Wednesday, April 28, 2010

Drinkers pay for themselves [update 3]

A big “hello!” to Leighton Smith’s listeners.

Leighton argues that as long as you and I are paying the medical bills of irresponsible drinkers, then irresponsible drinking is everybody’s business.

But, as a simple matter of fact, you’re not paying their medical bills.  You’re not paying their medical bills, because the taxes that are already extracted from drinkers more than make up for their external costs, including their public health costs.

Don’t take my word for that.  Listen to University of Canterbury economist Eric Crampton and Victoria University economist Matt Burgess, who concluded after extensive analysis just last year that the “external costs [of alcohol consumption are] roughly equal to collected tax revenues.”  They conclude, unequivocally

    “We find net external costs to be zero once full account of excise taxes is made.”

Or as Eric summarised on his blog yesterday:

    “Matt and I found last year that collected alcohol excise tax revenues exceed tallied external costs of alcohol misuse, which include the public health costs. It's consequently pretty depressing when we keep reading folks claiming that alcohol tax increases are a good idea because of the costs of drunks to the emergency room system. Those costs can be good reason for doing something like punishing actual behaviours that lead to costs while drunk, like drunk and disorderly or fights or drink driving. But they're not reason for hiking the tax: the tax already covers those costs.

So much for the argument that the “external costs’ of alcohol consumption make the consumption of alcohol everybody’s business. 

And no wonder the Crampton & Burgess report was not included in the Law Commission report.

UPDATE 1:  Yes, yes, I know the extraction of excise taxes is immoral. And I know the spreading of costs from some drinkers to other drinkers by means of the extraction of excise taxes is equally as iniquitous.  But as long as you accept the system that extracts taxes by force, and returns just a small portion of those taxes in the form of a government-run health system, then you’re stuck with arguing on that basis when you’re arguing about “costs” and “benefits.”

UPDATE 2: Eric points out in the comments that not only did the Law Commission not include Eric and Matt’s analysis as part of their recommendations (analysis which readers might remember, utterly demolished the earlier analysis on which the Law Commission was relying) but has instead commissioned further research that Eric says “could well be described as an orchestrated litany of lies.”

Naturally, he’s begun the task already of unravelling it. See:

UPDATE 3: Why this focus on “external costs”?  Matt Nolan explains the way economists think when they’ve got their socks economist’s hats on:

    “Remember the simple fact that, as long as we believe people are responsible, have better information on themselves, and are better able to make choices regarding themselves then arbitrary regulation (or some lesser combination of these points), then we shouldn’t focus on the entire ‘social cost (private + external costs)’ associated with alcohol when regulating.
    “The focus should only be on the external cost – the cost placed on other individuals from the choice of one individual.  The private costs are already being taken account of when the choice is made.
    As a result, if the calls of a 50% increase in excise tax are not based just on true external costs, but also broader private costs, they are asking for ‘too much tax’ in a strict ‘efficiency’ sense.  They may be doing this as they genuinely dislike alcohol (although the risk of unintended consequences spring to mind here--namely people drinking more alcohol beverages if the cost-per-alcohol-unit is lower, and also people brewing their own), or because they think people are inherently stupid.  However, neither of these reasons seems like a good justification for policy.”

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4 Comments:

Anonymous Barry said...

Are you sure the Minister was only referring to monetary costs? Did I miss something or did they also put a cost on emotional damage to peoples lives through alcohol related deaths.

If they are trying to put monetary values on alcohol-related hurt and death and it's resulting misery...

4/28/2010 10:49:00 am  
Blogger Eric Crampton said...

It's worse than that, Peter. They commissioned an Aussie consulting firm to produce a report that could well be described as an orchestrated litany of lies.

4/28/2010 10:50:00 am  
Blogger Richard McGrath said...

Barry, just one of the problems with the Face That Needs Punching and his friends was that they failed to take into account the benefits from drinking alcohol.

To their (closed) minds, there is nothing on the positive side of the ledger.

In moderation, alcohol enhances one's enjoyment of life. But what would those wowsers know about enjoyment?

4/28/2010 11:22:00 am  
Blogger Dave Mann said...

It amazes me that the idiotic killjoys want to regulate, tax and control everything for EVERYBODY while they continually fail to address the actual problem (if there really is one).

For example:

1) Why is there no PENALTY or FINE for an underage person BUYING alcohol? Why is the onus put on the seller, when it is actually the underage BUYER who is knowingly committing the offence?

2) Why, if drunkenness is supposed to be such a big problem, are there no laws against being drunk and disorderly in public? Why should EVERYBODY be forced to bear the brunt of the government's facistic authoritarianism just because a FEW people cannot control themselves?

This whole argument is just another example of lazy, authoritarian statism seeking to control us all like a flock of sheep and using any old excuse to do so.

Off with their fucking heads. We need a revolution and we need it FAST before breathing becomes illegal.

4/28/2010 12:57:00 pm  

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