Saving Lives via Alcohol Taxes
- posted by Jim Leitzel @ 1:18 PM

Like Phil Cook, I favor higher alcohol taxes in the US. In Phil's book, Paying the Tab, he reviews the evidence on alcohol prices and overall mortality. Based on that review, his best guess is rather startling: "...if Congress doubled the beer tax and raised the taxes on wine and liquor by a similar amount, one result would be tens of thousands of lives saved every year [p. 170]."

Labels: alcohol, Cook, taxes

 
New York Times on Vice Policy
- posted by Jim Leitzel @ 10:23 AM

A friend of Vice Squad brings our attention to yesterday's and today's business sections in the New York Times. Yesterday, Times economics writer David Leonhardt called for higher taxes on beer and wine. Today, we learn about the state of Texas's intention to introduce a $50 scratch-off lottery ticket, on the heels of other high-priced varieties that cost up to $30 each. The articles share a certain affinity for Vice Squad-style policy directions -- higher alcohol taxes and concerns about the under-regulation of gambling being venerable Vice Squad topics -- but more importantly, they share a reliance upon the ideas of friend of Vice Squad Phil Cook. Phil is both source and part-subject for the alcohol tax article, and his recent alcohol-policy tome, Paying the Tab, is described as "a wonderful little book". (Little? OK, the text per se is "only" about 200 pages, but I never viewed the book as little in terms of length or depth.) For the lottery article, Phil gets a reduced role of providing a short quote.

The lottery article notes that "traditional" lotto has been declining in popularity in Texas -- a "problem" that besets many state lotteries. Further, it provides some demographic statistics on lottery players, with yet more evidence that poorer people tend to spend more money, in absolute terms, on the lottery than do richer individuals:

In 2006, according to a University of North Texas survey commissioned by
state lottery officials, the typical black player spent $70 a month on the
lottery, compared with $47 for Hispanics and $20 for whites.

The demographic differences were especially sharp when it came to
scratch-offs. Players with a high school degree or less typically buy $20 a
month worth of scratch-off tickets, compared with $10 for college graduates. Similarly, players with an annual income of less than $12,000 spent 33 percent more a month than those with incomes above $100,000.

Labels: alcohol, Cook, lottery, taxes, Texas

 
A Euro 2000 Hooliganism Tale
- posted by Jim Leitzel @ 6:30 PM

It has been a while since Vice Squad drew upon Paying the Tab, Phil Cook's alcohol control monograph. On page 151, Phil recounts the story of the Euro 2000 soccer tournament, which was hosted by Belgium and the Netherlands. The Dutch city of Eindhoven elected to combat British soccer hooliganism by reducing the alcohol content of beer sold during the tournament ("Festival Beer") to 2.5 percent, about half or less of the standard beer alcohol content. (Phil doesn't mention it, but Eindhoven also chose to further liberalize the rules surrounding cannabis, hoping to entice visiting soccer tourists out of the bars and into the coffee shops.) At any rate, the low-alcohol gambit seemed to work, as the England supporters were fairly well-behaved in the Netherlands, especially relative to their comportment in Belgium. Less successful was an attempt in Rome this year to ban alcohol sales for 24-hours around an important football match involving Manchester United; a cannabis tolerance in Portugal for Euro 2004 worked out fine, it seems -- the main violence around the tournament emanated not from the host country, but from a Portuguese-owned pub in England.

Labels: alcohol, Cook, marijuana, Netherlands, soccer

 
Alcohol's Health Benefits
- posted by Jim Leitzel @ 12:17 PM

It has become common knowledge that alcohol consumption brings some benefit in terms of improved cardiovascular health. But Phil Cook's Paying the Tab reminds us that it once was common knowledge that Hormone Replacement Therapy (HRT) had similar heart benefits -- and when the results of an actual controlled trial came in, it turned out that HRT raised the risk of heart attacks. The beneficial effects noticed earlier were due, it seems, to biased samples: women who went through HRT had characteristics that made them healthier than women who did not. Could the alcohol story be similar? After all, as Cook notes, Gorbachev's anti-alcohol campaign did not seem to bring on a crisis in Soviet cardiovascular health -- rather the opposite, actually. In the end, Cook (page 119) does not argue that the health benefit for middle-aged people from moderate alcohol consumption is illusory -- only that "the evidence is far from definitive."

