Mar 10 2009

Negative externalities of consumption: Britain’s “inebriated hooligans”

49 responses so far

49 Responses to “Negative externalities of consumption: Britain’s “inebriated hooligans””

1. # Horia Stanescuon 27 Aug 2008 at 4:52 am

   A very interesting article and a nice way to tie in youth culture with economics mechanics. There’s no reason not to judge alcoholic beverages and the consumption of alcoholic beverages as a market failure. This market failure type can be classified as a Moral Hazard. In other words, the individual is not provided incentive to take socially efficient preventive measures. The incentive is provided, however, for the person in question to go on such booze-trips by cheap airlines and the minimal costs of the actual purchase of the alochol (four drinks and two shots for $8, less than one pint in London). Because this is the only method of intoxication which is protected by law, individuals are provided a great incentive to exploit this to its limits. Of course, the cultural factor must not be forgotten: British drinking culture is a very deep-rooted and praised amongst its users: try sending a group of 10 twenty-year old Iranians to the same location and see how much they drink after growin up in their own culture.
   If the local governing bodies would want to reduce these number of incidences it would be a very simple matter of altering or creating new legislature and enforcing it (ie. no more than 2 drinks per person in one night, blood-alcohol level limits and random breathaliser tests with scaling penalties etc.) or the introduction of a indirect tax or that of a minimum price for the selling of alcoholic beverages. However, this would impact other turistic businesses so greatly, it would effectively ruin the economy of the region as there are no other businesses people can easily shift into in Crete.
   This does mean, however, that there is an unfair distribution of taxpayer’s money across the nation. A large pub owner will have both the requirement and availability of government-provided services a much larger proportion of time than a rural family in Crete. The bar and pub proprietors will thus be able to rely on the police and medical services at no cost to be there to serve his customers if the need would arive. There already are over 20 officers placed on a 1000 foot long strip. This means that if you were to walk 15 meters in either direction you would be faced by a police officer. Comparing this to police activity in a village in the middle of Crete, we would see why this is an unfair (but not unnecessary) distribution of goods. As such, the private cost to run such a bar or pub in no way reflects the social costs. Not only are people more at risk of violent crime and disturbances from these hooligans, but the public resources which could become critical in a different location on the same island are being spent to supervise the big-spenders making trouble in turistical locations.

2. # Joelon 27 Aug 2008 at 5:51 am

   I would agree that alcohol consumption could be classed as a form of market failure. To be specific, it is a negative externality in consumption. This means that a good, such as alcohol, is being overconsumed below the social optimum, and is causing negative spillovers in consumption, such as widespread drunkenness, crime, and in the worst cases death due to overconsumption.

   One economic action which the government could take would be to levy a high tax on alcohol, directly proportional to the externality or the social cost. This would provide a financial disincentive for the consumption of alcohol. If we were to argue that alcohol is price inelastic, the burden of the tax should lie principally on the consumer, in this case young British partygoers. As opposed to legislation, this measure would be fully enforcible. However, to evaluate this measure in greater depth, if the tax would indeed be effective and would successfully decrease demand, then local business could suffer. Lower demand for alcohol would mean less revenue.

   However, in my view, this measure would fully justified in relation to question 3. Tourist businesses are profiting at the expense of the taxpayer, and the private cost of running these does not reflect the sometimes horrific social costs. For instance, the government has to pay for advertising campaigns to lower demand, and for healthcare (which is “free” in Spain, and state sponsored) whose resources are taken up by drunken Brits. A tax would provide the government with extra revenue, compensating the budget for the expenses incurred by inhebriated Brits. As for the businesses who would be hit by the tax, their private costs would merely reflect the social cost. Consumers would buy less alcohol, and therefore the existence of the negative externality ie. the drunkenness would decrease.

   Bottom line: Alcohol is too cheap. Brits are getting too drunk. Tax it.

3. # Alex Telfordon 27 Aug 2008 at 6:02 am

   The British misbehaving while on holiday is not a new thing, several years ago they were voted “the worlds worst tourists” coming bottom on on scale which took rudeness, meanness, behaviour, adventurousness and language skills into account.

   Like horia, I would say that over consumption of alcohol is an example of market failure, as the social costs associated with the consumption of alcohol are large, leading to tens of thousands of preventable deaths yearly and contributing significantly to health problems in chronic drinkers.

