Tuesday, June 24, 2014

Texas sharpshooters seek plain packaging's smoking gun

The far right is still busy employing the Texas sharpshooter fallacy to attack plain packaging, in the face of all evidence against their arguments. So far, we have seen a succession of attempts which have all been discredited in sequence.

  • Claim: Tobacco usage increased after plain packaging went into effect. Wrong; according to the industry itself the market shrank by 2 to 3 per cent in the first six months.
  • Claim: Tobacco usage is actually up because the ABS chain volume figures are affected by price changes and there is a substitution effect from smokers shifting to cheaper brands. Wrong; the ABS has confirmed that chain volume is adjusted to take into account the change in mix of price points.
  • Claim: Tobacco usage doesn't respond to increased regulation anyway. Wrong; it began sliding as soon as restrictions were imposed starting in the mid-1970s.
  • Claim: Tobacco imports are up, surely that must reflect consumption. Wrong; those numbers were caused by the last local tobacco manufacturer shutting its doors.

In addition to those discredited lines of inquiry, there are a number of other claims which are so ridiculous as to not even require refutation, such as that ABS figures can't be relied upon because they are subject to revision, or numerous cases of blatant misreading of data.

The latest bullet hole from these scattershot scatterbrains is the claim that smokers are flocking to the illicit tobacco trade to get their fix. Thus, in the comments of my last piece I had one of the Cat denizens (I'm guessing it's Aristogeiton) post a bunch of links to reports on the illicit tobacco industry in other countries.
"After all, if they weren't working to change behaviour, why is there such a kerfuffle about it from the tobacco companies?"
Why do you think? Because people are buying cheaper brands, because illegal tobacco sales are increasing, they are losing market share and profits.
Unfortunately, our anonymous friend can post all the links he likes to studies of the illegal tobacco trade in other countries, but none of it relates to the point that he is trying to make: that plain packaging causes Australian smokers to move their consumption to "chop-chop". There just isn't any hard data on that.

For instance, Sinclair Davidson linked a study by his RMIT colleagues Lisa Farrell and Tim Fry, which is viewable free of charge at this link. Farrell and Fry use what they call "novel survey data" to claim that tobacco users are price sensitive enough to change to chop-chop when the price of legal tobacco is 2.5 times the cost.
The data were collected by telephone survey during the period March to July 2007; respondents were aged 18 and over and self-identified as regular tobacco smokers. They were asked whether they had ever smoked chop-chop and were presented with a set of questions about its usage, as well as detailed questions relating to their health status and licit tobacco consumption. In total 1,621 interviews were conducted, with a response rate of 63 percent. At the time of the survey, six percent of smokers participated in the illicit market. Basic descriptive statistics tell us that 58 percent of smokers had seen or heard of unbranded illicit tobacco and, of those who reported awareness, 59 percent claimed to have smoked it. These findings are broadly consistent with those of the National Drug Strategy Household Survey... 
The sample was of a mere 89 smokers, who were already qualified as having moved to chop-chop. This is strike one against the survey, since its data set was taken not from the 100% of smokers but the 6% of chop-chop users. Strike two is that they include some irrelevant obiter dicta railing against plain packaging, when the survey is about price points and not branding issues - they quote British American Tobacco as saying their reaction to plain packaging would be price slashing, but that's their commercial decision and not an actual reason to fail to regulate the industry. Strike three is that this survey was done in 2007 but the study was published in 2011 when the plain packaging laws were debated and passed. This is a deeply flawed piece of work.

If that's the best they can do locally, there's not much evidence on their side.


  1. yeah Davidson understands ABS data as well as he understands budgetary data!

    Just another stagflation example of Davidson. He is unable to ever say he is wrong.

    I like how suddenly an inelastic demand curve turns all elastic!

    Plain packaging would reduce price differentiation .This would lead to less illicit sales not more. Duh!

  2. Hahaha, what a great homage to ABC style "journalism". Paul Barry must be quaking in his boots seeing how effective you are when you don't have a fraction of his budget