Labels: alcohol, Cook, Russia

 
State "Sales" of Lotteries
- posted by Jim Leitzel @ 9:45 PM

Last week Vice Squad noted a new series of articles from the New York Times on state lotteries. Today brought the second installment in the series, this one focusing on the possibility that states will sell (actually, in all likelihood, lease long-term) their lottery operations to private companies. The article details the extent to which these privatizations are being pushed by Wall Street investment banks, which figure to make out big-time in the course of lottery lease deals. Newcomers to politics will be surprised to learn that some of the representatives of the Wall Street firms that are highlighting privatization are, coincidentally, former high-ranking government officials, sometimes in the very states they are targeting.

The problem, of course, is that the lotteries are worth more (and the fees for the deals are commensurately higher) the more revenues that they can generate in the future. But as with all vices, revenue maximization alone does not conduce to the public welfare. The Times quotes Vice Squad regular Phil Cook: “'In principle, it’s possible to regulate the lottery, even if it’s privately run,' he says. 'But that’s going to require sustained will power on the part of state governments, and whether they are going to have that in practice is an open question.'”

There are two points that aren't really brought up in the Times article, but which I think are important. First, people tire of lotteries, and so maintaining or increasing revenues in the long-run requires the introduction of new games, new forms of ticket distribution, and innovative marketing angles; how these issues will be handled will be key to the social and revenue effects of any long-term privatization. Second, the length of the lease is obviously of paramount importance. I think that there is something to be said for short-term leases, on the order of the seven-to-ten years that have been employed in Britain. These relatively short lease terms mean that private lottery operators will be leery of conducting their operations in ways that raise public concerns, because visible problems would make it less likely that the same firm would be awarded a renewal when the original lease expires.

Labels: Cook, gambling, lottery

 
Zero Tolerance for Alcohol With Youthful Drivers
- posted by Jim Leitzel @ 9:55 PM

Vice Squad is not all that keen on zero tolerance (ZT) policies aimed at adult vice. But Phil Cook's Paying the Tab notes at least one dimension of success with respect to zero tolerance policies targeted at young drivers (those under 21, and hence, in the US, unable to legally purchase alcohol) who consume alcohol. Congress pressured individual states to adopt ZT laws (not unlike the manner in which in Congress adopted an effectively national minimum drinking age and blood-alcohol standard for drunk driving), which enhanced penalties for underage drivers who were operating their vehicles after drinking any detectable amount of alcohol whatsoever.

All the states had come into line by 1998. The resulting natural experiment generated strong evidence that the ZT laws reduced by 13-20 percent binge drinking and total alcohol consumption by males. Thus, the demand for alcohol was reduced by limiting one unfortunately complementary activity, namely, driving.

The quote, minus an internal citation, is from pages 78-79 of Paying the Tab.

Labels: alcohol, Cook, driving, teens, zero tolerance

 
Legalization and the Black Market
- posted by Jim Leitzel @ 8:32 PM

In some areas where prostitution is legal, illegal variants of prostitution still seem to flourish. (They might be illegal because the prostitutes are underage, undocumented, or ineligible or unwilling to work in the legal sector for some other reason, or just for tax evasion.) I have often compared this situation with alcohol in the US, where the legal sector, though taxed significantly, seems to outcompete the illegal sector, almost eliminating it. Phil Cook's Paying the Tab, however, indicates that the comparative success of the legal alcohol sector after Prohibition was far from automatic. "Initial liquor tax collections were disappointingly low, in part because the bootleggers continued to supply something like 45 million gallons per year (66 percent of the tax paid amount) [p. 30, reference omitted]." The Feds responded with a massive surge in enforcement and some new regulations that aided their efforts, resulting "in a considerable shrinking of the black market by 1937 [p. 31]."

Labels: alcohol, Cook, Prohibition, prostitution, taxes

 
Cook's "Paying the Tab"
- posted by Jim Leitzel @ 9:37 AM

Last month Vice Squad noted the release of Phil Cook's book on alcohol regulation, Paying the Tab. Last night a complimentary copy from the publisher, Princeton University Press, caught up with me; so far I have only read through the introductory Chapter 1. The book is elegantly written, almost a rebuke to the rest of the social science profession. (Disclosure -- Phil is a friend and former co-author, but I really don't recall the same level of grace in his earlier writings. Tom Schelling's blurb on the back refers to Paying the Tab as "beautifully written.")

