Key findings on alcohol consumption and a variety of health outcomes from the nurses’ health study

From the American Journal of Public Health, Volume 106, Issue 9 (September 2016): Key Findings on Alcohol Consumption and a Variety of Health Outcomes From the Nurses’ Health Study by Elizabeth Mostofsky, Kenneth J. Mukamal, Ed L. Giovannucci, Meir J. Stampfer, and Eric B. Rimm.

Conclusions. Regular alcohol intake has both risks and benefits. In analyses using repeated assessments of alcohol over time and deaths from all causes, women with low to moderate intake and regular frequency (>3 days/week) had the lowest risk of mortality compared with abstainers and women who consumed substantially more than 1 drink per day. (Am J Public Health.2016;106:1586–1591. doi:10.2105/ AJPH.2016.303336)

Doug Sellman jumps the shark (updated)

I don't expect much that is sensible from Doug Sellman on the matters of drugs and alcohol policy and I certainly don't expect good economics from him. But even by these standard Sellman has lost the plot in this article in the New Zealand Herald.

Sellman notes that the current policies with regard to alcohol and cannabis, are at opposite ends of a continuum. He claims that

Alcohol has a highly commercialised "free market" approach

Given all the regulations on alcohol calling it a "free market" may be going too far. It is however a legal market, thankfully. Sellman goes on to say,

At the other end of the continuum is prohibition, which exists for cannabis and all other recreational drugs (except tobacco).

And it is this prohibition that leads to many of the problems with drugs. The biggest boast organised crime ever got was prohibition. It was this that turned disorganised crime into organised crime.

Sellman goes on,

Excessive harm is caused at both ends of the continuum, where big business flourishes, one within the law and the other outside of it. Both share the goal of profit maximisation from supplying and selling as much of their drug as possible.

You men both groups want to give their customers what they want at a price they are willing to pay. The horror of it!

Later Sellman writes,

Behind the scenes, however, alcohol corporates target new young customers, avoid paying tax, schmooze politicians, and attempt to denigrate those who point out their devious tactics.

"Avoid paying tax", now I wonder where that idea came from. Many, (most?), industries "schmooze politicians". By schmooze - why that particular word? - I assume he means lobby. But somehow lobby doesn't sound as bad as schmooze. Does Sellman have any evidence for these claims? Don't Sellman and this drug and alcohol mates "schmoose" politicians when it comes to policy? Also for lobbying to work politicians have to be willing to do what the lobbyists want. If the politicians just said no the whole issue would go away.

Sellman continues,

The organised criminal cannabis suppliers also flagrantly target the young and avoid paying tax, but they don't try to pretend they are anything but gangsters making money out of drug dealing.

Indeed. But the reason that it is "gangsters" that are making the money out of drug dealing is simply because drugs are illegal. Legal, regulated, firms are just not allowed in the market.

Later we learn,

With change in the cannabis laws coming there is danger that a 180-degree switch might occur - from prohibition to commercialisation.

We can only hope. This would make dealing with the harms a lot easier to deal with. You are no longer turning those badly effected by drugs into criminals.

Sellman goes on to misunderstand basic economics.

Lobbying of our parliamentarians may already be under way by business leaders salivating at the new fortunes they anticipate reaping. This is especially so since the dramatic changes in the United States where four states now have laws allowing private businesses to supply and sell cannabis.

But if we had a legal competitive market for cannabis then in the process of trying to reap these fortunes they would force economic profits towards zero.

Sellman then says,

There are alternatives to a private business model, one of which is the establishment of state-owned enterprises.

Must we really point out  again all the problems there are with state-owned firms?

Then it is pointed out that,

With the Government taking control of drugs, the huge profit from sales goes back to the Government for the greater good. Black markets are undermined while health promotion can be genuinely undertaken at the point of sale, motivated by the fact the state bears the costs for harm from excessive use of these drugs.

But as noted above, with competition there will not be huge profits to make and given that state-owned firms are generally less efficient than private ones whatever profits there are would be less under government ownership. Also with private firms the profits that are made will be taxed. So there would be a trade-off between a higher rate of profit from a less profitable state-owned firm and a lower tax rate on the higher profits of  a private firm. Which would give the higher payment to the government is not clear.

Sellman ends by saying,

The continuance of rampant commercialisation of alcohol with the addition of an exuberant privately driven cannabis industry would be the very worst outcome of re-thinking cannabis law.

