Is the State Booze Monopoly the Best Way to Reduce Alcohol-Related Harms?

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Mark Price and Steven Herzenberg of the Keystone Research Center are out with a new report which claims that states with tighter controls on the sale and distribution of alcohol have lower alcohol-related fatalities.

Here’s the key part from their overview of the report:

Economists John Pulito and Antony Davies, in research released by two self-described “free market” think tanks, reached a very different conclusion. Their research found that states with tighter control of the sale and distribution of alcohol, in some instances, have higher rates of alcohol-related fatalities.[4]

This policy brief replicates Pulito and Davies’ analysis and then demonstrates that their results are reversed once you account for two variables excluded from the Pulito-Davies analysis but key to understanding the differences in alcohol-related motor vehicle fatality rates among the states — average vehicle miles traveled and average per capita income. Once these variables are included, states that more heavily control the sale and distribution of alcohol do have lower alcohol-related fatality rates for adults than either states that do not regulate or only lightly regulate alcohol sales.

All else equal, a heavy control state with the characteristics of Pennsylvania sees 58 fewer adult deaths each year from alcohol-related traffic accidents than a comparable state that has no such controls. (Heavy control states are defined as maintaining control over the sale of at least two types of alcohol at the retail level and at least one type of alcohol at the wholesale level.)

We find no difference in fatality rates for youth ages 15 to 19 according to the degree of state control over the distribution and sale of alcohol.  Among youth under the age of 15, a group Pulito and Davies do not analyze, we find lower fatality rates for alcohol-related car accidents in states that exercise heavy control over the distribution and sale of alcohol.

Although the full technical explanation is complex, there are straightforward reasons for including vehicle miles traveled and per capita income in this analysis. First, both variables have an impact on alcohol-related fatalities and, therefore, belong in a comprehensive analysis of variations in fatality rates across states. Second, control states tend to be ones in which people drive further and are lower income. Therefore, when the two variables are excluded, some of the higher fatalities that should be attributed to driving further and having lower incomes are wrongly attributed to state alcohol controls.

A few issues with this:

It’s one thing to observe that weak alcohol controls lead to more problem drinking and alcohol-related harms, and quite another to conclude that this means a state monopoly is the best way to address these problems.

In reality, there are two ways to approach alcohol-related harms: supply side policies and demand side policies.

A state monopoly on wine and spirits, and restricting beer sales to limited classes of sellers, are supply-side approaches. They reduce access to alcohol by making it inconvenient to buy alcohol. They also make alcohol more expensive, by reducing or eliminating price competition between sellers.

Alternatively, you could address the problem on the demand side through higher prices.

Lower prices are the thing that would increase alcohol consumption in a freer market for alcohol. More firms selling alcohol would mean more price competition, and lower prices would mean you could buy more alcohol for the same money.

We know how to stop that. If you establish minimum alcohol pricing, you can liberalize the rules governing who can sell alcohol without having to worry about a big increase in problem-drinking.

Right now, PA’s beer taxes are way too low, compared to the taxes on wine and spirits:

This is because PA taxes alcohol by price, instead of gallonage. This is an important point. Taxing prices instead of gallonage means that the cheap stuff that problem drinkers buy is very underpriced. A gallonage tax or minimum pricing would go a long way toward addressing the problems that Mark and Steven are attributing to low incomes.

As for highway miles, I see a few problems with using that as a reason to support supply side restrictions on the sale of alcohol.

Are people getting drunk at the liquor store, or at the beer distributor? No. They’re getting drunk at the bar, at home, or at some other business or residence that’s serving alcohol to drink on the premises. Near as I can tell, the various Turzai bills do nothing to change tavern regulations. Any change to how much people drink at bars is going to come from a change in prices, which again brings us back to minimum pricing or a gallonage tax.

Also, if drunk driving is the problem, then by all means crack down on drunk driving. An in-vehicle breathalyzer test, for example, would be a great way to do this. Also, cheaper more frequent public transportation on weekend nights would do a lot to reduce drunk driving. There are plenty of things the state can be doing to reduce problem drinking and alcohol-related harms that would make a state monopoly unnecessary.

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