Responding to Joe Gregorio:
Joe, I don’t think giving tobacco companies a “safe harbor” is realistic in this case. People will still smoke. A better approach may be to tax the companies producing cigarettes. Cigarettes have a very inelastic demand so the companies should be able to push most of those costs onto the consumers. If the tax is set at an optimal level (that’s the difficult question to answer), it should somewhat reduce the amount of cigarettes consumed and not stimulate much of a black market. The government can then use that money to improve access to merit goods and education related to cigarette consumption. Essentially, the idea would be to raise the marginal social costs of cigarettes and use that money to close the gap (i.e. reduce the externality) between the marginal social benefits and the marginal private benefits.
I think the DMCA example is off-kilter because I don’t see a negative externality in sharing copies of published works (I think it’s a myth and propaganda that there is harm in non-commercial copying). Requirements that service providers comply with take-down requests are putting the onus on service providers when it should not be their responsibility. This approach acts as a disincentive to launch and operate such sites as the costs of doing so go up. Service providers should only have to comply with a “take-down” if the content itself is illegal (e.g. slanderous comments or child pornography). Copyright violations should be between the copyright holder and person doing the copying – not the companies that provide technology that *could* be used for transmitting copyrighted works. I think the current safe harbor provisions for service providers in the EU are a better approach than the DMCA.