[skissane]

Another externality is that a lot of non-smokers dislike breathing in second-hand smoke, apart from whatever negative health impacts it may have–yet inevitably they end up doing so due to smoking in public places, smoking neighbours, etc.

It is hard to measure the value of this externality. But in the abstract it must have some value: suppose there was a magic spell which made all secondhand smoke go away, and using it had no negative side effects – how much would the average non-smoker be willing to pay for this spell? Personally I'd be willing to pay at least $1/day, and let us assume the average adult non-smoker puts the same value on it as I do. Then, by rough estimation, I'd say there are about 16 million adult non-smokers in Australia, which implies the cost of this externality in Australia is around $5.8 billion a year. That dwarfs in comparison to the health costs, but it isn't nothing either.