Monday, 2 November 2009

Alcohol submission

Matt Burgess sent off our joint submission to the Law Commission on Friday. It's available here. Highlights:
  • The best available evidence shows heavy drinkers respond less to price increases than do moderate drinkers; the costs on moderate drinkers of excise tax increases are therefore much higher than the Law Commission previously believed given their assertion that heavy drinkers respond more to price increases than moderate drinkers.

  • Public health measures of social costs bear no resemblance to economic measures of social costs and should be treated with skepticism.

  • Economists' recommendation to focus on external costs does not depend on strong rationality assumptions.

  • Alcohol and other intoxicants are substitutes; raising the price of one may induce substitution towards others. DiNardo and Lemieux find the US drinking age increase to 21 resulted in an increase in marijuana prevalence more than half the magnitude of the decrease in alcohol prevalence.

  • Individuals seem to overestimate the risks of becoming alcoholics, and youths especially overestimate this risk. Worries about "imperfect information" causing too much consumption are overblown. See Lundborg and Lindgren 2002.

  • Rashad and Kaestner 2004 provide some apposite warnings of drawing causal relationships from correlations between youth drinking and adverse youth outcomes; underlying variables may cause both.

  • The Law Commission should weigh more heavily the costs their proposed policies may impose on moderate and sensible drinkers.

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