This assumes people are working just because they aren't on a smoke break. If you work on a production line in a factory, it's fairly easy to see the output level of your work. If you work in an office, there is not a simple measure. The non-smoking worker could just as easily spend the same time chatting it up around the water cooler. Physical presence does not equal working time. I wish more managers understood tha…
Not to mention the amount of problems that are solved over a cigarette. I don't know if it was placebo, or a mental jolt from the nicotine, but I've come up with many a solution on a cigarette break. I don't smoke any more (thankfully), but when I did it at work, I was usually thinking of a work problem, and thus working.
This part has nothing to do with cigarettes, but I do think talking over work in different contexts is useful. I can't prove anything, but am convinced that more creativity in problem solving comes out when meetings aren't always in a conference room.