   If tourist nations were serious about reducing alcohol consumption they would have several available options; negative advertising as mentioned in the article is one option, but a more effective option which was mentioned by Horia would probably be to introduce an indirect tax onto alcohol, raising the price significantly could make the cost of more than two or three drinks per night prohibitively expensive to most holiday goers, and noticeably lowering consumption as a result. Although raising the cost of alcohol could have a very negative effect on the tourism industry, it is likely that an important reason for traveling abroad for some tourists would be cheap alcohol and nightclubs. It is very possible that raising prices would dissuade tourists with less disposable income from traveling, and therefore substantially cutting down service industry profits during the vital tourist season. Even if the price of alcohol was increased it is likely that they would be driven down again as other tourist locations lowered prices in order to draw in customers. I believe the best options for controlling the problem would either be extensive negative advertising campaigns, or severe fines and penalties for those caught breaking laws while under the influence of alcohol, these could act to reduce the incidence of heavy drinking related issues by providing a disincentive to overindulge without causing a rise in alcohol prices and scaring away consumers as a result.

   I would imagine that running a bar in a location like Greece would not be very expensive, and during tourist season bars, nightclubs and restaurants can be fully loaded with foreign customers and the potential for massive profits are high. Although, however cheap it may be to run a bar in Greece, the additional social costs not covered by the bars expenses can be very high. Accidents, arrests, damage to property etc. is common in such areas, causing a disproportionate amount of tax money to be spent in areas that deal with tourists, as police and ambulance squads must be ready for potential mishaps, as horia insightfully mentioned the presence of police officers may be extremely imbalanced. Local residents of the areas swamped by tourists for several months a year may be irritated by their presence, small local businesses could be driven out by the arrival of more popular big chain establishments, turning once diverse areas into homogenized tourist-y resorts and perhaps casting out tradition and culture in the process.

4. # Sean Isaacson 27 Aug 2008 at 6:09 am

   To add to what Joel and Horia have already said, there can be ways in which to cut down on alcohol consumption without too much of an opportunity cost. For example having Hotels specifically designed for people who like to go clubbing, so that they can waddle from the dancefloor to their bedroom floor after a night dancing and drinking. This way the contact with other people is avoided and the externality decreases. Additionally, places where drunken behaviour would be inappropriate (such as family restaurants or public areas) could provide a drink limit, or limit the volume of the spirits they sell, say anything under 15%. Both these methods would still allow for tourism of this type to occur, whilst preventing the negative effects of it from being too extreme.

5. # Joelon 27 Aug 2008 at 5:05 pm

   While I think Sean’s idea about drunk-fitted Hotels is an innovative one, it would surely decrease the capacity of hotels, and therfore drive up costs for businesses (as land costs money)

   As for the regulation on spirit levels, I would have to argue that people would simply drink more, and while contributing to business, would still incurr the same social costs.

6. # Matteoon 28 Aug 2008 at 1:40 am

   I do not think there is much to add upon the externalities issues that alcohol consumption creates or I would be simply repeating one more time what said above by the others. Although i have a few comments and suggestion to make. I think Sean’s idea is suitable in order to still allow British rude tourists to drink and party, and at the same time not deprive Spain, Greece etc from receiving the income they see entering every year from the huge mass of British tourist that arrive on their beaches,clubs and consumer their alcohol. Although as Joel said this could cause the capacity of hotels to decrease and therefore drive up costs.

   If you ask me, the best idea is an increase of the Police forces and have a review of the laws, or even have the government of these countries make new laws, in order to increase the severity of the punishments for all the crimes related to the behaviour that those tourists have shown. We can take England as an example.

   The huge problems of Hooligans were solved in a similar way in England. By introducing Stewarts, by increasing the organization of police around stadiums, and by the introduction of new laws for those who did not behave on sundays.

   Regulating spirits levels definatly wouldn’t work since as Joel said those people would simply drink more.

   If instead a much more organized police force would be on the field, this would allow security to increase, and at the same time increase the states revenues thanks to the money payed in fines by those who still do not respect the law

   This would allow local businesses to keep running smoothly (what would not accour if a high tax on alcohol would be put in place), and at the same time see an overall higher security, wellbeing for the locals, and for the other turists.

7. # Jean Kiekelon 28 Aug 2008 at 3:45 am

   Jason, thank you for posting this site to the AP listserv. I will be directing my students to your articles and analyses. This article and graphic explanation of spillover costs and benefits is something that students should find easy to understand and much better than McConnell’s long-winded explanation in the textbook. It will be something that the students should also be able to relate to than some of the examples in the book. Your blog is fantastic.

