Does demand for cigarettes create supply, or does supply create demand? : and what should we do about it?

Though smoking rates have declined in Australia, smoking is still the single most preventable cause of ill health and death in Australia.1 Smoking results in high monetary and health costs for the average smoker (the cost of cigarettes, additional medical costs, earlier death and disability) and for society (increased health expenditure and lost productivity). Determining ways to effectively and efficiently minimise these costs is therefore of great interest to economists and policy experts. Policy interventions to discourage smoking include taxes to increase the price of cigarettes, bans on advertising, displaying and promoting cigarettes, and most recently in Australia, plain packaging of cigarettes.