With alcohol, cost rules

The biggest alcohol deterrent? Price

A bar in a college town during “happy hour” is a perfect laboratory to gauge the effect of price on alcohol consumption. Cash-strapped young adults jam these establishments where binge drinking is acceptable, even encouraged.

University of Florida researchers analyzed more than 100 studies spanning four decades on price elasticity of alcohol. The results were consistent: When prices go down, people drink more. When they go up, people drink less.

In fact, price decreases alcohol consumption more effectively than law enforcement, media campaigns and school health classes. And price is most efficiently manipulated by taxes.

Doubling alcohol taxes would reduce alcohol-related deaths by more than one-third, traffic accidents by 11 percent and sexually transmitted disease by 6 percent, according to one study. For example, a fifth of gin in New York State had a tax of $.55 in 2010. It also estimated that a 10 percent increase in retail price would reduce drinking by 5 percent.

But alcohol prices are going in the other direction. Federal and state alcohol taxes have declined significantly since the 1950s when adjusted for inflation, as has the overall price of alcohol. That is likely a result of high profit margins on alcohol and the industry’s powerful lobbying presence in state capitals and Washington.

Binge nation

The federal government recently released a report on binge drinking, and it is startling. One out of 6 Americans consumes eight alcoholic beverages at a sitting about once a week. The figure comes from a survey of more than 450,000 U.S. adults.

Researchers say that survey respondents typically understate how much they drink.

According to conventional wisdom, young adults are the ones who knock back insane amounts of alcohol. However, more than 1 out of 3 binge drinkers are 35 or older. They also binge-drink more frequently than the younger crowd. Older binge drinkers are more likely to earn more than $50,000 annually.

Moderate drinking has been found to have health benefits. That is defined as two drinks a day for men and one daily drink for women.

Unlike moderate drinking, binge drinking is unequivocally bad. It is a leading preventable cause of death, killing about 79,000 Americans annually and shortening lives by about 30 years.

Heavy drinking raises the risk of liver disease, heart disease, depression, stroke and several types of cancer. But it also leads to injury and accidental death. Alcohol is a factor in about 60 percent of fatal burn injuries, drownings and homicides; 50 percent of trauma injuries and sexual assaults, and 40 percent of fatal motor-vehicle crashes, suicides and fatal falls.

The economic impact of alcohol-impaired driving is estimated at $51 billion, of which about 15 percent represents medical costs. Almost 1 out of 8 binge drinkers drive within two hours of drinking. More than half of those consume the alcohol in a bar, restaurant or club.

Professional sports events are also hotbeds of binge drinking. One out of every 12 fans leaving a game is legally intoxicated. Those who tailgated were 14 times more likely to leave the stadium with an illegal blood-alcohol level of .08 or higher. One out of 4 tailgaters had five or more drinks.

Alcohol is the lubricant of many social occasions. And drinkers are heavily influenced by how much is consumed by those around them. A study of social networks shows that people are 50 percent more likely to drink heavily if someone they are connected to does so. The network’s influence has a ripple effect. If a friend of a friend drinks heavily, the effect is 36 percent. Even a third-degree separation – a friend of a friend of a friend – raises the risk by 15 percent.

 

The price elasticity of alcohol

The biggest alcohol deterrent? Price.

According to Canadian researchers, setting a minimum price can curb binge drinking. For every 10 percent increase in the minimum price, people drank about 9 percent less wine and more than 3 percent less hard liquor. Beer consumption, it turns out, barely budged.

A bar in a college town during “happy hour” is a perfect laboratory to gauge the effect of price on alcohol consumption. Cash-strapped young adults jam these establishments where binge drinking is acceptable, even encouraged.

University of Florida researchers analyzed more than 100 studies spanning four decades on price elasticity of alcohol. The results were consistent: When prices go down, people drink more. When they go up, people drink less.

In fact, price decreases alcohol consumption more effectively than law enforcement, media campaigns and school health classes. And price is most efficiently manipulated by taxes.

Doubling alcohol taxes would reduce alcohol-related deaths by more than one-third, traffic accidents by 11 percent and sexually transmitted disease by 6 percent, according to one study. For example, a fifth of gin in New York State had a tax of $.55 in 2010. It also estimated that a 10 percent increase in retail price would reduce drinking by 5 percent.

But alcohol prices are going in the other direction. Federal and state alcohol taxes have declined significantly since the 1950s when adjusted for inflation, as has the overall price of alcohol. That is likely a result of high profit margins on alcohol and the industry’s powerful lobbying presence in state capitals and Washington.