Thursday 16 June 2011

Alcohol minimum pricing

The Australians are considering imposing alcohol minimum price regulation to reduce alcohol's social costs. Here's The Australian:
...decision by federal Health Minister Nicola Roxon to ask the National Preventative Health Agency to examine the idea of a uniform national floor price for a standard unit of alcohol, whether it be contained in beer, wine or spirits. Roxon described the referral as a preliminary but important step.
I'd noted some of the problems with minimum alcohol pricing last year. Unless there's really good evidence that the kinds of drinkers Roxon wants to target are really disproportionately hitting the cheap alcohol, we have to worry a lot about that moderate drinkers are far more responsive to price changes than are heavy drinkers. If the policy shifts enough "glass of cask wine per day" drinkers to not drinking, it will do reasonable harm given the health benefits of moderate drinking.

And as for that $30+ billion dollar social cost figure they're citing, recall that about $6 billion of it comes from this dodgy move alone, which I'd also noted last year. From that post:
At page 133, they provide some estimates of the economic costs of intangible harms Australians suffer as a result of someone else's drinking. Their survey respondents answer questions that give them a health-related quality of life score. A one-point drop in that score, they say, costs the individual the equivalent of $50,000. Respondents are sorted between those who cannot identify a known drinker who has negatively affected them, those knowing a drinker whose drinking has affected them "a little", and those knowing a drinker whose drinking has affected them "a lot". They take the mean quality of life score for each group, multiply the differences from baseline by $50,000, extrapolate to population averages, and come up with about $6.4 billion in costs.

There are a couple of pretty obvious problems here, if I understand their method correctly. Which I may not, but I'd love to hear if I'm wrong on this count. It really looks like they're just comparing sample means. If so, and if there are any other differences - differences unrelated to alcohol - between folks who have a close relationship with a problem drinker and those who don't, then the mean comparison is hopelessly confounded. There are all kinds of bad social circumstances that are predictors of problem drinking. Those same circumstances would lead to lower quality of life scores regardless of whether there's any drinking. Regression analysis is needed, not comparison of means.
I hope that the Australian health folks have more substantial foundations for their current policy push.

Here's Luke Malpass in The Australian [update: or, at least the journo's rendition - see Luke's comment, below]:
But Malpass demurs, saying figures on the cost of alcohol to society invariably fail to offset the benefits of the industry, including the employment generated, the export dollars created and, on some views, the positive health effects of the odd glass of wine.

"Across the socio-economic spectrum people enjoy a drink. But the unspoken assumption is that alcohol and cigarettes must be priced out of the range that these nanny-staters, these healthists, consider problematic. They assume people don't make a conscious choice to drink and not exercise. It's incredibly infantilising."

He says the so-called alcopops tax on pre-mixed drinks brought in by the Rudd government didn't achieve any behavioural change when it came to the alcohol consumption of young drinkers.

"The girls who would drink one Breezer or two Breezers don't any more. The alcohol tax changes resulted in perfect substitution, the teenagers stopped buying alcopops and instead bought a bottle of Jim Beam and mixed it with Coke."

More political intervention in this policy space is potentially politically damaging, according to former Labor senator John Black, now a political analyst.

"[A minimum price] would effectively be another tax on lower income groups and they won't like it," Black says. "It will have a disproportionate impact on people in the lowest income quintile, and it won't affect behaviour for those who are dependent and who have the problem. It's economics 101, inelastic demand."

There could well be blowback politically on the Gillard government, he says, with electorates containing a higher than average proportion of the nation's poor the political flashpoints.
I'd disagree with Malpass's the journalist's counting of employment as a benefit; the primary benefit ignored is consumption benefits to drinkers. Employment is a cost (think of it this way: we'd be better off if a genie appeared and wished every day's alcohol production simply appear and folks employed got to shift to other sectors). But Malpass is dead right about the healthists' disdain for the lower orders' pleasures. And Black is also right about the likely incidence.

Oh Australia, what's happened to you?


  1. This should be called the Moonshine Stimulus Act.

  2. Eric, the bit you disagree with is not a quote from me, and really misunderstood what I was saying, or I didn't explain it well enough. It was part of a wide ranging interview with the journalist, so two different points may be been conflated by one or both of us.
    If memory serves correctly I said that the primary benefits were to individual drinkers. I also was also talking about the overall benefits of alcohol consumption, not benefits of 'the industry'.

    I did however, at some point in the interview, point out that an awful lot of economic activity, and subsequent employment, was arranged around provision and service of alcohol, but I recall I was addressing a slightly different point. As it is, I may have used the word benefit, but it would have been in the context of what most people would consider a good thing, rather than a strict economic sense. I shall be vigilant about using the B word in the future!

    Aside from that, thanks for the compliments.


  3. Will update the post. It sure didn't sound like you!