License to Smoke??

Australia is thinking about implementing a licensing system for smokers. The idea is that you pay for a graduated license where the cost depends on whether you want the license to purchase up to 1 pack, 2 packs, or 3 packs a day. Nobody could buy more than that, to prevent a black market in cigarettes from developing. You get your money back if you give up the license, so in theory its revenue neutral.

The libertarian and behaviorist in me are fighting it out. On one hand, the libertarian in me doesn’t want to see the government get involved in our lives any more than it already does or create new restrictions on our freedom to choose our behaviors. On the other hand, there are several effects of this license idea that would be predicted by behavioral science

One is immediate gratification bias. You can’t start smoking one drunken evening. If you have to wait until the next day, the idea is that the delay will get you to think more about the decision. Second is the idea of default bias. When people want to start smoking, they may be too lazy to go buy a license. Third, they could force a limit on themselves by getting only a one pack a day license. Fourth, there would be an added incentive to quit (you would get your money back).

An add-on idea is to require a smoking test to get the license. You don’t have to know how to smoke, you have to know the health consequences of smoking. Again, this is to take advantage of the laziness bias. Even though the test would be easy, just having to learn a few facts before getting the license might make a few more people never start.

My own add-on idea would be to have a limited number of licenses and auction them, kind of like the carbon emissions market.

So which side wins out, the libertarian or behaviorist? Is this a legitimate Pigouvian tax because of the negative externalities of smoking on health care costs? Or are the behavioral benefits worth the additional government intrusion costs? What do you think?