8. # Wilhelm Nykoppon 28 Aug 2008 at 4:23 am

   I found the article to be pretty interesting, had never thought of drinking being a negative externality in consumption. It is pretty obvious though, having been to a few tourist resorts, and seeing some of the tourists whose aggressive drinking had become a social problem. This was resolved by two hotel employees escorting the inebriated group out. While this in no way solves the problem, it did offer a kind of band-aid solution, moving the social cost away from us, and onto someone else.

   I disagree with Joel’s point of taxation on alcohol from first hand experience; Finland implemented a very high tax on not only stronger liquors, but also beer. A poll the following year examining the reduction in alcohol consumption was quite shocking; it had not reduced the amount of alcohol people were drinking by more than a percent or two. Last year, the government reduced the taxation on alcohol again, as the population had gone from purchasing their alcohol from a store to importing it from, for example, Estonia. This meant that their revenue from alcohol had not increased. These two factors combine to show that increasing taxation was truly the opposite of what you stated, as it was ineffective.

   Sean’s idea of localizing the damages on the other hand, would work better to reduce the social cost, but not by much. While the tourists would now be isolated to certain locations, violence and such could still occur, but possibly to a smaller extent as they would not “waddle” through someone’s private property.

9. # Joelon 31 Aug 2008 at 9:43 pm

   What Wilhelm said is an interesting revelation. He mentions that a tax, bringing up the price of alcohol, brings about a minimal or negligable response in the quantity consumed. I think we can therefore determine that alcohol is Price inelastic.

   However, I would just like to float the idea that there is a possibility that alcohol too could be a giffen good. It is possible that even with a tax levied on it, alcohol still represents a small proportion of people’s income. To add to this, the private benefits of consuming alcohol in certain societies may be so high (in England it is simply part of the culture that you go “down the pub with ‘yer mates”) that an increase in price does not serve as enough of a disincentive to outweigh those private benefits.

   In light of Wilhelm’s evidence, I can only propose that the tax be made so high that alcohol becomes a luxury good. However, for any government taking this measure there would undoubtedly be severe political repurcussions (especially in England).

10. # Wilhelm Nykoppon 03 Sep 2008 at 3:30 am

    Joel I really don’t think absudly high taxes will work for two reasons:

    1. Prohibition failed
    2. No politician could support it without almost losing their jobs (popular opinion would definately be against it.

    Interesting how politics affect economics, and how they can do the opposite of what many are meant to do; as they stop the market from reaching equilibrium

11. # Ollieon 13 Mar 2009 at 7:08 pm

    I disagree with most of the others on this blog. I do not really believe that British Binge drinking is a failure of our Economic policy. It is a failure of our social policy; English youths literally have nothing better to do than get drunk on street corners and this habit grows and develops into their later lives.
    If taxes were to be put on alcohol or it prohibited all together this would only stimulate the illegal trade of smuggled booze, probably of a worse quality (just look at the moonshine in Russia that sends you blind). It would also without a doubt would send our youths onto harder drugs with worse side effects.
    I don’t think regulation or prohibition would lead us anywhere except a higher crime rate. I think more money should instead be invested in social programs such as sports centres.

    As for the drinking abroad, places such as Spain and Greece are usually the holiday destinations of choice for as Mr. Hauet would so poetically put it “Scratty” people.

    Scratty English people and excessive binge drinking leading to crime come hand in hand!

12. # Amiton 13 Jan 2010 at 8:54 pm

    I respectfully disagree with Ollie, Alcohol consumptions is a negative externality of consumption, at times.
    The economics are simple: the inebriated hooligans do not have to pay for the consequences of their actions and thus have a higher marginal benefit than the the marginal social benefit. To fix this would be simple lower the benefit by having hooligans who commit crimes pay a high fine or community hours. Eventually the MPB -> MSB and the problem will cease to exist as there will be a lower number of consumption equal to the socially optimal level.

13. # Jasonon 14 Jan 2010 at 3:17 pm

    2. The resort communities would simply have to raise the Marginal Personal Cost to the drunken tourists for their behavior. Keeping the benefit the same, increasing the MPC would cause the tourists to drink less and get into less trouble. There are several ways to accomplish this. They could raise the prices for drinks to foreigners after a certain time, for example, or tax them somehow per drink. As in Switzerland for the halb-tax card, there could be a similar thing, so that locals could pay a lower price than angry tourists (price discrimination). Another way to raise the MPC would be to increase the punishment as a result of bad behavior (fines). Either way, a rational tourist would drink less, as the intersection of MPC and MPB would be at a lower number of drinks.

