Well that is my point. If the restaurant owners allowed it and it wasnt hurting their business, so what? There are so many evils out there, where would you stop. Most drunks are coming from bars and restaurants. You know if made them quit serving alcohol, we could cut down on highway deaths in a big way. And portion size! Lets face it, many places serve way too much. It is unhealthy. People are fat in the US. Lets regulate that down. So many good ways to protect us from doing dangerous things. Soon we can be really safe and not have to worry about making those decisons ourselves!
Point being, allowing smoking didn't have an effect on business either, so either people didn't care about smoking enough to NOT visit that bar, but they would be ok with a law to change someone else or now the smokers aren't coming and the non-smokers are. If business got better, you could get rid of the law and few would go back to allowing it. I like the Coz model, someone annoys you and the waiter tries to fix it. The business taking responsibility for the problem and fixing it how they see fit. 
You get to vote on their solution with your patronage. Just for clarity now though, smoking and tipping are the top of the etiquette list now?
