Before we start working through Otago’s latest missive on minimum alcohol pricing, let’s re-state a few baseline facts.
- Heavy drinkers are less price responsive than are moderate drinkers. This is well established in Wagenaar’s metastudy, and is recognized (but then later ignored) in the Ministry of Justice’s report on alcohol minimum pricing. Here’s a table from that MoJ report. Heavy drinkers are somewhere around half as responsive to price increases as are moderate drinkers.
- Heavy alcohol use substantially increases your risk of some disorders: these disorders have positive aetiological fractions in normal tables looking at alcohol’s burden on the health system. But alcohol use also reduces the incidence of other disorders: these then typically get negative aetiological fractions. The 2008 Collins & Lapsley report in Australia included both the positive and negative health effects. When you add up all of the positive and negative effects, you get reduced all-source mortality risk, as compared to non-drinkers, up through consumption of about four standard drinks per day, with risk minimised at a bit under a standard drink per day. I summarised the evidence on the alcohol J-curve here and here, and contrasted it with the New Zealand Ministry of Health’s view here. Prior concerns about mixing former drinkers with never drinkers were worth worrying about, but have long since been answered.
Here are the key graphs from DiCastelnuovo and Donati:
- Drinkers get consumption benefits from drinking. You don’t have to assume perfect rationality to recognise that alcohol consumption is pleasurable for many many people. You can build stories around how imperfect information or bounded rationality could yield too much consumption for an individual relative to how that individual would judge things in a perfect world, but that just says that there is some net excess costs from the last units of consumption, not that all the prior units were worthless. The Ministry of Justice report handled this well by counting consumption reduction under minimum pricing or increased excise as a harm imposed on those consumers that could be offset by some health or other benefits.
- a 0.94% (1.12%) reduction in off-trade (on-trade) beer purchases,
- a 1.14% (0.07%) reduction in off-trade (on-trade) cider purchases,
- a 0.12% reduction (0.76% increase) in off-trade (on-trade) wine purchases,
- a 0.5% reduction (0.07% increase) in off-trade (on-trade) spirits purchases, and
- a 0.62% reduction (1.13% increase) off-trade (on-trade) RTD purchases.
Another significant concern is that the size of the elasticity estimates generated by AC Nielsen and the SHORE and Whariki Research Centre are very large compared to international estimates, and result in significant changes in consumption when the various pricing options are analysed. The large off-licence elasticities may be driven by the fact that both regular prices and promotional prices are included in the elasticities. The large on-licence elasticities are likely to be a consequence of a reasonably small sample size and cross-sectional data.
The discussion about whether minimum unit pricing is likely to be effective policy for New Zealand depends on the outcomes that are considered. The government’s analysis is focused only on whether the policy will deliver reductions in alcohol consumption by the heaviest drinkers, without increasing the cost of the cheapest alcohol to those who don’t drink so much. This is to misunderstand the range of benefits that can be attained by reducing alcohol consumption in all drinkers, and to undervalue the reduction in adverse effects of other people’s heavy drinking.
The gains come from putting a minimum price of alcohol that prices the poor out from consumption. Consumption that has a benefit – something that is ignored constantly.
Talk about evidence all you want (a lot hopefully – as evidence is central, and I respect the PHB for bringing empirical research up so constantly), but if your ethical framework places zero benefit on consumption choices of the poor your policy conclusion will be restricting the choice of those in poverty – always.
Concern over the effects of policy on drinkers other than those with the most harmful patterns is only warranted if reduction in consumption in these groups and the consequent health benefits are considered a poor outcome. Many harmful effects of alcohol have no threshold. For example, the leading cause of alcohol-related death in NZ women is breast cancer, and a woman who drinks two small glasses of wine a day has a 10% higher risk of breast cancer than a woman who has one. There are also substantial secondary benefits from reduction in other people’s drinking in the community – all for the price of giving up very cheap alcohol. These benefits include reduction in the risk that you or someone close to you will be injured by a drinker, the reduction in vandalism, disorder and intimidation in neighbourhoods and urban centres, and the large economic benefits to the country through reduction in healthcare costs and responses to crime.
PURPOSE:There is compelling evidence that heavy alcohol drinking is related to increased risk of several cancer types, but the relationship of light-moderate drinking is less clear. We explored the role of inferred underreporting among light-moderate drinkers on the association between alcoholintake and cancer risk.
