Is There A "Laffer Curve" Effect for Alcohol Taxes/Prices Versus Alcohol-Related Harms?

The famous (and controversial) Laffer Curve, sometimes called the Laffer-Khaldun Curve, posits that raising taxes beyond a certain point will decrease revenue rather than increase it.  Would such a relationship also hold for alcohol, not only for revenue, but for alcohol-related harms as well?  

Twenty-One Debunked has repeatedly noted that previous studies have generally found a reasonably strong inverse relationship between alcohol prices/taxes and alcohol-related harms.  That is probably the only thing that both Philip N. Cook and Wayland Ellis would agree upon, which really says something as they are on polar opposite ends to the alcohol regulation spectrum in general, and in particular the issue of the 21 drinking age.  

But does there ever reach a point beyond which this relationship breaks down and ceases to be true, or even reverses?  The recent experience of Scotland seems to suggest as much.  As British libertarian author and blogger Christopher Snowdon (no relation to the Wikileaks guy) notes in his blog, Velvet Glove, Iron Fist, a recent study found that Scotland's minimum unit pricing (MUP) scheme did NOT work as intended.  This mandated price floor of 50 pence per British standard unit of alcohol (about $1 per standard Amercian drink at the time, before the sterling crumbled recently) failed to meaningfully reduce alcohol consumption, particularly among the heaviest drinkers.  In fact, some population subgroups even saw increases in consumption.  And there was no effect on alcohol-related ER visits or crime either.  And it didn't even help the beleaguered pub industry either as promised.  Oops!

That's some pretty weak sauce if you ask us!

(And apparently not just Scotland, but also in Ireland has now implemented MUP as well.)

One study concluded at the end of 2018, long before the pandemic and lockdowns of course, and the other concluded in January 2020.  But what happened in the UK as a result of the lockdown-induced reduction in alcohol availability and marketing?  After all, as Joseph Califano of CASA famously said, "availability is the mother of abuse", so alcohol abuse and problems should have plummeted, right?  WRONG.  Snowdon notes that while overall alcohol consumption declined in the UK, the number of alcohol-specfic deaths actually increased.  Apparently, the average level of drinking in a population does not determine the extent of heavy drinking, it's the other way around.  And this natural experiment proves it more elegantly than any other study in history, and that also explains partly why MUP in Scotland failed to have the desired and predicted effects on the heaviest drinkers, who are apparently less sensitive to price and availability than the general population.

After all, the determinants of heavy drinking, and especially alcohol dependence, are likely quite different than those of drinking in general, and price is clearly one of the much lesser factors in their behavior.  And given the outsized impact on population health being driven by such a small minority of heavy drinkers, targeting the entire population so bluntly is unlikely to improve overall population health by very much if at all.

That's not to say that alcohol that is extremely cheap in a relative sense by historical and international standards, such as in the USA today, doesn't still generate some problems that respond to modest tax/price hikes at all.  That is probably still true, noting that America was the only major country in the world to see a net increase in overall alcohol consumption during lockdowns (to say nothing of the heaviest end of the drinking scale, let that sink in).  In the UK, even prior to the Scottish MUP scheme as well as during, it should be noted that nationwide alcohol taxes were already quite high and outpacing inflation for a while, and as of 2014 it was already prohibited to sell alcohol "below cost" in stores nationwide.  Thus further price hikes on the lower-end beverages may have had a more limited marginal effect and pushed the total prices to the wrong side of a Laffer-esque curve.  But we do know now that the overly simplistic models of the neo-temperance lobby leave a lot to be desired, to put it mildly.  The "whole population approach" clearly has some very hard limits.

After all, drinking per se is not the problem, excessive drinking (and the outrageous behavior that often goes with it) is the real problem.  And the 95th percentile of drinkers (top 5% of drinkers) seems to be quite inelastic (i.e. insensitive) to price.  Cart, meet horse.

The upshot:  while Twenty-One Debunked still supports raising alcohol taxes in the USA, within reason, we note that the effects are far more nuanced than we once thought, and often quite tenuous. 

UPDATE:  Apparently, alcohol-related deaths did drop by 10% in the first full year after MUP was implemented in Scotland, to the lowest level since 2013.  Another study found a 13% drop in alcohol-related deaths.  But in light of the other lackluster findings above, the actual causality of this correlation remains unclear for the time being.  Only time will tell if there are any long-term benefits to this policy, which is set to sunset in 2024, six years after it was first implemented in May 2018.  MUP does seem to be effective in Canada and Northern Territory, Australia. 

Also, another nuance that gets glossed over is that while alcohol taxes are now relatively high on beer, wine, and spirits in the UK, they are still quite low for cider.  Thus, MUP had the largest effect on the prices of cheap, high-strength ciders, many of which are "ciders" in name only due to a legal loophole.

And back to the topic of lockdowns, did you know that in 2020, for 13-18 year olds, the number of drug/alcohol deaths actually DOUBLED compared to the average of the several years leading up to it?   Lockdowns are clearly NOT benign for children or young people at all, and the next person to say "kids are resilient" can go take a long walk off a short pier!

(Corrections were made to some of the dates in the article above.)