Can government intervention be effective in correcting market failures associated with alcohol?
I have chosen to perform a microeconomic analysis surrounding the effect of Alcohol consumption on society. ‘Can government intervention be effective in correcting market failures associated with alcohol’ is the question set. The model I will be exploring is ‘market failure’ ‘where the market mechanism fails to allocate resources efficiently’ (Smith et al, 2006, p.56)
The Times
‘Alcohol-related treatment costs the NHS £1.7bn.’
The Telegraph
Londoners are losing an astounding 1.68 million working days as a result of alcohol-related absence.’
‘The Telegraph’ microcosmically displays how the issue prevails all around us as a society. It’s clear from numerous sources including ‘Alcohol Concern’ describing the ‘epidemic’ proportions of the problem. Mark P. Taylor describes Economics as ‘The Study of how society manages its scarce resources’ (2006, p.5). The issue is clearly rooted within individual decision making as well as analysing how society is allocating its limited resources. The 3 major issues below exemplify the 3 main causes of the market failure.
Information: Failure to provide good information (a public good) is a major cause of market failure and brings about the consequences of drinking alcohol hence reducing the efficiency of the market. Evidence suggests that advertising has strong detrimental effect on consumption, particularly for youth. (Saffer and Dave, 2003). The development of Markets promoting alcohol consumption benefits the industry groups however no such private incentives provide information that presents the negative consequences of consumption.
Self-control issues:‘1.2 million incidents of violence are alcohol-related’ (The Times, 2007) and 360,000 incidents of domestic violence (Simmons, BBC.co.uk), perpetrated show lack of control. Intervention is happening, a four-year government review into the nation's alcohol culture found a system that encourages people to consume until they collapse incurring costs such as health on society as a whole, so the goods and services provided by the market are not in our best interests costing our society its efficiency.
Externalities: Alcohol (a De-Merit Good and not in societies best interests) creates private costs for individuals and more general social costs, for example behaviour by those intoxicated in the broader community. Exemplifying the issue is the NHS and the medical costs incurred by alcohol consumption, which are not borne only privately by the individual. Above-average medical costs will be met partly from public funding. For this reason alone there should be a public interest in restricting use of alcohol. Decision makers do not take into account the cost imposed on society and others as a result of their decision
People can easily excuse their disputes, violence or sexual offenses simply by saying “I was drunk and didn’t know what happened” and “I lost control of myself.” At the same time, the society will easily accept their excuses because people do expect and believe that drinkers shed their inhibitions under the biological effects of ethanol. But in fact, alcohol’s behavioral effect is more of a cultural influence, and people can totally be in control of themselves even if they are drunk. In Gladwell’s essay, he provides examples of the Camba ethnic group and Italian Americans who are both in integrated drinking cultures and have the habit of drinking heavily, but can control themselves and do not usually have trouble with alcoholism after consuming alcohol because their cultures believe they can. Gladwell also demonstrates the alcohol myopia theory and the related experiment overview to prove that in ambivalent cultures, people who are heavily drunk can remain in complete control of themselves and make rational decisions if they are given proper incentives. “I was drunk and I lost my control” is never a valid excuse for behavioral problems from alcohol; to solve the alcoholism problem, our culture should change its belief of alcohol’s behavioral
“The harmful use of alcohol is a global problem which compromises both individual and social development. It results in 2.5 million deaths each year. An intoxicated person can harm others or put them at risk of traffic accidents or violent behavior, or negatively affect co-workers, relatives, friends or strangers. Thus, the impact of the harmful use of alcohol reaches deep into society.” This is a scary statistic which figuratively states that every thirteen seconds someone dies in a death related to alcohol. CBS news reported that more than 30 percent of American adults have abused alcohol or suffered from alcoholism at some point in their lives. This is a staggering number which is widely overlooked because alcohol is legal. Those who suffer feel helpless and trapped by their addiction being unable to stop and quit on their own. Thankfully a man named, Bill Wilson, lead a group of men to write how to become set free from the slavery of addiction.
Prohibition not only failed in its promise to curb the social problem created by alcohol. It actually promoted s...
spending a day working very low paying jobs, men would visit a saloon and spend all of their wages on alcohol (7,39). This destroyed marriages and families because not only then would the family not have any money to spend on food or the simple necessities for the women and children. Also, the incidence of domestic violence increased as a result of men’s intoxication. (7,40).
