Monday, April 17, 2006

Policies on booze

The Age, this morning proposes taxes on alcoholic products that are proportional to the alcohol content (volumetric taxes) rather than ad valorem taxes (taxes that are a fixed proportion of price) on the value of a product. This follows earlier claims by AMA President Bill Glasson for the same type of tax. It is claimed that current ad valorem taxes are a major cause of the disproportionate levels of alcohol-related harm experienced in some areas, particularly in some Aboriginal and Torres Strait Islander peoples and communities. Being based on price, ad valorem taxes take no account of the alcohol content. It hence favours the production and sale of cheap cask wine.

With some qualifications such a tax will work provided price elasticities are high enough. Recent UK work suggests they are. The UK Treasury estimate price elasticities for beer at -1.0, spirits -0.9 and wine at -1.1. A price elasticity of -1.1 means that a 10% increase in price will reduce consumption by about 11%. Interaction effects with income can strengthen these price effects. Those on low incomes (the poor and the unemployed) with low incomes might display stronger price-elasticity effects.

Of course such a tax will inevitably be regressive and falls on people who drink sensibly and for whom a glass of wine is a pleasant conclusion to a busy day as well as drunks.

Alcohol is a potentially dangerous drug - it is neurotoxic. As previously discussed on this blog its positive health effects may be considerably exaggerated. And alcohol may hold particular problems for adolescents and young adults. A variety of health, assault and road accident problems are linked to alcohol. There are, however, more specific policies than taxes for targeting those at risk from alcohol.

Education policies have turned out to be expensive and many claim they are ineffective. One crucial item of information that is often not presented relates to the alcohol consumption of a father. There is a strong genetic basis for problem-drinking (and here) and those with alcoholic fathers probably should not drink. Those coming from dysfunctional families where physical and sexual abuse have occurred may also be triggers for alcoholism. But these are fairly non-specific triggers to act upon and are difficult situations to identify.

Alcohol is linked to 30% of car accidents in Australia and campaigns to limit drink-driving clearly make sense. It seems some of the punch has gone out of such campaigns. People accept a drink-driving conviction as a working hazard of modern life. It is no longer a social disgrace. My suggestion is to steeply increase penalties to enforce ignition interlocks and to jail (without fail) repeat offenders. This is a penalty that is directed at a harmful consequence of drinking rather than drinking per se. So too are regulations directed at alcohol vendors that prohibit sales to those intoxicated.

Banning advertising and restricting the availability of alcohol via trading hour restrictions do not make much sense to a libertarian who believes in rational choice models. But they do make sense to those of us who recognize self-control issues associated with excessive alcohol consumption and the role of cue-related responses to advertising and promotional stimuli. And banning alcohol advertising is very effective – this is why the liquor lobby oppose it so intensively.

Minimum age restrictions make much sense if you believe (as some suggest) that the brain neuron-killing potential of alcohol is most severe during adolescence and if you paternalistically agree that lids are excessively impulsive and prone to self-harm. Grow up first boys and girls.

And finally we need to deal with those who do have alcohol problems with therapies, drugs and other treatment policies. This is a vast subject for another posting but two points. (i) Providing treatment reduces user costs of abusing alcohol so that direct harm-reduction will be to some extent offset by induced increase use. (ii) Treatment of those with problems offers less gain to society than preventing potential abusers from ever abusing. This is not a sternly critical rebuke to the important work done by treatment agencies, just fact.

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