A reader is intelligently puzzled by my assertion (below) that the average external cost of drinking a can of beer is at least $1 puzzling:
One dollar a can in external costs seems high. US beer sales are around 200 million 31-gallon barrels a year. (*) That makes 66 billion twelve-ounce beers.
Are external costs really $66 billion a year? On the other hand, twenty gallons consumption per capita seems too high. Is my arithmetic off?
An excellent pair of questions, pointing their way to the heart of the problem.
His arithmetic is right. If we restrict our attention to the population 15 and over, the actual per-capita figure is even higher than he gives: it comes to about a can of beer per adult per day. Most people don’t drink nearly that much beer. But the consumption distribution obeys Pareto’s law: about half is consumed by the 10% heaviest drinkers (who have more than four drinks per day, averaged over the year), and another 30% by the next 10% (the two-drinks-per-day-or-more group). So the per-capita number is way above the median.
As to damage, about one-third of all crime leading to prison time, and a higher proportion of violent crime, is committed under the influence. (*) Of course not all of that is beer, but beer accounts for about 2/3 of the alcohol, and more than that among those in their prime crime-committing years from 15-25. And not every crime committed by someone who’s been drinking would have been averted if that person hadn’t been drinking, but surely much of it would have been.
If we said, just for purposes of calculation, that a quarter of seriousness-weighted crime was alcohol-caused, and that two-thirds of that was beer, we’d have beer responsible for about 16% of the crime problem. What dollar value should we assign to that much crime, and to that much of a contribution to the criminal riskiness of the social environment?
The total law enforcement budget is about $150 billion, and most of us think that crime itself is a more important social problem than law enforcement spending. So the total damage done by crime and the control mechanism it requires is more — I’d say much more — than $300 billion per year.
If that seems high to you, consider that it’s about $1000 per capita, and think what you, personally, would be willing to pay to live in a society half as crime-ridden as our current society. Less than $500 per year? Surely not. The benefits of crime reduction, let’s recall, aren’t limited to prevented victimization; the big gains are in reduced crime-avoidance costs, reduced residual fear, and reduced social tension. Oh — and not having 2 million human beings kept in cages ought to count for something, shouldn’t it?
Or think of it another way: the GDP is about $10 trillion, so estimating the total cost of crime at $300 billion per year would make it about 3% of GDP. Would you rather live in a country with today’s crime rate and today’s GDP or in a country with a crime rate one-third lower and a GDP one percent smaller? I can’t imagine hesitating about that choice.
Using $300 billion as the cost of crime and 16% as the share attributable to beer, beer-related crime would then cost about $50 billion per year, or about 75 cents a can. Add in the costs of drunken driving, other drinking-related accidents and fires, infectious disease including a big share of sexually transmitted diseases, unplanned pregnancies, health care paid publicly or shared through health insurance, workplace losses not fully reflected in lower wages for problem drinkers, and so on and so forth, and I’d say $1 per drink is much more likely too low than too high.
What’s complicated here is that the typical drink has an external cost of zero, but the average drink has a large external cost. That’s the case for trying to squeeze down specifically on problem drinking by forbidding the sale of alcohol to those who have a proven record of drunken violence.
But also note that we don’t know whether a given drink was actually harmless or harmful until we know whether drinking it turns out to have been part of a pattern leading to problem drinking: part of the social cost of a beer consumed by a 16-year-old is the risk that, at 25, that teenager will have grown into a mean drunk.
Update: Well, this sure started an argument. More, with links, here.