I can't help but think it would in fact be the best of all practical outcomes. The harms would be easier to deal with and we would have an legal, efficient industry.

Update: An interesting comment from the report "Public health and international drug policy" from the Johns Hopkins-Lance Commission on Drug Policy and Health, published (pdf) at the website of the Lancet on March 24, 2016.

Although regulated legal drug markets are not politically possible in the short term in some places, the harms of criminal markets and other consequences of prohibition catalogued in this Commission will probably lead more countries (and more US states) to move gradually in that direction—a direction we endorse.

The advantages of beer drinking

.... at least in Russia.

Understanding consumer behaviour is crucial for many economic questions. A new column - The persistence of consumption habits by Lorenz Kueng and Evgeny Yakovlev - at VoxEU.org looks at the persistence of consumer habits towards alcohol among Russian males. Beer sales expanded rapidly after the collapse of the Soviet Union both in levels and relative to vodka sales, driven mainly by the beer consumption of cohorts born in the 1980s and 1990s. The authors estimate that this trend will reduce the male mortality rate in Russia by one quarter in the next 20 years.

The conclusion of the paper is,

We study the implications of our results for the evolution of life expectancy of working age males, taking into account the persistent habits we uncovered. It is important to note that of the 40% alcohol-related deaths each year, only about 7% are due to alcohol poisoning. Over 30% are due to external causes related to alcohol intoxication, including vehicular and other accidents and homicides, and hence are also unrelated to long-run consequences of alcohol consumption, such as liver cirrhosis. To proceed with the analysis, we estimate a hazard model of death as a function of the share of alcohol consumed, controlling for many individual characteristics, in particular the level of total alcohol intake. The estimates show that consuming the same level of alcohol but doing so by using more vodka rather than beer is associated with a significantly higher mortality rate, both statistically and economically.

Using our results, we estimate that male mortality in Russia will decrease by one quarter within 20 years even under the status quo, that is, under the current set of policies and current levels of relative prices of alcoholic beverages. This will happen simply because new generations will be more accustomed to beer and will replace older generations with strong preferences for vodka. Since much of the gap in male life expectancy is due to occasional binge drinking (even holding fixed the average level of alcohol intake), which in turn is more likely to occur for males who prefer vodka, this shift in consumption habits toward beer has strong effects on life expectancy. Hence, this reduction in the male mortality rate will be the result of changes that occurred several decades ago.

So drinking beer rather than vodka has its positives.

Did U.S. beer mergers cause a price increase?

One of the great unanswered questions in economics is, Do beer mergers cause the price of beer to increase? Well the answer, based on U.S. experience at least, is a definitive yes and no. Orley Ashenfelter, Daniel Hosken and Matthew Weinberg discuss the findings of their research into the Miller and Coors merger in a column at VoxEU.org.

They write,

Football season is here. Bud, Miller, or Coors, the classic American lagers, are the beverage of choice to accompany the big game throughout the US. Despite the recent surge of microbrews and imports, the big three brands still capture more than 60% of the market. With the recent merger of Miller and Coors only two large national brewers remain. No doubt many beer drinkers have wondered whether this merger has raised the price of their brand.

We have recently taken up the task of answering this question. We did this for two related reasons.

• We wanted to measure net price increases to beer drinkers.
• But we also wanted to see if we could sort out (a) the cost savings that might result from beer production being closer to consumers from (b) the monopolistic pressure on prices that mergers encourage.

As it turns out, breweries make a great place to study these two issues because shipping beer to markets far away is costly.

What did we find? Well, it turns out there were both anti-competitive effects of the merger and cost saving effects. What this means in practice is that whether a beer drinker faced a price increase or a price decrease depended on where the drinker lived. On average prices neither increased nor decreased, with increases in some markets being offset by decreases in others.

Mass produced beer all around the world is most of the time crap, and there are a lot of better quality substitutes out there, so I find myself asking Why do we care even if mergers do lead to price increases? After all if increases in price cause people to substitute away from the low quality mass produced beers into higher quality beers, why do we care? This looks like a good thing.

Alcohol policy in practice

Economist Phil Miller from the Market Power blog took this picture at a Nashville Sounds game on 13/6 "sometime during the 3rd - 4th innings +/-0.5 of an inning". He goes on to say,

Other than this section which is in section HH, the ballpark was about half full on a beautiful night for a ballgame.

Miller adds,

Imagine the difference in attendance in this section if the words "alcohol" and "free" were switched around.