Tuesday, April 27, 2010

Palmer report - initial thoughts

A couple of initial thoughts on the newly released Palmer report.

  • They apparently worry that while alcohol price increases have exceeded the CPI, price increases haven't kept up with wages. So alcohol has become more affordable relative to incomes. It's, of course, by definition less affordable relative to the other elements of the consumption basket if alcohol price increases have exceeded CPI. But measuring it against income increases lets them worry about the growing problem of alcohol affordability. (see section 17.5 onwards). Now, if alcohol is more income elastic than other goods, alcohol consumption could rise relative to other goods despite the relative price effect. But then we'd expect stronger movement in the aggregate consumption statistics, which remain pretty flat. And, we'd expect a lot of worries in the report about rich people are disproportionately represented in the harmful drinking stats.
  • They've fixed the nonsense of their prior view that heavy drinkers are as price responsive as moderate drinkers. That's good.
  • But, they worry a lot about harmful drinking instances by moderate drinkers. Recall, of course, that their threshold for a harmful drinking session is six standard drinks for a male: under three pints of 5% beer. It's no surprise that they find that a quarter of drinkers report meeting this rather low threshold. Sure, it's into the range where we start seeing increased mortality risk, but not crazy far into that range. If minimizing mortality risk is desiridatum, we all ought have a mandatory glass of wine per day.
I'm currently working through the Marsden Jacob report commissioned by LC on the economic costs of alcohol. Wishing I had a beer here ... egads.

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