14. # Thomason 15 Jan 2010 at 1:50 am

    1. Yes overconsumption is a market failure. It could be classified as public goods failing since it is the polices and the governments responsibility to control behaviour such as this and if tourists are getting away with in on these levels then is it the government that has failed.
    2. To stop tourists from behaving like these the government should stop the tourists from feeling that they will be able to get away with the acts that they are committing.

15. # Gabeon 15 Jan 2010 at 2:23 am

    2. If the tourist nations were serious about cracking down on drunk tourists, what economic actions could they take in the resort communities where most of the trouble occurs?
    - I think for this question I would have to agree with Jason, if they dont want drunk tourists in their towns all they have to do is raise the price by adding tax to the alcohol and if the locals don’t want to pay the extra price because there not causing any trouble, then make there be some kind of system making them able to have half-off for a card system. Also if the tourists were aware, as they come into the country, to know that if they are caught for bad behavior because of alcohol would result in serious trouble. And they could do that with advertisement. The consequences would probably make them drink more responsively.

    Gabe

16. # Gelando Makrideson 19 Jan 2010 at 5:56 pm

    1. I believe it is, and it would a market failure due to negative externalities and overallocation of resources towards the alcohol market.
    2. The government could tax alcohol sales in hotel bars, decreasing the incentive to get drunk at hotels. They could also provide government-funded coupons for other local activities which would be included in hotel stays.

17. # Meiling.echl.f09on 24 Jan 2010 at 12:06 pm

    1. The over-consumption of alcohol creates effects outside the market, for example, the casualties caused by drunk driving and hospital fees (covered by taxpayers) for people who have alcohol related problems. Therefore it can be classified as a market failure: a mixed, negative externality in which is initiated in consumption but received in production.

    2. They could impose a tax on alcoholic drinks, making it more expensive to consume a large number of drinks. People would still buy drinks as demand is relatively inelastic, but, with the imposition of a tax, they might not have the purchasing power to consume enough to make to make them dangerously drunk. However, if the tax must be thought through carefully: too high and this will encourage the creation of a black-market (which might create even more disastrous negative externalities), too low and it will have no effect.
    Higher penalties for people who disrupt public order and safety as the result of over-consumption of alcohol might work, however this must be made known to the public, thus necessitating some form of negative advertising to reduce demand.

    3. Proprietors of bars and clubs in resort areas benefit from the Briton’s excessive alcohol consumption because it earns them a greater profit. They might purposely offer drinks at lower than normal rates in order to attract demand and remain competitive (assuming that demand for a particular alcoholic drink is price elastic). However, their encouragement of excessive alcohol consumption in order to attain a private benefit comes at a social cost. This social cost includes things like damage to public property by drunk holiday makers and the casualties and hospital fees as a result of drunk driving and bar fights. These costs are born by taxpayers all around the country. So unless the government takes economic or legal action, the private cost of running a bar in a popular resort will not reflect the social cost.

18. # Laura Yilmazon 25 Jan 2010 at 12:01 am

    I would agree that alcohol consumption could be classed as a form of market failure. To be specific, it is a negative externality in consumption. This means that a good, such as alcohol, is being overconsumed below the social optimum, and is causing negative spillovers in consumption, such as widespread drunkenness, crime, and in the worst cases death due to overconsumption.

    If tourist nations were serious about reducing alcohol consumption they would have several available options; negative advertising as mentioned in the article is one option, but a more effective option which was mentioned by Horia would probably be to introduce an indirect tax onto alcohol, raising the price significantly could make the cost of more than two or three drinks per night prohibitively expensive to most holiday goers, and noticeably lowering consumption as a result. Although raising the cost of alcohol could have a very negative effect on the tourism industry, it is likely that an important reason for traveling abroad for some tourists would be cheap alcohol and nightclubs. It is very possible that raising prices would dissuade tourists with less disposable income from traveling, and therefore substantially cutting down service industry profits during the vital tourist season. Even if the price of alcohol was increased it is likely that they would be driven down again as other tourist locations lowered prices in order to draw in customers. I believe the best options for controlling the problem would either be extensive negative advertising campaigns, or severe fines and penalties for those caught breaking laws while under the influence of alcohol, these could act to reduce the incidence of heavy drinking related issues by providing a disincentive to overindulge without causing a rise in alcohol prices and scaring away consumers as a result.

