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The case for setting a minimum price on alcohol

More expensive alcohol may not sound like a great idea. But really, it is.

A man drinks beer. Philipp Guelland/Getty Images

Your booze is probably too cheap.

That’s probably not something most people who enjoy beer, wine, or any other alcoholic beverage think at the store or bar, but it’s a view widely shared by public health and drug policy experts — especially as the effective price has fallen due to market competition, mass production, and policies that have failed to keep up with inflation.

The concern about alcohol’s price has most recently come up through the Republican tax law, which cut the federal excise tax on alcohol by roughly 16 percent. In the lead-up to the vote, many economists argued that, if anything, the tax should be increased — as much as four times over — to make up for the external costs related to alcohol, from drunk driving to liver cirrhosis to the spread of sexually transmitted diseases.

But there’s another policy that could be used to raise the price on alcohol, if lawmakers want to seriously address this issue: a national minimum unit price on alcohol. This is something that Canada already does, that some states do, and that parts of the UK are considering following a court ruling that allowed Scotland to move forward with its own minimum pricing policy. It has the advantage of being more targeted than a tax: While a tax is applied to all alcoholic beverages, a minimum price is more likely to impact cheap booze that’s very often bought solely to drink in excess.

Okay, that’s nice. But why the hell should the government have anything to do with your booze, right?

The basic argument here is that alcohol can be dangerous — but its often low price doesn’t always account for that. This gets into what economists call an “externality”: a side effect of a product that has a negative impact on society as a whole but isn’t reflected in its price, which can skew consumers toward favoring or embracing a cheap product that is in fact dangerous. Think carbon-based fuels, which can be much cheaper than alternative fuels that don’t contribute as much or at all to global warming. A product’s price should reflect its externalities so there is a deterrent to excessively consuming it.

Alcohol definitely has some big externalities: Excessive drinking is linked to 88,000 deaths each year in the US, making it the third leading cause of preventable death in America after smoking and the combination of poor diet and physical inactivity. Alcohol has also contributed to the rise in deaths in the opioid epidemic, since drugs like opioids are often used alongside booze — and that increases the chance of overdose due to how both drugs interact once consumed. Indeed, both alcohol-related and opioid overdose deaths have risen in the US for years.

And death is only one external cost of alcohol, with others including more crime, car crashes, and reduced economic output.

Much of this is enabled by cheap alcohol, which, based on the research, makes it easier to drink in excess. So maybe it’s time to try a different approach.

How a minimum unit price works

A minimum unit price on alcohol isn’t new. But it’s received some renewed attention in policy circles this year after a court ended a years-long challenge against Scotland’s minimum pricing plan, prompting other parts of the UK to consider the policy.

The basic idea is that the price of alcohol — or at least some alcoholic beverages — is too low, enabling excessive drinking. So raising the price could help cut back on excess boozing, which would in turn produce all sorts of public health and safety benefits.

The research backs this up: A 2013 review of the research by Tim Stockwell and Gerald Thomas at the Centre for Addictions Research in Canada found that, based on data from Canada, “a 10% increase in average minimum price would result in the region of an 8% reduction in consumption, a 9% reduction in hospital admissions and a 32% reduction in wholly alcohol caused deaths — with further benefits accruing two years later.” Negative side effects, such as people resorting to potentially dangerous bootlegging to get cheaper alcohol, were minimal, the review found.

Under the policy, the government sets the minimum price on every alcoholic beverage. Businesses and stores can then decide to sell alcohol at the minimum price or above it, but not below.

Prices can vary depending on the type of alcoholic beverage. In British Columbia retail outlets, for example, the minimum price for packaged beer (in bottles and cans) in 2016 was $3.19 (in Canadian dollars) per liter, while the minimum price was $6.44 per liter for wine and $27.88 per liter for spirits.

There are two big reasons to do this over a traditional excise tax.

First, an alcohol tax affects all alcoholic beverages. But a minimum price hits a smaller pool of cheaper products. In doing this, the minimum price targets excessive drinkers, because they tend to be, according to the research, bargain shoppers, while moderate drinkers are less likely to hunt down the lowest prices.

