Critique of the Philip Morris study of the cost of smoking in the Czech Republic

This critique analyzes the methodology used in a study of the economic burden imposed on public finances in the Czech Republic by the consumption of cigarettes. The study was prepared by a consulting firm on behalf of the Phillip Morris Company. This critique, by using economic theory and a cost-benefit methodology, refutes the conclusion of the Phillip Morris study that smoking represents an economic benefit to Czech state finances. In fact, the correction of only one among numerous errors in assumptions and calculations in the Phillip Morris study leads to the opposite conclusion: Instead of savings of $150 million per year, smoking drains at least $373 million from the state budget annually, nearly .8% of the Czech gross domestic product. The net loss to the society is even greater if all pertinent costs and benefits are calculated properly. The critique demonstrates how to craft a rigorous economic response to common industry attempts to influence public opinion in which the industry employs specious or erroneous assumptions and data.