19. # Laura Yilmazon 25 Jan 2010 at 12:03 am

    mei ling, i think your answer is full of thought and knowledge

20. # Trevor.echl.f09on 25 Jan 2010 at 9:17 am

    1. Yes, overconsumption of alcohol is definitely a market failure. It would probably be classified as a negative consumption externality. This is because an overconsumption of the good on the part of consumers is creating the negative externalities which affect the consumers and not the producers.
    2. They could limit the sale of alcohol. This would bring the marginal private benefit back in line with the marginal social benefit and ensure that there is no overconsumption of alcohol, at least on the hotel’s premises. Other actions that could be taken include banning the sale of alcohol all together although this may also have a negative effect.
    3. While they are able to sell a lot of alcohol to many willing and ready tourists, the effect this alcohol is having on their behavior is a cost that must be shouldered by the taxpayer. Stupid behavior from drunks results in police officers having to divert their resources to address concerns of the actions of tipsy tourists. Also, ambulances and hospitals are sometimes needed and this definitely pulls money straight from the taxpayer. The private cost of running a bar does not reflect the social cost. The only time it does is when bar fights occur and the owner of the bar has to deal with the effects of this. Otherwise, the social costs are felt outside the bar where most of the stupid actions take place and where resources from the community must be diverted. That is why resorts need to put limits on the sale of alcohol because the bar tenders probably won’t do it themselves so long as they are earning money.

    Trevor Tezel

21. # Trevor.echl.f09on 25 Jan 2010 at 9:25 am

    Meiling, you bring up some good points. We seem to disagree on whether or not this situation is a mixed negative externality or a negative consumption externality. I see where you’re coming from, and I’m in the process of researching to determine the answer to this…. Also, you take a different route then me on the actions that the resort should take in order to address this problem. While a cap seems the most appropriate to me, your idea of a tax got me thinking. It would raise government revenue and possibly help offset some of the social costs of these drunk tourists. Maybe they can pay the costs of the stupid actions they will be taking later in the evening by buying alcohol! It’s an interesting concept to consider.

    Trevor Tezel

22. # Masaya.echl.f09on 25 Jan 2010 at 12:43 pm

    1. Over-consumption of alcohol is a market failure because the consequence of this is causing negative externalities to the society as a whole. Although it is a benefit for the individual drinking the alcohol – personal positive externality – the crazy behavior triggered by drunkenness is causing negative social externality.
    2. If the tourist nations were serious about cracking down on drunk tourists, they could, as a first step, initiate prevention awareness campaigns through posters and commercials, they could establish penal laws to fine any violators including bars and shops who sold alcohol to the violator. Higher taxation on alcohol could be an alternative way for prevention. High tax would induce people not to spend money on alcohol; and for every purchase of alcohol the government would gain more tax revenue.
    3. Because bars and clubs in resort communities are likely to be fully loaded, especially during holiday season when many tourist arrive, hence, their profits made is tremendously large. Yet, the profits they make does not reflect the total social cost. The negative externalities brought by the over-consumption of alcohol in these clubs and bars are costing massive amounts of government expenditures. For example, personnel expense for cleaning up mess and deploying police officers, maintenance fee to fix broken government property, etc.

23. # Masaya.echl.f09on 25 Jan 2010 at 12:59 pm

    Trevor>>
    Though you said banning of alcohol sale is one method of prevention, do you not believe that such action would decrease overall sales of local bars and clubs, and consequently affect the resort’s economy?

    In a way, the local economies are able to operate the way it is because of alcohol

24. # Jacob.echl.f09on 26 Jan 2010 at 4:10 am

    1. Yes, it is a negative consumption externality. The overconsumption has harmed the consumers without harming the producer.

    2. They could increase syntaxes in order to deter consumers from purchasing more alcohol and producers to sell because it becomes more inconvenient.

    3. The proprietors are usually going to have a high demand for alcohol in tourist countries, but then the taxpayer ends up paying more. Their behavior while drunk can get them arrested or injured, which hurts them and not the proprietor. Also, the proprietors don’t lose consumers because the people arrested are tourists and would have left anyway, and there will always be more. The private cost does not reflect the social cost. The social costs usually happen outside the bar like in the street or on a plane. The only time the private cost affects the social cost is if there was a Star Wars Cantina situation going on, but this is not very common.

25. # Jacob.echl.f09on 26 Jan 2010 at 4:12 am

    Masaya,

    You have good ideas on how to fix this problem, good job. Taxes are a great way to get revenue and deter consumers, but anti-alchohol campaigns are simply genius.

