The Economics of Alcohol Control

I recently finished reading a very through, level-headed book analyzing the Economics of Alcohol Policy. The book is titled Paying the Tab: The costs and benefits of Alcohol Control by Philip Cook. The book focuses mostly on the costs of alcohol consumption. This is due to the fact that it is much easier to estimate the costs of alcohol consumption (e.g.: drunk driving, spousal abuse, health affects, homicide) than the benefits (e.g.: the enjoyment from drinking, possible health benefits from moderate drinking).

Cook wisely notes that alcohol research must be conducted “with boldness tempered with humility.” Data on alcohol consumption is notoriously unreliable. Individuals tend to underestimate their alcohol consumption on surveys. Wholesale alcohol tax records are more accurate but “takes no account of wastage, illicit production for sale (moonshining), or production at home.”

There is little doubt that alcohol is one of the biggest public health issues in the U.S. Alcohol costs include motor vehicle fatalities, increased homicide rates, and health issues such as cirrhosis. The CDC estimated that “63% of all potential lives lost due to drinking were due to acute effects of drinking, namely injuries resulting from assault, suicide, traffic accidents, poisoning, and so forth.”

So why do people drink? Some people enjoy the taste of a fine wine; others enjoy the intoxication of alcohol. According to journalist Pete Hamill, alcohol offers “confidence for the shy, clarity for the uncertain, solace to the wounded and lonely, and above all, the elusive promise of friendship and love.”

According to Cook, the best manner in which to balance these costs and benefits is to impose a higher alcohol tax. This policy has been shown in many studies that when the cost of alcohol increases, alcohol consumption decreases. Taxing is attractive because 1) it still allows individuals the choice to consume if they please, 2) it reduces overall alcohol consumptions and the adverse consequences that come with increased alcohol consumption and 3) it raises money for the government. One problem with all taxes, however, is that a black market may emerge to avoid the tax.

Further, one can think of the tax as a “user fee” that alcohol drinkers must pay in order to pay for the externalities alcohol consumption creates (e.g.: drunk driving, costs to public health care entities). Other regulations, such as zero tolerance drinking and driving laws for minors, have been shown to be effective. On the other hand, increase jail time for DUIs and more punishments for establishments which serve minors do not serve to decrease alcohol consumption.

Cook does a wonderful job of showing allowing anyone to drink any time they wish is not ideal. Some restrictions are welfare improving. Yet complete Prohibition is not the answer either. Neither libertarians nor tee-totalers are completely in the right.

In 1948, Mississippi Judge Noah Sweat summed up the arguments for and against alcohol:

If when you say ‘whisky’ you mean the devil’s brew, the poison scourge, the bloody monster that defiles innocence, dethrones reason, destroys the home, creates misery and poverty…–then certainly I am against it.

But, if when you say ‘whisky’ you mean the oil of conversation, the philosophic wine, the ale that is consumed when good fellows get together, that puts a song in their hearts and laughter on their lips, and the warm glow of contentment in their eyes…if you mean the drink that enables a man to magnify his joy, and his happiness, and to forget, if only for a little while, life’s great tragedies and heartaches and sorrow…–then certainly I am for it.