There’s a simple economic explanation for this: If you’re a heavy drinker, alcohol is simply going to make up much more of your budget — so you’re going to look for cheaper stuff to cut down costs. After all, you’re not in it so much for the taste, but just to get drunk. So who cares if you have to buy a cheap, gross malt liquor?

Alcohol. David Silverman/Getty Images

If you’re a moderate drinker, though, you don’t have to worry so much about price. Since you don’t drink that much, whatever you prefer and buy — whether it’s a six-pack of beer or a nice bottle of wine — will be a small, less frequent part of your budget.

“If I drank whiskey every single day, I would definitely bargain shop for whiskey,” Keith Humphreys, a drug policy expert at Stanford University, told me. “But because I only drink whiskey once every six months, I don’t really care what it costs.”

To envision how this works in the real world, Humphreys gave me a hypothetical of two people with similar incomes.

One is Sally, who likes to have a beer occasionally after a tough day at work. She goes for her favorite: Budweiser. (Don’t judge Sally.) Each 12-ounce can of beer costs her $1 per unit of alcohol.

Then there’s Joe. He just wants to get drunk every night, with little care for the taste. He tried to do this with Budweiser before, but it was too expensive. Then he figured out that malt liquor in 40-ounce bottles has way more kick per dollar. So he started to buy that. This ends up costing him about 30 cents per unit of alcohol.

Now the government raises the minimum price of alcohol to 50 cents per unit. In this case, Sally isn’t affected at all since her Budweiser is already $1 per unit, but Joe’s costs go up. So Joe has to cut back on his drinking, since he can’t afford it anymore.

This is just one hypothetical, but it shows, generally, how minimum pricing hits heavy drinkers harder than moderate drinkers.

Another benefit to minimum prices over alcohol taxes: Businesses get to keep the revenue from the minimum price. This mitigates the potential impact a higher price of alcohol — that aims to reduce consumption — may have on the economy and jobs. “It tends to be an even break,” Humphreys said. “[Merchants] have fewer people buy stuff, but they’re charging more.”

This does mean that the government will miss on some potential revenue compared to an excise tax, some of which could have been used for programs that further combat excessive alcohol consumption. But this does have an upside: It upends some of the perverse incentive governments may have to encourage drinking — since it won’t have as many revenues based on how much alcohol is sold.

Of course, an alcohol tax and minimum pricing can also go hand in hand if necessary. The general idea is alcohol’s price is too low, so the government should take steps to make drinking more expensive. Any policies to that effect are a gain, at least from a public health perspective.

A higher alcohol price targets excessive drinking in particular

A common refrain regarding higher alcohol prices, whether forced through higher taxes or higher minimum prices, is they unfairly target and hurt all drinkers, even responsible ones, and that people who drink excessively — and may be addicted, after all — are going to drink no matter what the price is.

This isn’t true. For one, minimum prices only raise the price on booze that’s below the, well, minimum price. That won’t affect a lot of alcoholic beverages, particularly the fancy expensive stuff that many moderate drinkers, who are in it more for the taste than for getting as drunk as possible as cheaply as possible, seek out. That’s part of why studies show that a minimum price affects heavy drinkers the most.

With a higher alcohol tax, there’s another reason the impact is mostly felt by heavy drinkers: If someone is only buying a six-pack of beer or one bottle of wine a week, then a price increase of, say, 50 cents probably won’t mean much. But as someone buys more and more, that extra cost builds up — and eventually becomes inhibitive.

The research supports this, finding that a higher alcohol price not only gets people to drink less but has a particular impact on excessive drinking and its negative outcomes.

The Task Force on Community Preventive Services in 2010 reviewed the research on alcohol’s “price elasticity,” which is how much consumption changes with price. The results were clear: “Nearly all studies, including those with different study designs, found that there was an inverse relationship between the tax or price of alcohol and indices of excessive drinking or alcohol-related health outcomes. Among studies restricted to underage populations, most found that increased taxes were also significantly associated with reduced consumption and alcohol-related harms.”