26. # Mattea.echl.f09on 26 Jan 2010 at 4:20 am

    1. Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
    Because the effects of the consumption go beyond simply the consumer, it’s an externality. This is a negative consumption externality because it harms people.
    2. If the tourist nations were serious about cracking down on drunk tourists, what economic actions could they take in the resort communities where most of the trouble occurs?
    The best option would be to place a tax on alcohol. This would raise the price and discourage people from buying it. If they don’t buy it, they can’t drink it.
    3. How are proprietors of bars and clubs in resort communities benefiting at the expense taxpayers from other parts of the tourist nations? Does the private cost of running a bar in a place like Malia, Greece reflect the social cost? Explain.
    The proprietors are making lots of money off of the sale of alcohol. Their benefit is at the expense of the community, who has to suffer the antics of the drunken tourists. The private cost is nowhere near the social cost. The hospital visits and crimes committed exceed by far the cost of maintaining a bar.

27. # Mattea.echl.f09on 26 Jan 2010 at 4:24 am

    Jacob,
    Would you say that the producer isn’t harmed at all? If you look at the owner of the bar as the producer, then they are likely part of the community. They will have to deal with the drunks, the same as everyone else. Generally, though, I would say that you are correct in labelling it as a negative consumption externality.

28. # Meiling.echl.f09on 26 Jan 2010 at 6:28 pm

    Trevor,
    Now that I’ve read your comment, I’ve rethought my position a little. It seems that it is a negative externality that is received both in consumption and production. I agree with you in that the overconsumption of alcohol harms consumers as well (for example with healthcare costs), but this in turn affects the production of other goods and services (I don’t think I was clear on this earlier on), because people who have chronic alcohol problems and health issues are unable to work productively.

29. # Dennis.echl.f09on 27 Jan 2010 at 12:32 am

    1. The overconsumption of alcohol is a market failure and can be classified as a negative externality because it has negative effects outside of the price market.

    2. If the tourist nations were serious about cracking down on drunk tourists, and were not interested in the particular effects it had on the market, they would simply tax the good and it would slowly decrease the overconsumption, but the issue with this, as mentioned in the article, a tax could completely drive away the consumers and cause the market to collapse. The best idea, with the market in mind, would be to limit the supply of alcohol and therefore, limit the consumption.

    3. The proprietors of bars and clubs are benefitting at the expense of the taxpayers because they get to continue to supply consumers that overconsume, while taxpayers have to pay for all the damage that the drunk British people do. The private cost of running a bar does not reflect the social cost because the cost of running a bar does not include all the damage done by the people outside of the bar (the social cost).

    -Dennis-

30. # Dennis.echl.f09on 27 Jan 2010 at 12:36 am

    Mattea,

    Do you think that taxing alcohol would really be the best route regarding the sensitivity of the market? The article mentions how consumers really easily leave the market if the conditions become unfavorable and perhaps go to another more favorable market, so I’m thinking that it wouldn’t be the best idea. Maybe a better idea would be to just strengthen the police force to deal with these people..

    -Dennis-

31. # chamonix.echl.f09on 27 Jan 2010 at 4:53 am

    1. I think that the drinking issue is a market failure. I think that it could be viewed as both a negative consumption externality and a negative mixed externality. It is a negative consumption externality because British drinkers lower the quality of life for locals and a negative mixed externality because British drinkers are hurting their own health and safety.

    2. If local authorities were serious about cracking down on alcohol, there are various steps that they could take. However, all of these steps would come with a risk of hurting the economies of their communities. Some of these actions might include higher arrest rates and less police leniency (although this would be very expensive for taxpayers), limits on the number of bars in a neighborhood (although this would cut jobs), higher taxes on drinks (although this would reduce consumption and tourism which would take money away from the community.) All of these actions might be effective, but they would have heavy costs for the communities.

    3. Bar and resort owners in tourist-based communities are benefiting from taxpayers in other areas of their nations because those taxpayers must pay for negative externalities of the resorts. The private costs of running a bar do not reflect the social costs. The cost of street cleanup, police actions, lawsuits, jail, and emergency medicine is very high as compared to the cost of running a bar.

    Chamonix

32. # chamonix.echl.f09on 27 Jan 2010 at 5:09 am

    Masaya,
    I really liked your post. It helped me to better understand the whole situation, and I especially liked how you pointed out that tourists are seasonal.
    I had a few questions, though. You stated that one way for alcohol overconsumption to be reduced was for the government to establish penal codes which would fine any establishment that sold alcohol to someone who committed a crime. I do not see how this could work. Wouldn’t this be punishing business owners for acting BEFORE a crime was committed? (Is that legal or just?) I agree that bartenders should not serve patrons who are already drunk, but isn’t this a fine line and very subjective? Finally, how would police determine where the drink was served? If a person was drunk enough to participate in the kind of behavior that would spur this level of legal action, they might not remember where they had been. I feel like this would be an ineffective plan of action.
    Thanks so much for raising these points!
    Chamonix

33. # Ralph.echl.f09on 29 Jan 2010 at 1:44 am

    1. Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
    When a negative production externality is initiated, the firm will not be made to pay for the cost imposed on others. The overconsumption of alocohol in a market failure. The real cost to society is large, as drunk people cause havoc among the streets at night, and authorities must come in to sort out problems. The private benefit for all the companies that produce the alcoholic beverages to benefit from all the revenues gained.

