Megan posted earlier asking how a libertarian economist might respond to the claim of a market failure for non-smoking bars not cropping up on their own. She theorizes that this must occur because bar owners would not want to alienate the large, profitable customer base that smokes. This explanation, however, does satisfy those who believe efficient markets should have produced smokeless bars through non-smoker demand.
I'd have a few suggestions.
I would first argue that alcohol and cigarettes are probably complementary goods. Having bars without smoking is kind of like having a hamburger restaurant with no hamburger buns: the two go together naturally. You could have one without the other, and there may even be a market for that. But these goods are so complementary, it might not happen.
For cigarettes and alcohol, I'd argue that their complementary nature is historically driven and probably less functionally driven like the hamburger and bun comparison. However, since both are drugs, I would argue that there is a bit of functionality there as well. Those who are willing to partake in cigarettes are more likely to partake in alcohol than those who are less willing to partake in cigarettes, and vice versa.
I would next assert that most people who go to bars must not mind smoke that much. If they did, they wouldn't go. While for some non-smokers, the presence of smoke may knock a few points of utility off their experience at the bar, it must not make that utility negative. Maybe that utility loss is so minimal that it wasn't strong enough to inspire a demand for smokeless bars. A weak demand should not necessarily create a new market. The demand for smokeless bars must not have been strong enough.
This does not seem like a market failure to me, because I would further argue that there's always been a substitute for smoke-filled bars: smokeless homes. Anyone who truly abhors smoke can simply throw or attend social gatherings at houses or apartments. In that setting smokers can politely be asked to smoke outdoors or go home.
How strong is the house party substitute? If I had data on whether house parties have decreased since bar smoking bans have taken effect, then that would be helpful. I don't, and other variables like the desire to drink at home for cheaper during a recession might skew the data anyway. I still doubt, however, that the minor harm to utility that smoke in bars causes most people inspires them to seek alternatives.
As a result, I wouldn't call a lack of smokeless bars a market failure, because I don't think that markets with lackluster demand that already contain pretty good alternatives should be created. Is there a market for hamburger restaurants with no buns for carb conscious people? Maybe, but it doesn't seem to be strong enough for bun-less hamburger restaurants to be popping up -- especially since people can just cook their own at home without the bun if they choose.
Hi,
I think you are missing a lot here.
a) There is a market for bun-less hamburgers. Many places I frequent promote this option prominently for the carbs conscious dieter. I never saw this until +/- 5 years ago when the carbs diet boom peaked, but when it did, the market responded rapidly. This is not an example of a market with "lackluster demand with pretty good alternatives." It is on the contrary a sufficiently high demand market that many hamburger joints I know market this option non-trivially. It is indeed just a market like anything else, and responsive to changing tastes among a subset of the population interested in carbs-free diets.
b) There really is no comparison because I don't care if the table next to me has bun eaters or not, I do care if they have smokers. There is no "second-hand bun" effect.
c) The neighborhood bars where I live (MA) appear just as crowded as they were before the ban on smoking. There is no way to conduct a controlled study here that I can see because we don't have smoking and non-smoking bars side by side to see which is more popular. But given that the bars are as crowded as before (at least where I live) I guess the demand for smokeless bars is the same as the demand for smokey bars. Maybe the smokers are all now doing house parties and the non-smokers are now all at the bars, but demand for both is constant?? More likely the insistence of a minority of smokers and bar owners that smoking was critical to their experience and business prospects turns out to have been weak, anecdotal data and/or fear of change without any market data and at this point demand for smoke-free bars is sufficient to make up for whatever small percent of smokers have decided to no longer patronize bars.
d) There has been demand for smoke-free bars for a long time (although I am not sure if anyone quantified it), but the market did not respond to that, the state had to impose it. It is clear to me in my neighborhood that demand for smoke-free bars is at least equal to demand for smokey bars, but the market did not provide this alternative. I don't see how this is not a "market failure" in some sense.
e) see: http://www.boston.com/ae/food/restaurants/articles/2005/04/04/restaurants_bars_gain_business_under_smoke_ban/
-DM
You can offer bunless hamburgers to some, and hamburgers with buns to others. If you don't want the bun, there isn't any problem if the person at the next table does. Its a lot harder with smoking. You can have smoking and non-smoking sections, but that's imperfect (unless you have rooms which is unlikely), and adds costs and problems(two different bars, possibility of running out of space in one section while having room in the other, etc.
You've got this backwards. There has been a long-standing market failure. California's been smoke-free for over a decade, but there is a loophole that allows employee-owned bars to have smoking. Almost none have opened up (or reorganized themselves to allow smoking.) If the market demanded *smoking* then there would be a premium on smoking establishments that would justify opening them.
Yeah, the smoke-ban question is an interesting one, because while in theory I believe bar owners should be able to decide whether to allow smoking in their establishments, in practice -- as a regular patron of bars and former light smoker -- I really, really, really prefer smoke-free bars and have found that most of my friends, smokers and nonsmokers alike, do too.
And now that I've experienced both options, if the smoking ban anywhere I've lived were lifted, I'd certainly go out of my way to patronize the bars that continued not allowing it. Daniel is right that I didn't mind smoke that much...until I'd enjoyed a few years without it. Ideally, someday they will lift smoking bans, and patrons will make it very clear to owners that reintroducing smoking will hurt business.
(And I'd argue strongly against the idea that gatherings at home are a viable alternative to hanging out at bars. As fun as a good house party is, there are significant psychological factors at play in the desire to go to a bar -- maybe most importantly, the possibility of surprise that's just not there when you know everyone you'll be drinking with well enough to invite them over.)
Apparently not too many (former) smokers in the crowd today.
When one tends to smoke (at least whilst drinking), 99% of the time bars have relatively convenient outdoor (or partially-so) areas where you can go smoke. The "market" adapted, no failure what-so-ever occurred. Smokers and non-smokers alike can still go to non-smoking bars and effectively enjoy the same behaviors they could before the bans.
Not to mention the sidewalk smoking culture that popped up everywhere bans were enacted, and weirdly always felt to me like kind of a bonus, even in the dead of winter. I bet I had more interesting, spontaneous conversations with strangers huddled together outside the bar while smoking than I ever did inside one.
I concur, the sidewalk/back porch/alleyway smoking area indicates the demand for smoking at the bar is just as high.
I'm a non-smoker, and I find the smoking area usually more interesting than the inside of the bar. It's quieter and people are predisposed to chatting (since you usually can't drink and smoke out on the sidewalk.) With those propane heating towers in the winter, being outside is usually nicer than being inside.
The element that loses out from the smoking ban is the old-timer that likes to sit at the bar, smoke a pack while downing 10 drinks.
FYI, Hawaii's smoking ban...totally ridiculous. Almost all of their structures are open air (stairways are on the "outside" of the building, malls are open roofed, etc.) and they ban smoking in the open-air areas that are "inside" the structure of the building.