This thesis examines the public choice issues surrounding the ongoing tobacco controversy. From a standard public interest story, the arguments against tobacco suggest the need for a total ban of the product; yet that was never seriously proposed. Thus this thesis seeks to apply public choice principles in search of a more realistic understanding of the actions surrounding tobacco. Various public choice principles are analyzed including interest group behavior, bureaucracy, and rent seeking. However, the rent extraction model of political extortion was examined in depth, and tested empirically using event study methodology. Using stock market data from 1997 and 1998, during the period of the national tobacco settlement discussions, the author found the evidence supported the rent extraction theory: wealth was extracted in exchange for no action against the industry. This model of political extortion can be extended to assess the role of the class action lawsuit: is it a tool of legal extortion? One interesting aspect of class action lawsuits is the high percentage that do not go to trial, but are settled out of court. This is especially true for securities class action lawsuits. The author gathered data on thirty securities class action lawsuits, and performed event studies to assess the validity of extending the rent extraction model to legal extortion. The data strongly supported this extension. One could look at the actions surrounding the tobacco issue as simply changing claims to the property rights of the tobacco industry and smokers. The author examined several theories of property rights and the process of change. A historical review of tobacco- related actions was undertaken, with the analysis supporting the proposition that changing property rights occur as a process of conflict over scarcity, with public opinion changes leading political entrepreneurs to force change in existing property rights structures.