    2. If the tourist nations were serious about cracking down on drunk tourists, what economic actions could they take in the resort communities where most of the trouble occurs?

    The tourist nations could increase the price of alcohol, however this might affect their economies, as tourists might be less inclined to. Local authorities taking stricter policies. However this could increase the cost to society, using public money. I like Dennis’s comment on limitting the supply, however I don’t believe this is the solution, as it would be unfair on consumers who do not abuse alcohol.

    3. How are proprietors of bars and clubs in resort communities benefiting at the expense taxpayers from other parts of the tourist nations? Does the private cost of running a bar in a place like Malia, Greece reflect the social cost? Explain.

    Financial benefits for these bars are high, where as social cost is large, as damange is done to property, and cost of local authorities having to step in to take action. Or hopsital admissions. The social cost is alot higher then the social benefits recieved by the bar owners.

34. # sara.echl.f09on 30 Jan 2010 at 11:44 pm

    1. I think that the overconsumption of alcohol definitely is a market failure. I would say that it is a negative consumption externality because it’s the consumers that are being harmed and not the producers, the producers’ benefits actually increase with the overconsumption of alcohol.
    2. Well, they could increase the price of taxes on alcohol by a lot. This would make the producers less incline to produce it and the consumers less inclines to buy it.
    3. The proprietors of bars and clubs are benefitting from the increased sale of alcohol. The fact that their tourists means that there is an effect on the community outside the bar. This means that the private cost does not reflect the social cost because while the owner of the bar might have to pay taxes and pay to fix the bar after a lot of drunken tourists, they don’t have the costs that the government has when drunken tourists misbehave.

35. # sara.echl.f09on 30 Jan 2010 at 11:48 pm

    Dennis,
    Do you think the government would be able to limit the supply of alcohol without taxing it? There are a lot of firms in this market and it would be very difficult to get them to limit their production. Taxing would probably be an easier way to limit the overconsumption.
    Sara

36. # daniel.echl.f09on 01 Feb 2010 at 10:46 pm

    1.Is over consumption of alcohol a market failure? If so, what type could it be classified as?

    over consumption of alcohol is a failure and can be classified as negative consumption externally because it directly effect the consumers and has no effects on the producer.

    2.If the tourist nations were serious about cracking down on drunk tourists, what economic actions could they take in the resort communities where most of the trouble occurs?

    They could increase tax on alcohol reducing the cheap prices that lures tourists into buying vast amounts and then the money could be spent on advertising campaigns. they could look to increase the budget on the police force and enforce heavier fines on misbehavior.

    3.How are proprietors of bars and clubs in resort communities benefiting at the expense taxpayers from other parts of the tourist nations? Does the private cost of running a bar in a place like Malia, Greece reflect the social cost? Explain.

    Proprietors benefit because of the increase in the sale of alcohol as tourist buy exceptionally more then locals. Th private cost doesn’t replicate social costs as they don’t have to worry about there behaviour once quiting themselves from the bar and so the government gets left with these costs.

37. # daniel.echl.f09on 01 Feb 2010 at 10:50 pm

    sara.echl.f09

    hi sara

    in your answer you say increasing tax will reduce the likelyhood of producers producing it i think that theey still will with the nature of the product it i addictive so its inelastic so they would pass the cost on and produce same amount it jus with a higher price the tourist will buy less

38. # victoria.echl.f09on 02 Feb 2010 at 4:11 am

    1. Yes overconsumption of alcohol is a market failure. It could be classified as negative consumption externality this is because it affects the consumer and not the producer.

    2. They could make a law that only allows you to buy a certain amount of alcohol. They could also higher taxes on alcohol. These two examples would be a risk, as not as much money would come in from the tourists and tourists will not come anymore. It will also harm the community, as tourist money is very important in the development of a community.

    3. Bars and clubs in resort communities are benefiting of the expense of the taxpayers because they can sell drinks to the tourist and the tourist will gladly buy them and the ones actually paying in the end are the taxpayers when they have to pay for all the mess that happens outside of the bar or club.

