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Do regulated products pay their way?

As part of a feature-length exploration of the regulations governing the sale of restricted products like cigarettes and guns, Courtney Devereux ran the numbers on whether these products pay for the costs associated with them.

Regulated items, although sometimes controversial, feed into New Zealand’s economy through consumer purchases. But do the financial benefits stack up against the costs incurred through injuries and death?

Alcohol: A 2013 study undertaken by the Auckland City Council reports that New Zealanders spend $85 million a week on alcohol, or $4-5 billion a year. Although this spending represents a significant input into the economy, there have been a number of studies that estimate the cost of alcohol harm in New Zealand. Previous estimates have ranged from $735 million to $16.1 billion.

Smoking: A pack-a-day smoker puts in around $9,200 into the economy each year, according to Smokefree New Zealand. For the average life expectancy of a pack-a-day smoker (61.4 years for a man - 10 years under the national average), that equals out to just under $500,000 put into the economy in each smoker’s lifetime.

The estimated health costs of second hand smoke and air pollution per year fall just under $80 per year per microgram/m3, inclusive of medical bills. If you apply that formula to the 605,000 Kiwis that smoke, the costs of their potential health issues and the pollution they cause equals out to $48.4 million. So although the economic gain outweighs the costs in the sense of sale versus consequences, it does not factor in those affected by second-hand smoke.

Firearms: New Zealand’s gun culture is small, but compared to the size of our population, the economic gains are still significant.

The average gun in New Zealand will set you back around $1,500. Prices can range between $300-$95,000. Going from the average price and the reported number of guns in New Zealand of 1.3 million, the sales and supply of guns so far has put just under $20 billion into our economy since records began in 1996.

This doesn’t include gun accessories, and the cost to obtain and renew a gun licence. A gun licence is $126.50. With 250,000 licensed gun owners, that means around $31.6 million made through licencing since the current system of record-keeping was initiated in 2010.

The New Zealand Treasury’s Guide to social costs benefit analysis, states that the value of a statistical life is estimated at $3.85 million as at June 2013. This is calculated by indexing average lifespan to the average hourly earnings.

This story originally appeared in NZ Retail magazine issue 751 August / September 2017.

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