Ideas@TheCentre
The costs of alcohol: all dollars and no sense
New Zealand is currently experiencing a great wringing of hands about binge drinking – the media, politicians, police and public health figures have whipped up a storm of public concern about the social costs of alcohol, demanding government do something.
In response, the Law Commission is investigating the accompanying legislative framework. It is expected that recommendations will include higher taxes and more restrictive liquor laws.
Binge drinking is sometimes a problem, and no doubt in extreme cases can make emergency departments unpleasant. Like it or not, drinking is a central part of life in the antipodes—this is a cultural issue. The historical legacy of ‘the six o’ clock swill’ has surely shown that the problems associated with binge drinking will not be alleviated by introducing more restrictions.
One reason for the most recent public concern is a report cited by the commission that estimated the social costs of alcohol consumption at NZ$4.8 billion. But this report, written for the ministry of Health by Business and Economic Research Limited (BERL), seems to have it wrong.
BERL has come under trenchant criticism from Dr Eric Crampton (University of Canterbury) and Matt Burgess (NZ Institute for the Study of Competition and Regulation) in a report suggesting that BERL’s figures are a staggering 96.9% too high and that the real social costs amount to only NZ$146.3 million.
This is a jaw dropping difference. As is pointed out, the problem with the BERL (and many a public health) report was its use of an epidemiological, not economic, measure for harm. It assumes anyone drinking over this margin (1.8 pints/3 schooners of beer, one large glass of wine, or a home poured G&T for men, less than one of each for women) is irrational and that irrational consumers gain zero gross benefit from drinking. These are unrealistic and unsound assumptions.
Alcohol consumption has obvious benefits such as social networking, relaxation and fun. Are most people who drink in these contexts really irrational?
Hopefully, the Law Commission will consider this analysis and not jump into taxing and regulating relaxation for sake of appeasing widespread misconceptions.
Luke Malpass is a Policy Analyst in the New Zealand Unit at the Centre.
