Hi Paul,

The key thing for me is trying to identify the externality – and trying to understand the nature of the individual action involved.

The hard thing with “problem drinking”, “problem smoking”, “problem drug taking” is that often the externality we observe is either:

1) A cost on the individual (or a related internal unit – eg the family), not an actual externality

2) A result of OTHER CHARACTERISTICS of the individual – eg the drinking/smoking/drug taking is a symptom not a cause of the actions.

In such a case, I fail to see how a tax instrument provides a very good tool for what is likely to be a mental health issue. I try to flesh out this idea a bit here:

http://www.tvhe.co.nz/2014/02/04/policy-and-heterogeneity-a-point/

My biggest concern is that policy is starting to be based on what the “ideal” individual should be – and if people differ it is a “cost” to “society”. This is not right, and it seems that it is my own discipline that is most determined to push this type of idea 😐

Re this issue in general. I think that there are two types of problem drinking: (1) binge drinking (excessive drinking once or twice a week) and (2) traditional alcoholism (drinking every night).

Policy in NZ reduces (2) but increases (1).

When you increase the price of alcohol it makes it more difficult to drink every night.

However it is still possible to drink excessively every Saturday. In fact, the more expensive alcohol is the more people binge drink. It is to do with wanting to drink in ‘town’ but only being able to afford to drink at home. To get around this people drink excessively at home and then go to town. I dont believe people get super excessively drunk on purpose, this is a by-product of getting ‘pre-loading’ but getting it wrong. That last shot of vodka before town, intended to save $10, but actually being one that wasnt actually needed.

If I was setting policy I would take similar measures to status quo on alcohol bought for home consumption, but attempt to make measures to make alcohol bought ‘in town’ closer in price. For example, currently a beer costs approx $2 per bottle at super market at $8 bottle in night club. If this was $2 and $4 the incentive to drink at home rather than at night club would be less. People would then drink as they need it rather than in preparation, and the risk of getting it wrong would cost less.

This also has the benefit of helping bars take responsibility as people will be in bars rather than sneaking a last woody out of the boot of a car. Thoughts?

Yeah, they’re pretty dismissive of that consumers might enjoy such things.

Yes.

I was criticising the rhetoric of the post here – which was to concentrate on benefits from the reduction in consumption.