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Journal Articles
Abstract:
Economic research has contributed to the evaluation of alcohol policy
through empirical analysis of the effects of alcohol-control measures
on alcohol consumption and its consequences. It has also provided an
accounting framework for defining and comparing costs and benefits of
alcohol consumption and related policy interventions, including excise
taxes. The most important finding from the economics literature is that
consumers tend to drink less ethanol, and have fewer alcohol-related
problems, when alcoholic beverage prices are increased or alcohol
availability is restricted. That set of findings is relevant for policy
purposes because alcohol abuse imposes large "external" costs on
others. Important challenges remain, including developing a better
understanding of the effects of drinking on labor-market productivity.
The production and sale of alcoholic beverages account for a small
share of national product in the United States and in other advanced
economies. However, the deleterious effects of alcohol consumption on
health and safety constitute a substantial economic burden, reducing
our overall standard of living. Chronic heavy drinking causes organ
damage that results in disability and early death. Other possible
consequences include cognitive impairment, addiction, reduced
productivity, neglect of family responsibilities, and birth defects.
The acute effects of alcohol abuse are still more costly: traumatic
injury and property damage from accidents, criminal victimization,
domestic violence, unwanted sexual encounters and venereal diseases,
and hangover. In sum, alcohol is not just another commodity. Around the
world, historically and currently, public concern about the
consequences of excess alcohol consumption for individual health and
community wellbeing has been incorporated in cultural norms, which are
often reinforced by private rules and government regulation.
The nature and extent of government involvement in the alcohol market
has varied widely over time and place, reaching a logical extreme in
the United States with Prohibition in the 1920s. Every state now has a
wide array of alcohol-control measures in place, including a minimum
age of purchase (twenty-one), excise taxes, a licensing system for
retail outlets, and penalties for driving under alcohol's influence.
While alcohol control is not so contentious as when the temperance
movement was in full flower, the relevant policies continue to be
debated and are subject to change.
To some extent, the debate over appropriate policy is concerned with
factual issues. That is the arena in which economists have made their
primary contribution. Economic research on the effects of
alcohol-control measures on consumption and its consequences has helped
to establish that such measures can be effective in reducing alcohol
abuse and improving public health. But the debate is also concerned
with values "of how best to balance the conflicts between individual
liberty and community well-being. Economists have contributed to this
discussion through application of cost-benefit analysis to the
evaluation of alcohol-control measures and treatment. Economists'
normative framework is distinguished in part by its incorporation of
the consumer-sovereignty principle, acknowledging the pleasures of
drinking as well as the pains.
This paper provides a brief summary of the economics literature on
drinking and its consequences, with a focus on the effects of
alcohol-control measures. We conclude by suggesting that higher tax
rates on alcoholic beverages would be in the public interest and noting
the importance of further research on drinking and productivity.