Evaluating Economic Justifications for Alcohol Restrictions

Does economics justify restricting alcohol consumption? A new line of research concludes that alcohol involves significant social costs and that various restrictions would lead to net social gains. This article focuses on Levy and Miller (1995), who conduct a cost-benefit analysis of serving-intoxicated-patron laws. We administer a survey of taverns in Washtenaw County, Michigan, to investigate the plausibility of some of Levy and Miller's claims. We find a number of problems with their economic discussion: in addition to a number of problematic assumptions, they count private costs as social costs and completely ignore consumer and producer surplus associated with alcohol. We find their assumptions bias the results in favor of the restrictions. Despite their popularity in public policy debates, these economic justifications for restricting alcohol are dubious