Abstract: Cigarette smoking has been an acceptable consumption activity since the seventeenth century. However, the relationship between health and cigarette smoking was not investigated to any great extent until the twentieth century. Researchers concluded that the three major smoking-related diseases were cancers, cardiovascular diseases, and respiratory diseases (Herdman, Hewitt, and Laschober 1993; Oster, Colditz, and Kelly 1984). According to the Office of Technology Assessment (OTA) smoking-related illnesses were responsible for nearly one in five U.S. deaths in 1990 and resulted in 417,000 deaths of U.S. residents (Herdman, Hewitt, and Laschober 1993). The report noted that this number was far greater than the total number of deaths due to automobile and other accidents, AIDS, suicide, and homicide. The total costs to society were $68 billion or $2.59 per pack of cigarettes ($1990). Domestic cigarette consumption has declined in the past two decades due to a variety of factors. They include "continued large hikes in cigarette wholesale prices, prospects for higher taxes, more and more social smoking restrictions, declining social acceptability of tobacco use in the United States and antismoking activities" (Grise 1991, 31). However, the percentage of the population that smokes has remained at 26 percent for the past three years so that cigarette smoking continues to remain a serious health problem (Herdman, Hewitt, and Laschober 1993). Existing policies in the United States mean that the individual is responsible for the decision to smoke or not to smoke provided that he or she can afford to do so. It is of interest, therefore, to examine the positive and negative consequences of cigarette smoking from the perspective of the individual. Of particular importance in such a comparison is the fact that the benefits and risks from smoking are incurred at different points in time. The individual, who smokes, receives benefits immediately while the negative consequences of smoking occur many years in the future. Thus, the individual's subjective rate of time preference as well as the value the individual attaches to a reduction in life expectancy will affect the internal risks from smoking. This study investigates the lifetime risks (costs) and benefits of smoking for a male individual. It differs from other analyses in its emphasis on internal as opposed to external or societal costs. It also differs from earlier studies in that the benefits from smoking are considered. The results of this analysis should provide information about the risks posed by cigarette smoking from the perspective of the individual and provide insight on the impact of delayed or postponed risks on consumption decisions which yield immediate benefits. REVIEW OF LITERATURE Costs of Smoking There have been several studies on the societal costs of smoking (Herdman, Hewitt, and Laschober 1993; Luce and Schweitzer 1978; Office of Technology Assessment 1985; Rice et al. 1986). Most of these studies used a similar procedure and obtained similar results. The costs of smoking were based on direct health care costs, indirect morbidity or productivity costs, and the indirect mortality costs at one point in time. Direct health care costs were costs associated with preventing, detecting, and treating smoking-related diseases while the indirect morbidity costs were the productivity losses to the economy due to time lost from work or from housekeeping. Productivity losses were based on earnings from work or housekeeping. The indirect mortality costs were based on the loss of future earnings of individuals due to premature death from smoking-related diseases. The most recent study by the Office of Technology Assessment (Herdman, Hewitt, and Laschober 1993) noted that six million life years were lost in 1990 due to premature mortality. Total costs amounted to $55.8 billion ($1985) of which $5.7 billion were direct health care costs, $17. …
