Negative Externalism In Tobacco Law

The European Union has focused on the impact of tobacco use with the first EU tobacco-control legislation in the late 1980s. European Commission (2010) states that the EU legislated policies have been further developed with its certain purposes. The EU aimed to encourage tobacco users to cease and protect their citizens who are exposed to second-hand smoke in order that citizens could reside and work in smoke-free environments. The reason why the EU has endeavored to intervene with the production and consumption of tobacco has originated in one factor: negative externality. Negative externality can be defined as an adverse effect of production and consumption of goods or services, which imposes external costs on the third party outside of the market. The activity of producers and consumers may affect the economic welfare of bystanders with no corresponding appropriate compensation because most producers and consumers consider only the benefits and costs to them (Mankiw, 2011). Thus, the EU has …show more content…
In the tobacco market, there are only negative externalities, which have an adverse effect on the third party. The European Union has been trying to remove welfare loss that is created due to the difference between the marginal social cost and marginal private benefit by imposing several policies. The policies have played central roles in improving the problem of negative externalities. Although the policies still need to be developed when regarding its down side, there is no doubt that they have helped government decrease the impact of negative externalities in tobacco consumption and production. Thus, the EU intervention is necessary for reducing the effect of negative externalities in tobacco