UP IN SMOKE.(The Talk of the Town)(tobacco industry)

In 1638, Ch'ung-chen, the last Ming emperor, declared war on tobacco: anyone caught importing or using it would have his head chopped off. Ch'ung-chen was not the only seventeenth-century monarch to take a hard line on the matter. Thirty-four years earlier, James I of England had written "A Counterblaste to Tobacco," a tract that condemned smoking as "a custome lothsome to the eye, hatefull to the Nose, harmefull to the braine, dangerous to the Lungs." But, as a lawmaker, James adopted a more circuitous approach to regulation. At first, he attempted to banish smoking by raising tobacco taxes four thousand per cent. When that didn't work, he decided that, if people were going to smoke, the state should at least profit, and he established a royal monopoly on tobacco.

Today, the opposing impulses to profit or to punish--capitation vs. decapitation, as it were--continue to shape the relationship between the U.S. government and the tobacco industry. On the one hand, the state reaps huge rewards from Americans' addiction to nicotine: smokers pay twelve billion dollars a year in tobacco taxes, and the tobacco companies, as a result of a settlement signed in 1998 with forty-six states, pay state governments close to eight billion dollars a year. On the other hand, policymakers looking to curb smoking favor increasingly Draconian solutions. The Justice Department, for instance, is in the midst of a racketeering suit against those same companies, alleging that they have engaged in a half-century-long conspiracy to defraud the American public, and originally seeking punitive damages on a scale that could have bankrupted the industry. (That request for damages has been tossed out of court, but a verdict on the racketeering charges is expected soon.) One wing of government, in other words, is partnering with tobacco while the other is trying to demolish it.

For the tobacco companies, this is pretty much business as usual. The industry now spends more than half a billion dollars a year in legal fees, and billions of dollars a year in settlements. In strict monetary terms, the settlement with the states might seem like a bad deal for the tobacco companies. Research by W. Kip Viscusi, a Harvard economist (and frequent pro-tobacco witness), suggests that if you take into account tobacco taxes and the higher mortality rates of smokers, which reduce the government's Social Security and Medicare payments, smoking actually saves the public money. But the tobacco companies signed the agreement because the threat of nearly every state in the union suing to recoup health-care costs was a risk that investors were unable to gauge and therefore unwilling to take. Controlling how much they'd owe and meeting the government halfway, as opposed to having to worry about what forty-six different juries might decide, was worth the money.

In the popular imagination, ...