38 Pages Posted: 15 May 2015 Last revised: 20 Jun 2015
Date Written: June 19, 2015
Alcohol consumption is associated with severe externalities as well as negative effects suffered by drinkers themselves. The usual economics prescription for promoting social well-being in the face of externalities is to apply regulations, including taxes, to force decision makers to confront the full social costs of their choices. Self-harms suffered by rational and informed adult alcohol drinkers, alternatively, offer little rationale (by the lights of traditional economics) for coercive policies aimed at stemming alcohol consumption.
The inherent unknowability of the extent of rationality in drinking decisions suggests that the “first best” policy of leaving rational drinking unfettered, while attempting to adjust potentially irrational choices, is not available in practice. The contention of this paper is that a second-best approach should be robust, in the sense that the policy regime will work fairly well when drinkers are fully rational, and also will do a creditable job of serving social well-being when alcohol-related choices are marked by substantial rationality shortfalls. In the case of the Russian Federation, some policies that mark rather severe departures from the current alcohol system, but are consistent with robustness, include: voluntary self-exclusion from either alcohol purchases or consumption; mandatory exclusion for those who produce external alcohol-related harms; and, a buyer licensing scheme that relies on a “double default” system to reduce both alcohol prevalence and the harms that stem from the drinking that does take place. This paper explicates these “aspirational” alcohol control policies.
Keywords: alcohol, Russia, robustness, self-exclusion, licensing, John Stuart Mill
JEL Classification: L51, K00, I18
Suggested Citation: Suggested Citation