Are Menthol Smokers Different? An Economic Perspective

Of the 45.7 million current smokers in the U.S. age 12 and over, more than 18.5 million usually smoke menthol cigarettes. The Food and Drug Administration recently proposed a tobacco product standard that would prohibit menthol as a characterizing flavor in cigarettes. The FDA concludes that the prohibition of menthol in cigarettes is appropriate for public health, meeting the criterion established by the 2009 Tobacco Control Act. In this paper we explore whether there are internality-based market failures that provide an applied welfare economics rationale to prohibit menthol. Our empirical approach provides descriptive evidence from the 2018-2019 Tobacco Use Supplement to the Current Population Survey on how menthol use is associated with smokers’ market demand along multiple intensive and extensive margins. We also use direct measures of smoking-related misinformation and internalities, and stated preference data, from a 2021 Cornell Online Survey. We acknowledge that the associations we document in observational data might reflect bias due to self-selection into menthol use. We discuss several lines of evidence about whether self-selection into menthol use might be mainly quasi-random. We leave it to reader whether there is convincing evidence that differential levels of internality-based market failures are a sufficient justification for the proposed prohibition of menthol cigarettes.