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EVALUATION-.OF APPENDIX--'10: - ECONOMIC JUSTIFICATION FOR NO SMOKING POLICIES AT THE WORKSITE ITI t i. U C t., I. INTRODUCTION My name is Dr. Walter R. Holman; I am a financial economist and associate professor of finance at the Sellinger School of Business and Management, Loyola College. I have been asked to review and comment on an al-ticle by Ruth Behrens entitled, "Economic Justification For No Smoking Policies at the Worksite." I received a Ph.D. in economics and finance from Syracuse University and also hold two degrees in industrial engineering. I have served as the dean of the Sellinger School of Business and Management and as chairman of the department of finance. Prior to joining Loyola's faculty, I was a principal in the international management consulting firm of Booz, Allen & Hamilton, Inc., where I also served as the Director of Financial and Economic Studies for the firm's Environmental Division. At Booz-Allen, I conducted numerous regulatory analyses and economic impact -analyses for the U.S. Environmental Protection Agency (EPA) in:luding an evaluation of all of the Agency's economic impact methodologies relating to water and hazardous wastes. - The cover letter from Mr. Bob Axelrad (Director, Indoor Air Division) to the document entitled, "Environmental Tobacco Smoke: A Compendium of Technical Information," states that this document is an integral component of EPA'.s U

Environmental. Tobacco _Smoke_ (ETS); policy.. _Thee document-'-s --- preface states that this document has been written by experts in the field and is intended to provide information necessary to allow the public, government agencies and the building industry to make well-informed choices regarding exposure to ETS. It is, therefore, within this context that I reviewed the article which'constitutes Appendix 13 of the EPA document. (1) SUMMARY OF FINDINGS . In summary, I find the Chapter 10 Appendix woefully inadequate with respect to EPA's stated Dbjectives. The article does not meet the standards of cDmprehensive and objective research prevalent in the fields of science and economics. Frankly, it doesn't come close to achieving the label of "good research." Amongst the many shortcomings of the article, the following are most prominent: o failure to consider most of the relevant literature, especially studies which provide evidence contrary to the "conclusions" reached by the author. o incomplete discussions of the serious methodological problems and significant data deficiencies which continue to plague research efforts to identify and scientifically measure the costs of smoking. o failure to present objectively the limitations and ~ ~ lack of generalizability of some of the studies N cited and discussed. ~ C,lt G^

failurp to address key- aspects of the topic such as-: - company costs (direct, indirect and intangible) associated with smoking limitation or cessation programs; - benefits/cost analysis of smoking cessation programs from the perspect:ive of the company, society and the individua7_; - capturing the benefits of company smoke cessation programs: methodology, problems, findings from prior studies. o frequent reliance on anecdotal information whose relevant context (e.g., validity, representative- ness) is neither identified nor discussed. o complete•failure to utilize a research and writing format appropriate for a serious research paper: lack of stated objectives; incomplete ref erences; failure to cite and/or discuss the majority of relevant literature; absence of clear, testable L_ hypotheses; absence of tightly drawn and supportable conclusions; and lack of any in-depth discussion of the limitations. of the research presented or cited. (2) APPROACH OVERVIEW A three step approach was utilized in the review and Up ~ evaluation of the article; these steps a:~e as follows: ~ ~ tJ W Ut 0)

o summarize-the paper-'s scope-, objectives---and-= conclufr- sions. o identify significant deficiencies in each of the paper's four principal sections. discuss in detail the reasons that.the paper does not meet the standards of good research. Section II, which follows, critiques the Chapter 10 Appendix's substantive assumptions and cDnclusions. Section III addresses the significant shortcomings which qualify the Appendix as poor research. 4 t