This chart shows the findings, with each number representing the percentage effect on excess consumption for every 1 percent increase in the price of alcohol:

A chart showing alcohol’s price elasticity. Task Force on Community Preventive Services

Other research shows that price increases lead to positive public health outcomes. David Roodman, a senior adviser for the Open Philanthropy Project, has conducted really thorough, impressive reviews of the research, from the effects of incarceration on crime to the domestic economic impacts of immigration. He also in 2015 took a look at the research on alcohol prices. His findings were incredible (emphasis mine):

The literature on this topic is large, and at first glance it seemed that the high-quality studies contradicted each other. Yet as I dug deeper, I found a pattern: the larger the experiment — the larger the price change — the clearer the effects. In the end, I believe the preponderance of the evidence says that higher prices do correlate with less drinking and lower incidence of problems such as cirrhosis deaths. And I see little reason to doubt the obvious explanation: higher prices cause less drinking. A rough rule of thumb is that each 1% increase in alcohol price reduces drinking by 0.5%. Extrapolating from some of the most powerful studies, I estimate an even larger impact on the death rate from alcohol-caused diseases: 1-3% within months. By extension, a 10% price increase would cut the death rate 9-25%. For the US in 2010, this represents 2,000-6,000 averted deaths/year.

To put it another way, paying about 50 cents more for a six-pack of Bud Light would probably save thousands of lives every single year.

This is a conservative estimate. It only counts deaths from alcohol-caused diseases. The number of saved lives would be higher if it accounted for alcohol-related deaths due to violence, car crashes, and other problems.

And yes, a higher alcohol price would have an effect in those other areas as well. A 2010 review of the research in the American Journal of Public Health, for example, concluded, “Our results suggest that doubling the alcohol tax would reduce alcohol-related mortality by an average of 35%, traffic crash deaths by 11%, sexually transmitted disease by 6%, violence by 2%, and crime by 1.4%.”

In short, higher alcohol prices — whether set through minimum pricing or taxes — really do reduce alcohol-related problems, particularly heavy drinking.

A common counterargument is that higher alcohol prices or taxes could lead to job losses, since the alcohol industry may be forced to fire workers or hire fewer people to make up for the profits lost as a result of the taxes and as people cut back on their drinking. But studies and researchers have found that the revenue from the taxes and the spending shift from alcohol to non-alcohol products can lead to, on net, more jobs.

But even if higher alcohol prices lead to fewer jobs in some cases, they could still be worth it. Jobs aren’t everything; public health and safety matter too.

Another common case against higher prices on alcohol is that these policies are regressive and affect the poor more, because low-income people are less likely to be able to afford cheaper alcohol.

A 2014 study in The Lancet demonstrated that while it may be true, the counterclaim only tells half the story. The other side: Low-income people also see the biggest health benefits as a result of a minimum unit price on alcohol because the higher prices are more likely to have an effect on them — and get them to cut back on drinking. The study concluded, “If, as argued by some commentators, reductions in consumption itself induced by policy are negative effects, then our results suggest a minimum unit price has a mixture of regressive (consumption) and progressive (health outcomes) effects.”

Still, the study found that moderate drinkers, regardless of income, are hardly affected by a minimum unit price. The biggest impact is on the heaviest — and most harmful — drinkers, including low-income harmful drinkers, who are the most likely to buy a lot of very cheap booze.

Maybe you still oppose all of this on the grounds that the government simply should not be involved in controlling behaviors. That’s up to you to decide. I personally think the government should try to push people in society to be healthier and happier when it’s possible, especially when the issue at hand is a product that, frankly, isn’t necessary for human life. People accept this for all sorts of goods, from other drugs to cars to guns. So why not alcohol?

By simply raising alcohol’s price, America could save lives, combat crime, and slow the spread of sexually transmitted diseases. That does mean you may have to pay a bit more at the checkout line next time you buy your favorite beer, malt liquor, or chardonnay, or maybe you’ll have to pass on the booze altogether — but the research suggests it’d be worth the cost.

Correction: This article originally misstated the court that settled the Scottish minimum price legal battle.