Well, the California example is about too many PSA warning labels. So many things are known by the State of California to cause cancer that no-one takes heed of the labels anymore. Similarly Nancy Reagan's anti-drug campaign (and Tipper Gore's parental advisory music labels) only encouraged kids to do more drugs and listen to angrier music.
So it's not that kids will smoke more (or much more) it's that the labels will be more easily ignored when the government fails to be sparing in their use.
In an non-government example, when everything is a sin, then nothing is a sin.