above S1, a rational consumer may go to S*1. C2
Stock, S C1 S0 S1 S2
S*2
S*1