The economics of curbing alcohol consumption

at 02:00 PM ET, 01/07/2012


(UESLEI MARCELINO - REUTERS)
Late last year, the Centers for Disease Control ran the numbers on how much binge drinking costs the United States. They came up with a pretty big number: Excessive alcohol consumption costs $223.5 billion each year, mostly due to lost workplace productivity and increased health care costs.

New research from a team of Canadian researchers explores one way to bring down that cost: Set minimum alcohol prices. They find, in an article to be published in the journal Addiction, that governments can drive down drinking by setting higher minimum prices for alcohol, an approach that could be more politically feasible than taxing liquor.

Researchers Tim Stockwell, M. Christopher Auld, Jinhui Zhao and Gina Martin combed through historical data on minimum alcohol prices in British Columbia, where the provincial government sets a price floor for various liquors, beer and wine. The number has moved around a lot in the past few decades, creating a natural experiment to look at what happens when alcohol is more or less expensive.

For every 10 percent hike in minimum alcohol price, they found people drank 3.4 percent less alcohol. For certain drinks, the effect was even more pronounced: Increasing the minimum price of wine by 10 percent correlates with an 8.9 percent drop in consumption. Beer, however, appeared relatively resilient to price fluctuations, with a 10 percent bump lowering consumption a paltry 1.5 percent.

The researchers contend that minimum alcohol prices could reduce excessive alcohol consumption, and the negative public health outcomes that come along with it, in a way that’s more politically palatable than a tax. Food taxes have also struggled to encourage healthy eating. A 2007 study from the Forum for Health Economics and Policy modeled the impact of a 10 percent fat tax on fatty dairy products and found unimpressive results, with little in the way of behavior change. For a soda tax to get results, it usually has to be about 1 cent per ounce, a level of taxation that most state-passed fees don’t reach.

Minimum pricing, the authors argue, could get around a lot of the political downfalls of taxing unhealthy foods. “Minimum pricing promises the twin advantage of greater effectiveness for health purposes and greater public acceptability,” they write, noting the “strong evidence that hazardous and problem drinkers seek out the most inexpensive alcohol so as to maximize ethanol intake per dollar spent.”

England and Wales recently passed legislation that prohibits selling below-cost alcohol, to take effect in April. Scotland is weighing a similar bill, but it’s come under fire from the alcohol industry there. The Scottish Whisky Association has been a particularly vocal opponent, arguing “Minimum pricing will fundamentally damage the Scotch Whisky industry at home and abroad with negative consequences for the wider economy.”

 
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