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Politicians Have Abandoned Economics for Paternalism

August 30, 2018 in Economics

By Ryan Bourne

Ryan Bourne

Have advocates of lifestyle and environmental regulation given
up pretending that the policies they advocate are grounded in good
economic analysis?

Two stories from last week suggest so. The first was reporting
around a new study by the Global Burden of Disease project, which
concluded that even moderate drinking increases the risk of
alcohol-related health problems or injury.

According to the BBC, this was said to show that “the
health risks of drinking exceed any possible benefits”.

We then heard that the government, buoyed by the apparent
responsiveness of consumers to the existing 5p plastic bag levy,
wanted to double its rate.

The aim of this was presumably to try to wipe out plastic bag
use almost entirely, and came hot on the heels of the proposal to
ban single-use plastic straws.

Both alcohol consumption and plastic use do exhibit what
economists call “social costs”. Drinking can result in
related crime, criminal justice and healthcare costs borne by
others. Plastic use can cause litter and pollute oceans.

Economists are therefore comfortable with certain policies, such
as targeted taxes, that mean these costs are priced in when we make
our consumption decisions.

But claiming that the health risks of drinking always exceed the
benefits and doubling the plastic bag charge go way beyond this
line of reasoning. In both cases, the suggestion is that because
some activity is considered “bad”, the optimal level of
that activity is zero.

This is mistaken.

Social costs aside, drinking alcohol is a personal decision. Our
starting point as economists is that humans internally weigh up the
costs and benefits of deciding whether to drink.

This new study may well be right that having one drink a day
very modestly increases the risks of drinking-related illnesses.
But we drink because we enjoy alcohol consumption. These are
benefits to us. We do not walk around judging every decision solely
according to its net impact on our health.

To claim that health risks exceed any possible benefits is
therefore absurd. No public health official, nor BBC journalist,
can possibly know whether this is true, because the benefits
include an individual’s own personal enjoyment.

By all means, publish information on the risks to our health to
inform our decisions, but to use this study as a basis for more
stringent policy would be a paternalistic overreach.

Sadly, that is exactly what we should expect — because
it’s how smoking regulation has developed.

Initially, governments advised smokers on the risks of smoking.
But when the public continued to smoke in large numbers and
deviated from what supposedly rational people would do, politicians
ratcheted up the regulatory intervention.

There are of course direct third-party effects associated with
smoking, …read more

Source: OP-EDS

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