Economic Approaches to Estimating Benefits of Regulations Affecting Addictive Goods.

The question of how to evaluate lost consumer surplus in benefit-cost analyses has been contentious. There are clear health benefits of regulations that curb consumption of goods with health risks, such as tobacco products and foods high in fats, calories, sugar, and sodium. Yet, if regulations cause consumers to give up goods they like, the health benefits they experience may be offset by some utility loss, which benefit-cost analyses of regulations need to take into account.

Graphic warning labels and the demand for cigarettes.

Background: In 2010, the US Food and Drug Administration (FDA) proposed requiring tobacco companies to add graphic warning labels (GWLs) to cigarette packs. GWLs are large prominently placed warnings that use both text and photographic images to depict health risks of smoking. The companies challenged FDA's authority on First Amendment grounds; the courts accepted that FDA could compel companies to add GWLs, but argued that FDA had not established that GWLs would significantly reduce smoking.