Chapter 1 lays out the overall message, that alcohol control is too important to be confined to only a few dimensions, those of helping alcoholics and preventing drunk driving and underage consumption. Other measures that target the availability and price of alcohol can reduce the social costs of drinking while retaining most of the benefits. Cook compares the last couple of decades of alcohol control with tobacco control -- the latter has seen high (often too high, I -- and Phil, I think -- would argue) tax increases and a panoply of measures aimed at reducing the costs of smoking, while alcohol taxes generally have fallen (as inflation eats away their real value) and other control measures have languished.

I knew that about one-third of Americans do not drink in any given year, and that overall consumption is quite skewed towards the heavy drinkers, but Phil reinforces that message (page 8): "a majority of adults either don't drink at all or drink less than once per month, while the heavy drinkers at the top 10 percent of the distribution account for the bulk of sales and consumption." Wow.

I hope to have more on Paying the Tab as I make my way through it.

Labels: alcohol, Cook, taxes

 
Discuss This Book
- posted by Jim Leitzel @ 10:23 AM

Tyler Cowen at Marginal Revolution posts about the new book by Vice Squad mentor Phil Cook on alcohol control. Phil's book is Paying the Tab: The Costs and Benefits of Alcohol Control, and the blurb from Thomas Schelling is a keeper. I haven't seen the book yet -- I am in Tbilisi, so it might take awhile -- but I did see Phil present a portion of the book last year. Phil is a supporter of raising taxes on alcohol, which also coincides with my view (hmmm, maybe I got it from Phil?). Tyler is unconvinced.

I hope to have more to say about Paying the Tab when I return to Chicago.

Tyler's post, incidentally, induced a comment from me, which I will reproduce below (not that it is the sort of thing that merits repetition)...

The alcohol excise tax falls in real terms every year, because it is not indexed to inflation. In real terms, the current federal excise tax is less than one-quarter of what it was in 1951. If we doubled the federal alcohol excise tax, it would be back at about the level it was at in 1973.

Incidentally, at least one scholar often thought to be a libertarian, John Stuart Mill, thought that it was perfectly appropriate for the government to impose higher tax rates on goods like alcohol.

Labels: alcohol, Cook, taxes

 
Moderate Drinkers and Social Costs
- posted by Jim Leitzel @ 4:34 PM

About 1/3 of American adults don't drink alcohol in any given year. Of those who do drink, their consumption varies markedly. In particular, heavy drinkers are hugely important customers for alcohol sellers: more than half of the alcohol consumed is drunk by the heaviest 10 percent of the drinking population. (See Philip J. Cook and Michael J. Moore, "The Economics of Alcohol Abuse and Alcohol-Control Policies," Health Affairs 21(2): 120-133, 2002.) Does this mean that most of the social harms associated with alcohol consumption also can be traced to the biggest drinkers? In a word, no. Light and moderate drinkers are probably responsible for more than half of all alcohol-related problems.

Some of the most recent evidence on this phenomenon appears in the April, 2007 edition of the journal Addiction. Actually, the evidence dates from 1969 to 1992, but the analysis has just been provided. The data concern adult Finns who drink, and the problems that were studied were of three types: self-reported alcohol problems, alcohol-related hospital admissions, and alcohol-related deaths. The authors -- Kari Poikolainen, Tapio Paljärvi, and Pia Mäkelä -- divided the drinkers into the heaviest ten percent, and everyone else. For the Finnish men in the sample, the heaviest drinking ten percent consumed just less than half of the alcohol consumed by men; for women, the top ten percent drank slightly more than half of all alcohol consumed by women. Here is an excerpt of the results:

Seventy per cent of all self-reported problems, 70% of alcohol-related hospitalizations, 64% of alcohol-related deaths and 64% of the premature life-years lost before the age of 65 occurred among the 90% of men consuming less. The respective figures for women were 64%, 60%, 93% and 98%. Drinking five or more drinks per occasion was related to more harm than not drinking that much.

So there is a strong case to be made that public policy should target all drinkers, especially all binge drinkers, and not just those who are very heavy drinkers. One policy that does this is the alcohol excise tax, of course.

Labels: alcohol, Cook, Finland, taxes