METHODS:In a cohort of 127,176 persons, we studied risk of any cancer, a composite of five alcohol-associated cancer types, and female breast cancer. Alcohol intake was reported at baseline health examinations, and 14,880 persons were subsequently diagnosed with cancer. Cox proportional hazard models were controlled for seven covariates. Based on other computer-stored information about alcohol habits, we stratified subjects into 18.4 % (23,363) suspected of underreporting, 46.5 % (59,173) not suspected of underreporting, and 35.1 % (44,640) of unsure underreporting status.
RESULTS:Persons reporting light-moderate drinking had increased cancer risk in this cohort. For example, the hazard ratios (95 % confidence intervals) for risk of any cancer were 1.10 (1.04-1.17) at <1 drink per day and 1.15 (1.08-1.23) at 1-2 drinks per day. Increased risk of cancer was concentrated in the stratum suspected of underreporting. For example, among persons reporting 1-2 drinks per day risk of any cancer was 1.33 (1.21-1.45) among those suspected of underreporting, 0.98 (0.87-1.09) among those not suspected, and 1.20 (1.10-1.31) among those of unsure status. These disparities were similar for the alcohol-related composite and for breast cancer.
CONCLUSIONS:We conclude that the apparent increased risk of cancer among light-moderate drinkers may be substantially due to underreporting of intake.
Connor et al, as usual, insinuate that moneyed interests prevented their preferred lovely policy’s adoption.
It is difficult to understand the government’s decision when the Ministry of Justice report appears to appreciate the evidence-base for minimum unit pricing. Also the evidence from Sheffield and British Columbia have been available for some time. When the British government reneged on its commitment to introduce this policy in July last year, Prof Sir Ian Gilmore, chairman of the Alcohol Health Alliance UK, said the government had “caved in to lobbying from big business and reneged on its commitment to tackle alcohol sold at pocket-money prices“.
There’s a better and simpler explanation: the evidence base in the MoJ report was weak given their elasticity estimates, and the government wasn’t keen on running a nanny-state initiative in an election year unless the evidence were stronger.
So, some bottom lines:
- The elasticities reported in the Lancet study are out of line with what we’d typically expect;
- The health benefits reported in the Lancet study are very likely widely overestimated due to overestimation of heavy drinkers’ price responsiveness and due to the Lancet paper’s ignoring of the health benefits of moderate consumption (and the forgoing of same when price hikes induce moderate drinkers to cut back);
- The NZ Ministry of Justice report itself noted substantial problems in their elasticity estimates; the Minister was consequently entirely right to shelve plans for substantial price hikes or minimum pricing;
- See also Bill Kaye-Blake on this one. He commented:
The report appears to be a masterwork of consulting. It freely acknowledges that parameters are wrong and then uses them anyway. I’ve never had the guts to do that.
- See also Bill Kaye-Blake on this one. He commented:
There is a reasonable case for minimum alcohol pricing when combined with lower overall excise: if there’s reasonable evidence that lower-priced products are disproportionately consumed by harmful consumers and that we consequently do more to abate harms in that cohort than we do to impose harms on poorer moderate consumers, then minimum pricing lets you increase prices at the bottom end without doing as much harm to moderate consumption among middle-income consumers. But it has to be an empirical case based on reasonable elasticity estimates and weighing appropriately both harm reduction and consumption losses. The MoJ report failed on the elasticity estimates but at least got the framework right; the Connor et al post didn’t seem to think the consumption losses mattered.
- Minimum pricing
- Minimum alcohol pricing and economic rents
- Markets hate profits: minimum pricing edition
- Petrol tax:speeding :: alcohol tax:binge drinking
- Increasing excise is great, if you assume the right things
- The Omniscience Constraint
- Public health and the regulatory state
- Minimum pricing
- Minimum prices and mortality risk
- Evidence and minimum pricing
- About that Canadian study…
- Alcohol minimum pricing
- A hopefully concluding note on the price elasticity of alcohol
Disclosures: as I will be ceasing employment with the University of Canterbury effective 14 July, the Brewers’ Association of Australia and New Zealand has ended its contract with the University; my prior disclosures statement no longer applies. I am doing a bit of expert witness work on local alcohol policies that has nothing to do with minimum pricing.