Petrol tax:speeding :: alcohol tax:binge drinking

By Eric Crampton 04/02/2014 2


If you want to reduce binge drinking, excise tax rates are a remarkably blunt instrument. We don’t use petrol taxes to curb drag racing; we shouldn’t think that alcohol excise is a great solution to binge drinking.

I’d posted last year on a nice Australian study by Byrnes et al who found that tax increases did a lot to curb light and moderate drinkers’ consumption, but did little to stop binge drinkers. Heavy drinkers did respond to the price hikes, but only by cutting back on their light drinking days. They still binged on the weekends.

Was that study representative? A new metastudy by Jon Nelson says so. Jon went through 56 papers examining the effects of alcohol taxes or prices on binge drinking and found very little effect. He writes:

A large body of evidence now indicates that binge drinkers are not highly-responsive to increased prices or taxes, and may not respond at all. Nonresponsiveness holds generally for younger and older drinkers and for male and female binge drinkers alike. Increased alcohol prices or taxes are unlikely to be effective as a means to reduce binge drinking, regardless of gender or age group.

Nelson notes that a lot of alcohol policy papers suggest prices as effective mechanism against binge drinking. Livingston’s review, quoted by Nelson, looks a lot like the Law Commission’s review of the effect of prices on heavy drinkers from a couple of years ago. Nelson on Livingston:

A recent review by Livingston (2013, p. 374) argues that “many critics of alcohol taxation suggest that it fails to affect problematic drinkers [but] this is not supported by the literature, with studies showing that both young people and heavy drinkers respond to price changes.” A Global Strategy report of the World Health Organization (2010, p. 16) states that “. . . increasing the price of alcoholic beverages is one of the most effective interventions to reduce harmful use of alcohol.” These and similar statements tend to be based on limited literature reviews or econometric studies that focus on population-level demand, and not alcohol demands by individual binge drinkers and other heavy/excessive drinkers.

 And me on LC:

The LC cites a WHO study arguing that heavy drinkers are no less elastic than other drinkers. A quick check shows the WHO is looking at 2-3 studies while the above-linked one [me citing Wagenaar] is a meta-study of more than a hundred, with results that are near identical to another meta-study of similar magnitude. The latter, forthcoming in the Journal of Economic Surveys, doesn’t give a breakdown between heavy and light drinkers, but has near identical estimates of average elasticity. I give a heck of a lot more weight to a serious meta-study, and especially when two of them give near-identical results, then to a couple of pieces picked from the potential list. If there are more than a hundred studies, you can always find a few that give you numbers you like.

Looking more closely at the Law Commission’s preferred WHO finding, … wow. Terrible work.

While heavy drinkers are sometimes thought to be likely to be less affected by price, the Committee found that the evidence does not support this belief, with higher prices affecting the amounts consumed by frequent and heavy drinkers. This finding is supported by a large body of evidence which has shown an impact of prices on harms caused by alcohol, also indicating therefore that heavier drinking has been reduced (34). Natural experiments that have occurred recently in Europe as part of changes required as consequences of economic treaties have shown that as alcohol taxes and prices have been lowered, so sales and alcohol consumption have increased (37). In some jurisdictions in Europe, special taxes have been introduced for spirit-based sweet premixed drinks, in response to increases in young people’s drinking (38). These have led to reductions in sales and consumption of the specific drinks.

Nothing in the paragraph supports the WHO’s argument. Nothing. Demand curves slope downwards, that’s all they’re saying. All groups are somewhat elastic in that demand drops when price increases. The question at hand is whether moderate drinkers reduce their consumption by more than do heavy drinkers, and they provide zero evidence supporting their opening claim. I cannot see how the Law Commission dismissed the findings of the meta-study based on this paragraph.

Why does this matter? There are a whole pile of price-based regulations that get recommended because of potential effects on binge drinking: alcohol minimum pricing, alcohol excise, banning price discounting at bars (happy hours), for example. Nelson finds they don’t really do much, whether for youths, young adults, or adults. Some fun results from field experiments:

The natural experiments examine tax reductions on beer and wine (Hong Kong), spirits (Sweden, 14 Switzerland), and all beverages (Finland). Tax cuts range from 100% in Hong Kong to about 30-50% in Nordic countries. A study for Finland by Helakorpi and colleagues (2010) finds mixed effects on binge drinking, while four other studies report null effects on binge drinking and heavy drinking more generally. In some cases, empirical results appear to be dominated by existing trends toward less binge drinking, which are not offset by tax cuts and reductions in alcohol prices.

There are four field studies for the United States, one for Australia, and one for the United Kingdom. Varied price measures are examined: free alcohol at events (2 studies); price discounting such as pitcher specials, drinking game discounts, and buying rounds (3); fixed fee/ cover charges for all-you-can drink (one study); and average price comparisons by drinking level (one study). A study by Clapp and colleagues (2003) reports null results for free alcohol, but Wagoner and colleagues (2012) find that free drinks increase binge drinking by both genders.

Thombs and colleagues (2009) report that fixed-fees increase chances of intoxication among college students, but other price promotions are not significant. Stockwell and colleagues (1993) reports null results for price discounting among young adults in Australia, while Jamison and Myers (2008) and O’Mara et al. (2009) report mixed results for binge drinking and intoxication. Overall, this is a mixed set of results. Four United States studies use college student respondents, so results can be compared to seven studies using Harvard CAS data. Three CAS studies report that fixed fees increase binge participation (Powell et al., 2002; Wechsler et al., 2000; Weitzman et al., 2003), but three studies also report null results for fixed fees or free drinks (Williams et al.,2005; Wolaver, 2007; Wolaver et al., 2007a).

A few further points:

  • The cutoff for binge drinking in the NZ data is 5 standard drinks for youths and 7 for adults. Seven standard drinks is more than I would have in a typical session. But a half litre of Renaissance Scotch Ale, at 7%, is 2.8 standard drinks. Say you get to the Staff Club at 4:30 on a cool winter’s day and have a pint. Then you have another at 6. Then you have a half-pint at 7:30. You’ve just had a binge drinking session, and you’ve very likely not gotten drunk. Sure, it’s more than you should have on average every night, but you don’t go to the Staff Club every night, do you? Binge drinking encompasses a range of drinking patterns both harmful and (relatively) harmless.
  • There’s been a fair bit of recent media talk around the burden of drunks in the emergency department. I’d love to know how much of that could be reduced by having a separate facility, staffed by a paramedic and a cop, where drunks with minor injuries, or who are too intoxicated to drop anywhere else, could be kept until they’re sober enough to release. Put a fee for service on the facility so it recoups its costs. It’s no surprise that emergency room doctors get fed up with obnoxious drunks who get dumped there. Question is why we’re leaving so many there for so long rather than moving them on to far less costly holding facilities. 

SciBlogs note: my standard disclaimer on alcohol issues applies.


2 Responses to “Petrol tax:speeding :: alcohol tax:binge drinking”

  • Your opening analogy between speeding and binge drinking is faulty. Speeding is how fast you choose to go with a given volume of fuel. Binge drinking is choosing a large volume of alcohol to consume in a short period of time.

    • You have a litre of petrol. You can use it up driving reasonably for 10 km, or in a one km race.

      You have a litre of vodka. You can use it up reasonably over a couple of months, or drink most of it in an evening.

      Taxes are a bad way of inflencing choices between those alternatives.