The value of booze

Nice piece at CiF trying to point out that there\’s value to the consumption of booze as well as costs. However, we can sharpen up this a little:

There are personal and social benefits too, although it is by definition difficult to put a numerical value on them: how much is a glass of champagne at a wedding worth, or a few pints down the pub with your friends?

Difficult but we can make a start.

We at least know what the lower bound is.

The value to the person purchasing the alcohol of purchasing the alcohol must be higher than the amount they spend on purchasing the alcohol. If it weren\’t, then they wouldn\’t purchase the alcohol now, would they?

Now yes, this might be diminished by the costs they also bear in cirrhosis, drunken fights and waking up to one of the Two Fat Slags on vomit stained pillows. And it would be right to take those costs into account as well. But as our first order estimate of the consumer benefit of alcohol our lower bound simply cannot be any lower than the amount that people are willing to spend on purchasing alcohol.

The BBC tells me that this number is £38 billion a year.

The UK alcohol market also enjoyed the biggest rise in value, with sales estimated at £38bn – up 15% since 1999.

That\’s a fairly large number to put against that £2.7 billion a year cost to the NHS (however strangely calculated that was).

That the consumption of alcohol has both costs and benefits is obvious: for there are such to everything. But if we\’re going to try and work out whether something is worth it we do need to include the benefits as well as the costs.

8 comments on “The value of booze

  1. And of course the £2.7bn has to be set against specific alcohol taxes, which deal with the externality.

    On the other hand alcohol clearly has a time-inconsistency issue, whereby a portion of the £38bn is regretted!

  2. Actually there’s also an addition issue, isn’t there? I’d be a bit wary of summing up the amount spent on fags and saying that was the minimum value received.

  3. Its a typical high risk high reward strategy.

    Potential Gains
    Have a good time
    Get Lucky

    Potential Risks
    Have a fight
    Puke
    Wake up with something from a horror film

    For most people most of the time, the gains outway the losses.

  4. Only up by 15% in value since 1999..? I reckon that would equate to a reduction in consumption by volume / units / whatever. I’m damned-sure that I’m paying more than 15% more for my pint than I was ten years ago!!

  5. Possibly accounted for by a shift from buying in pubs (expensive) to supermarkets (cheaper). Of course, drinking in a pub also buys social benefits other than the alcohol itself, such as ability to meet people, talk to friends, warm yourself in front of the pub’s open fire and pick up the occasional Two Fat Slags if that’s your thing.

  6. It also buys society benefits as well; if I can’t have beer, I’m not going to work.

  7. Perhaps someone could enlighten me because I’m not sure about this.

    The 2.7 billion you refer to is, I guess, the cost to the NHS of treating the illnesses caused (in some people) by alcohol consumption.

    But if we start from year zero, very, very few people require medical attention after their first year of drinking (unless you’re a footballer), so can we assume that it’s a long term thing that takes, say 20 years?

    Then don’t we compare 20x 39 billion to Yx2.7 billion where Y is the length of the treatment in years?

  8. But if we start from year zero, very, very few people require medical attention after their first year of drinking

    a) go to A&E on a Friday night
    b) observe the ages of the people with drink-related injuries

    I suspect it evens out quite neatly: at the point when you’re old enough that climbing scaffolding, fighting, and/or drinking yourself into a coma are no longer appealing, *then* the previous 10 years of liver abuse starts to catch up with your body.

    While I agree strongly with you and the CiF writer on the benefits of alcohol, Matthew’s got a good point on the methodology for quantifying them – you’re assuming economic rationality, which probably holds for the public at large, but possibly not for a subset of people who’ve already had six pints.

    Better to do a survey of drinkers when they’re sober, and ask them how much they’d *choose* to spend on drink on a night out (yes, there are flaws here as well, but less severe ones).

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.