Harwood, H. (2000). Updating Estimates of the Economic Costs of Alcohol Abuse in the United States: Estimates, Update Methods, and Data. Rockville, MD: National Institute on Alcohol Abuse and Alcoholism.
Alcohol plays a major role in society today. It is constantly being in our minds through advertisements, whether its commercials or
Robinson, David. From Drinking to Alcoholism: A Social Commentary. London: John Wiley and Sons, 1976.
However, there is a point that binge drinking would have social costs to society including sickness and violence due to the alcohol intake. As we have private costs and benefits to alcohol (For example being able to enjoy yourselves more) as well, we are seen to be consuming too much of it which creates a negative externality as shown in the diagram below.
“According to the U.S Surgeon General, about 5,000 kids under 21 die every year as a result of underage drinking—from crashes, homicides, and suicides” (Bellenir 65). Reducing underage drinking can reduce drinking-related harm, and even though there are programs in place to help prevent these suicides, alcoholism continues to ruin the lives of underage drinkers. Alcoholics in general are walking billboards to major companies that advertise their products—especially underage drinkers that in the process make these companies wealthier. Alcohol abuse gives a false sense of security, self confidence, and maturity to underage drinkers that later commit crimes, violence, and are victims of homicides. Underage drinkers not being able to get back on their feet after falling in so deep into alcoholism, eventually hit rock bottom and wake up to a world they no longer belong to. Underage drinkers realizing that the turning point is far from close commit suicide.
PURPOSE: To persuade my audience NOT to drink and drive Every person is accountable for his or her own “right to drink”. Failure to treat this or any “right” responsibly has consequences. The person’s “right” can and should be taken away when the failure to act responsibly endangers others.
In conclusion to alcoholism and alcohol abuse everybody who has an alcohol problem should hear everything contained within this paper. The number one drug killer is alcohol, even if all the deaths of overdoses were combined alcohol still makes up for more deaths. If you cannot drink responsibly you will pay for it in the long run.
“For every family that is impacted by drugs, there are another 10 to 15 families impacted by alcohol abuse. It's a pretty big deal. We have a tendency to only look at part of the puzzle.” (Kevin Lewis). As a society we tend to categorize the severity of addiction in a way that drugs are the most dangerous and alcohol being just a problem. Because alcohol addiction can be a slow progressive disease many people don’t see it in the same light as drug addiction. An addiction to drugs is seen as being a more deadly and dangerous issue then that of alcohol because a drug addiction can happen more quickly and can kill more quickly. Alcohol is something that is easy to obtain, something that is found at almost every restaurant. People with an alcohol addiction can not hide from alcohol as easy as a drug addict. Approximately 7 million Americans suffer from alcohol abuse and another 7 million suffer from alcoholism. (Haisong 6) The dangers of alcohol affect everyone from children with alcoholic parents, to teenagers who abuse alcohol, then to citizens who are terrorized by drunk drivers.
Other economic problems were that citizens found themselves “drinking away” their pay cheques. These economic problems resulted in the government not taking in as much money as they could have, and spending money in areas that could have been avoided, if prohibition hadn’t existed in the first place. It was apparent that Prohibition didn’t achieve its goals, instead, it added to the existing economic and social problems, as well as creating new problems that would be prominent in today’s society. Organized crime grew into an empire, disrespect for the law grew, the per capita consumption of alcohol increased dramatically, city officials fell to gangsters, and the government lost money. It is obvious that prohibition is a miserable failure from all points of view.
Researchers state that binge drinking can cause death and disease at a rate of 3.7% and 4.4% respectively all over the world (Hermens at el.,2012:1). Apart from this, further research indicates that alcohol contributes to negative outcomes that kill or disable people at a relatively young age (WHO,2011:20). This can give a result that many people can loss many
Alcohol abuse is the most common problem, nowadays. In fact, majority of people drink alcohol repeatedly to the point where they have difficulty to stop. Statistics show that, as much as, “40% of college students report drinking five or more drinks in one episode” (Walters & Baer, 2006). Alcohol has become more popular over the years as advertisements, simultaneously with commercials of it, filled the media. It also is easily accessible and cheap in comparison to other psychoactive substances. On the other hand, alcohol safety awareness programs are barely noticeable. My research will present how alcohol and its abuse gets into people’s lives and how it influences their physical and mental health, as well as, social existence.