II. CRITIOUE OF CHAPTER 10 APPENDIX: SUBSTANCE L t. UT r t (1) SUMMARY DESCRIPTION Appendix 10 addresses the topic of the economic justification for worksite smoking polic:.es, smoking bans in particular. It focuses on four aspects of the topic. These four aspects represent the four primary sections of the article and are as follows: o Section 1: Costs of Smoking to i:he Nation o Section 2: Differing Methodologles Make Pinpointing Worksite Costs Hard o Section 3: Economic Impact of Smokers On the Worksite o Section 4: Individual Companies Document Costs, Consequences of Smoking The Appendix reaches specific conclusions in each of the four sections and several overall conclusions. The more specific conclusions are as follows: o Section 1: the economic impact of smoking on the nation is staggering... . (T]hree key studies provide simiLar estimates of large costs. o Section 2: differing methodologies make pinpointing worksite smoking cost hard (but, the two cited studies, Kristein (1983) and Weis (1981), estimate large costs). o Section 3: substantial evidence exists demonstrating - 5 -

the important types.--of economic_impacts-- smokers exert on bus:.ness. o Secti-ion 4: individual companies have documented the costs and consequences of smoking; these studies offer further insights into the (high) price businesses pay for their .smoking employees. The author's more comprehensive conclusions are the following: o U.S. businesses are paying heavily for'their smoking employees through productivity losses and increased health care and other costs. o implementation of policies tha': restrict or eliminate smoking within businesses are one inexpensive, yet effective step that companies can take to discourage smoking and to vividly illustrate their concern for health, as well as for their bottom line. (2) KEY PROBLEMS IN PAPER'S FOUR SECTION3 In this part of the memorandum, the reviewer identifies the primary problems -in each of the four sections of Appendix 10. A comprehensive discussion of these problems and their implications is presented subsequently in this memorandum.

Section Primary Problems and,/or Shor-tcomings -= - 1 o author cites only 3 of a large number of studies which address the question of what smoking is costing the nation. o conclusion is drawn :hat the similarity of the estimates of tota1 costs from the 3 studies underscores that smoking does cost the nation a staggering amount. - As discussed in the next section of this memorandum, a closer review of the cited Rice, et al (1984) paper indicates (as do Rice and his colleagues) that there are huge dif- ferences among the 3 studies in the estimates of costs for each of the three diseases studied. - These huge differences accidentally cancelled out when aggregating the individual disease costs to arrive at an overall cost of smoking. The reported "similarity of costs" among the 3 studies was a fortunate accident which raises serious questions about the true comparability of the estimat-es and highlights several crucial

il L U L i 4,- t 2 3 methodological ' ssues-wh•ich are- - subsequently discussed in the Rice paper. o author alludes to methodological difficulties in pinpointing worksite costs but then proceeds to cite the high costs provided by two studies (Kristein, 1983 and Weis, 1981) with no further discussion of the large number of serious methodological problems and no reference to the large body of research literature addressing this subject. o author cites a wide variety of information concerning the economic impacts smokers exert on businesses over their nonsmoking counterparts. - author does not, however, address the significant proDlems which researchers continue to struggle with. - the primary problem is the inability to develop valid methods for apportioning the differential economic impacts of smoking (smoker versus nonsmoker costs) between - 8 -

smoking and other- soc-ioeconomic;.- genetic, and other characteristics of smokers which may be responsible for much of the referenced economic impacts of smokers. the studies cited by the author do, however, address this important methodological problem and its implications--making cost estimation extremely difficult. I- I L G L 4 o author states that studies by companies to document the costs and consequences of smoking have varying degrees of validity but then proceeds to present anecdo.tal information from the experiences of two companies. - the author provides no indication as to the validity, comprehensiveness, or representativeness of these two anecdotal data points. - the author claims, however, that they offer insights into the price businesses pay for their smoking • employees. - 9 - a"k

III. CRITIQUE OF CHAPTER 10- APPENDIX; -RESEARCH SHORTCOMING6 --- i L f (1) OVERVIEW OF RESEARCH DEFICIENCIES In this section of the memorandum, the reviewer identifies and discusses the numerous and substantial shortcomings of the Chapter 10 Appendix which qualify it as very substandard research. These shortcomings can be - categorized as follows: o failure to review the majority of relevant research studies, especially in the following 3 areas: - costs of smoking to the n<<tion; - impact of long-run reductions in smoking on the economy; - capturing the benefits of smoking cessation programs. o failure to present and discuss all the relevant research findings embodied in 1.he rich literature, especially: - findings which are inconclusive or do not support the author's expressed conclusions about smoking costs and the benefits of smoking cessation policies; - findings relating to the 3erious methodological problems and data deficiencies which make estimation of smoking costs and no smoking policy benefits difficult if not impossible to estimate.