The Economics of Alcoholism

Awhile back I wrote a post on the economics of addiction. This new post is focused on the economics of alcoholism and alcohol abuse. First we’ll define an economic term – externalities. Here is an excerpt from an article that discusses externalities related to alcohol consumption and consequences:

 Alcohol use has received a considerable amount of attention in the economic literature because of what economists call “externalities”.  Externalities emerge when two events occur: 1) my behavior impacts your well-being and 2) the price I pay to consume a good is not equal to the price born by society for my consumption of that good.  An externality can be either negative or positive.  If it is negative, as is often the case with excessive alcohol use, the price I pay is less than the costs to society of my consumption.  I consume more of a good than I would have consumed had I paid the full price, and other members of society are negatively impacted.

When a drunk driver runs into another vehicle, major damage is usually caused far beyond whatever it costs the drunk driver. The costs of alcoholism and alcohol abuse to society is in the hundreds of billions of dollars, thus government often attempts to intervene to recoup the costs, such as raising the taxes on alcohol.

In the above article the author makes the point that these government interventions haven’t reduced heavy drinking, and it’s the heavy drinkers who most often create the societal costs related to alcohol consumption. It doesn’t seem fair to punish moderate, social drinkers for the actions of drinkers who are addicted to or who misuse alcohol.

The author suggests that treatment for alcoholics and those who misuse alcohol is the best solution. Knowing what I know about the regenerative power of recovery, I have to agree. Not only will treatment reduce the negative externalities to society, it will increase the positive externalities — what a person in recovery contributes to society far exceeds the cost of treatment.

If a special focus is applied to addiction treatment, treatment outcomes will improve, thus more recovery, thus greater benefits to society. Many of those alcoholics who cost society billions of dollars annually will begin adding to society. This makes too much sense, I guess. Just kidding, but it’s easy to become jaded and skeptical when you know there are better solutions, yet the solutions are ignored or half-heartedly applied. We’re living in complicated times, and innovative solutions are needed to deal with our myriad social problems. Alcoholism is treatable, but it requires a great deal of effort — it also depends on smart and dedicated men and women getting into the field to contribute their talents.