Youth smoking continues to be an important public health problem. Many policy tools designed to reduce youth smoking are based on economic principles. This paper describes the economic and policy context of tobacco use aiming at reducing youth smoking and explains the economic rationale for tobacco control tools such as excise tax and price, clean indoor air laws, youth access laws and the broad provision of health information to the public. An overview of economic models of addiction provides the framework for empirical analysis of the impact of these policies. This is followed by a summary of the empirical evidence of the effectiveness of various tobacco control tools that are primarily economic in nature. The most consistent finding in this literature is that higher cigarette prices discourage youth smoking. Compared to the effects of cigarette taxation and price on youth smoking, the evidence on the effectiveness of the youth access laws and clean indoor air laws are still mixed and inconclusive. More research is needed to address issues such as: (1) the effects of gender, age, race and socio-economic status on the relationship between tobacco control policies and youth smoking; (2) better measurement of the outcome variables to account for the multi-dimensional nature of dependence; and (3) the effects of excise taxes and other tobacco control policies with regard to a host of dimensions of smoking such as initiation, cessation, and more generally the trajectories of tobacco use that would include patterns of progression, maintenance, regression, cessation, and relapse. More frequently collected longitudinal data than those currently available are needed to address the above issues. Understanding smoking behavior cannot be achieved without incorporating familial and other social contexts.