Price-fixing is the wrong way to tackle binge drinking
Plans to introduce a minimum price of 50p per unit of alcohol in the North-West of England – apparently supported by David Cameron – are deeply misguided. In all markets price-fixing is a bad idea and alcohol is no exception. Problem drinkers may simply forego other goods in order to pay the higher prices. Minimum prices could also encourage drinkers to buy alcohol in other areas or switch to low-cost, “informal” sources such as home-brew or “booze cruises” across the Channel. The policy is therefore likely to be ineffective and could even prove counterproductive if alternative supply routes expand. A further important objection is that it will unfairly penalise moderate drinkers.
A better approach than minimum prices would be to focus on eliminating the ways in which the government facilitates alcohol abuse. In particular, binge drinking is in some ways a direct consequence of the welfare state. If the government offers to pay for any treatment people need, they will make the most of it. They can live dangerously, safe in the knowledge that the NHS safety net will catch them.
Such “moral hazard” can be addressed by charging those who repeatedly seek treatment for self-inflicted injuries and illnesses. The best solution, of course, would be to scrap the NHS entirely and let the private sector fill the gap. If people had to pay for their own healthcare, they would have strong incentives to adopt healthier lifestyles. The burden that alcohol abuse imposed on taxpayers would also be reduced substantially.