Economist Approach to Alchoholism Essay

Submitted By dexterdog28
Words: 1202
Pages: 5

An Economist Approach to Alcoholism Most economists would start by using assumptions to simplify the problem and focus on what really matters (O’Sullivin, Sheffrin, & Perez, 2012). Alcohol abuse describes persons who engage in excessive or frequent drinking. The effects of abusing alcohol can create, family conflict, Professional problems, legal difficulties, failing health, and accidental deaths. Economist must simplify these social issues into economic solutions. We can weigh the economic strain of alcohol abuse to the economic value of alcohol sales. The Washing Post reported on the Centers for Disease Control (CDC) who calculated the cost of excessive alcohol consumption to $223.5 billion each year, mostly due to lost workplace productivity and increased health care costs (Kliff, 2012). The regulatory and law enforcement cost are estimated to be $13.7 billion. To determine if this cost is acceptable to economic gain, economist would also look at alcohol’s economic contributions. The United States Census Bureau (2012) statistics show that the U.S. alcohol industry is a major contributor to the economy; responsible for over $400 billion in total U.S. economic activity, generating nearly $90 billion in wages and over 3.9 million jobs for U.S. workers. That adds up to $237.2 billion in economic cost to $400 billion in economic activity or a 59% economic gain. Not knowing the percent of revenue that alcohol abusers actually contribute the so solutions will be measured against a marginal change. One variable solution could be to increase the cost of alcohol to lower the consumption. This could mirror the CDC’s approach to reduce cigarette related diseases. The CDC (2013) estimated that a $1 increase in the price of a pack of cigarettes in all states would reduce smoking-related disease and death to result in over $52 billion to long-term health savings over 5 years or 4% annually. We can than assume that if liquor prices were raised by $1 per bottle or 12 ounces, that we would get savings of $10.4 billion in health and $1.3 in regulatory and law enforcement cost. This margin of change will also be applied to a reduction in economic activity of $16 billion. Incentive based solutions rely on the assumption that people are motivated by self-interest or self- preservation (O’Sullivan et al., 2012). To Account for the loss of economic activity, offer business owners a 4% tax decrease to adjust for the mandatory price increases could save jobs and minimize profit losses. Increasing punitive damages and lengthening jail time for abusers who break the law may steer abusers towards attending voluntary treatment and rehab programs. The social savings can then be applied to Alcohol education and treatment to reduce future dependency problems social economic cost. Prescription Drugs Economic Influence The Congressional Budget Office’s 2012 report discovered that prescription drugs are inversely proportional to medical service spending in health care programs. An increases/decrease of 1% has been linked to a one-fifth of 1% reduction/increase of medical service spending. That means a 1% increase in prescription spending can cut the cost of a $250 billion medical service program by $500 million (CBO 2012). When prescription drug companies run low on the higher demand drugs the laws of supply and demand will mean a higher cost to consumers for those drugs left in supply. Surgical and medical supply products will also be reduced by an increase in prescription drugs. High cost procedures like Spinal fusions and knee replacements can be help off for years with the use of pain relieving prescriptions. Consumers are managing pain and colds with over the counter products because prescription cost also mean a trip to the doctor, which further increase cost. Rising prescription cost will mean an increase in over the counter sales.