Michael Bloomberg led a major digital change in financial markets, using the Bloomberg Terminal to deliver fast, accurate financial data to Wall Street—and captured significant value along the way, catapulting him to be among the top ten wealthiest men in America. He accomplished analogous changes as mayor of New York City from 2002 to 2013. Under his leadership, the NYC Department of Health and Mental Hygiene (DOHMH) made significant leaps in public health, increasing the life expectancy of New Yorkers by three years between 2001 and 2011, outpacing the national increase of 1.8 years over the same period. Using the city’s 2010-12 median income of $50,711 as a proxy for economic value, that amounts to $517 billion in value created, with billions more added annually from births and newcomers.
Anti-smoking programs were a large contributor to the improvement in life expectancy. Bloomberg’s DOHMH, together with the City Council, was a pioneer in banning smoking in public places—from workplaces, bars, and restaurants to public parks and beaches—and increasing the excise tax on cigarettes. Among other indicators, that cut the portion of public high school students who smoked in half, from 18 percent in 2001 to 8.5 percent in 2011.
Unfortunately, the “digital innovation” of e-cigarettes threatens to erode these gains in public health. The technology, which emerged in 2004, use a battery to vaporize a liquid containing nicotine and flavoring, producing a hit of nicotine like that of a cigarette, but with fewer of the harmful chemicals that cause smoking-related diseases. E-cigarettes put a modern veneer on smoking and particularly target the young with flavors from bubblegum to gummy bear.
While the traditional approach to technological disruption in the private sector is to adapt to the new business model and seek to either undercut it, match its capabilities, or shift to adapt, governments face a different challenge when faced with innovation. They must determine what value (or harm) the innovation does in society, where the risks are, and what role they should play in supporting, hindering, or regulating it. The Food and Drug Administration was relatively slow to regulate e-cigarettes, only passing regulations that went into effect in 2016, but DOHMH was far faster, including e-cigarettes in the Smoke-Free Air Act in 2013. The DOHMH approach was also unambiguous: e-cigarettes were to be treated as regular cigarettes, with sales restricted to those over 21, and use banned in offices, bars, restaurants, and parks.
Will DOHMH ultimately be a “winner” in facing the innovation and potential harms of e-cigarettes? It appears to be the right direction so far. A recent review of 800 studies on e-cigarettes indicated the real danger, noting “conclusive evidence that most products emit a variety of potentially toxic substances” and finding 15 studies indicating that “when teens and young adults use e-cigarettes, they are more likely to try regular tobacco within a year.” These concerns mean that strong approach DOHMH took was warranted, and it is reasonable to assume that the reductions these policies saw in traditional cigarette use would similarly work against the new variety, though a slight bump in the short-term may be expected. Since 2013, the city has continued to see a decline in smoking, but adolescent use is higher than the smoking rate, at 15.9% compared to 5.8%. DOHMH continues to find new ways to lower smoking rates, as with a series of more aggressive bills announced in April 2017 to raise prices, reduce the number of retailers, cap e-cigarette retail licenses, and ban cigarette sales at pharmacies.
As for capturing value, assessing value for public sector institutions is a tricky business. The purpose of government is to provide value back to its citizens, but that value can come in many forms and straightforward economic calculations only go so far. Certainly, the headline number of lives saved or extended demonstrates both real social and economic value, adding more productive time, lower health care costs, and ultimately increased tax revenues for the city. But it’s important to avoid thinking so narrowly about value for DOHMH. The improved, smoke-free public space that policies to limit smoking provide and the improved enjoyment of life that people get when they avoid cigarette-related illnesses also have clear value, which the city has no need to capture itself. In some ways, the city does have an interest in making e-cigarettes a loser in the market, which it does clearly attempts though the high taxes imposed—essentially extracting value from e-cigarette producers both to lower demand and to keep those companies from profiting significantly off a public health disaster.
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