39. # victoria.echl.f09on 02 Feb 2010 at 4:24 am

    Hey Trevor

    I am in one way disagreeing with you and in the other way I think your right. Alcohol should be band as this would definitely lower the number of drunken tourists to about 99% (some people don’t follow law and order) but on the other hand money coming from tourists because of alcohol is very important, as it is a lot of money also needed to develop the community and make even more tourists come.

    Vica

40. # Eline.echl.f09on 02 Feb 2010 at 11:44 am

    Alcohol is a demerit good and would never do society any good, so the overconsumption of it would undoubtedly lead to a market failure. The market failure would be a negative externality, as there is an overallocation of alcohol. The many accidents and crimes as a result of excessive alcohol consumption will inflict large costs on society, so the externality is a negative consumption externality, initiated and received in consumption.

    One action tourist nations could undertake to reduce alcohol consumption by tourists is to raise alcohol prices. While this would provide the state with more money to raise awareness of the problem through, for example, advertising, it would probably not be that effective as the tourists go on holiday with the intention of drinking a lot and higher prices would not influence their consumption behaviour that much. Limiting the amount of alcohol in tourist resorts is also an option though it would decrease the satisfaction of the tourists.

    Proprietors of bars and clubs in resort communities benefit from the tourists’ alcohol overconsumption, probably selling alcohol at lower prices to compete with rivaling bars and clubs and encourage the tourists to drink more. This of course is at expense of the taxpayers from other parts of the tourist nations, who have to pay for the costs imposed by drunk tourists. Money and police forces to keep the behaviour of the tourists under control will be very much present near resorts but would be lacking in other parts of the nation. Initiated with in production(the bars and clubs selling alcohol at lower prices) and received in consumption, this would be a mixed negative externality.

41. # Armando.echl.f09on 02 Feb 2010 at 12:12 pm

    -I believe that the overconsumption of alcohol is a market failure and that it is a negative consumption since the consumers are being harm in a long term effect, but the producers don’t.
    -If taxes were inplemented or just the prices were really high people will decide to stop buying alcohol and producers will be mad since they will be losing a big profit.
    -The owners of bars and night clubs are smart since they gain a really high profit for the sale of alcohol and cigarttes, therefore places were the alcohol is cheaper there will be a great profit, eventhoug it will harm the tourists.

42. # Armando.echl.f09on 02 Feb 2010 at 12:14 pm

    Sara,
    actually I want to be the owner of this abandoned club called COLORS, in the most expesive part of the capital of Colombia, just be cause I sure that this will be a great method of gaining money and satisfying the consumers and tourists.

43. # Eline.echl.f09on 02 Feb 2010 at 10:22 pm

    Trevor,
    Banning alcohol might make it less available to tourists, thus reducing alcohol overconsumption, but it would definitely create a black market for it that would generate crime and violence, and the costs of enforcing this policy would be very high, requiring many police forces. On top of that, alcohol can be banned in one tourist nation but that doesn’t mean it will be banned in all countries, which makes it easy for the tourists who don’t want to drink water and soft drinks all the time to change their holiday destination. This of course would lead to enormous losses for the nation prohibiting alcohol.

    Your idea of penalizing people before they get drunk to pay for the costs they will cause is excellent, but how will this be realized? Do you mean all tourists would have to be penalized, regardless of the fact that they might not get drunk? It is a very interesting idea though.
    -Eline

44. # Marcelo.echl.f09on 03 Feb 2010 at 5:14 am

    1. Indeed, overconsumption of alcohol is a market failure, since it is creating negative externalities, from consumers to society as a whole, including consumers and producers. I mention producers since, even though they gain a lot of money with British drunkards, their customers’ impulsive actions might as well frighten off other clients, such as in a bar fight.

    2. I believe that if the aim was to reduce the negative externalities created by drunken tourists, the general idea would be to discourage such people from drinking too much. Such thing can be achieved through setting higher prices on alcohol, for example through a new tax, or price floors. The government could also force bars to close earlier. Furthermore, the government could set severer punishments or higher fines to those found driving drunk, or those causing trouble. The general idea would be to scare them with the law.

    3. Of course, to a certain extent, the owners of bars are really enjoying this burst of British tourists which have become their number one clients, raising sales enormously, definitely increasing profits. However, as I said before, these drunken tourists might as well cause trouble inside the bars, deterring other customers, and maybe causing property damage, an extra cost. Thus, I would say that even if under a certain point of view the private cost is more than the social cost, to some extent they might be equated. (I am not taking into account deaths, which as far as I know, are rarely caused by drunkenness alone, but actually by driving drunk.) Quoting from Chamonix, “street cleanup, police actions, lawsuits, jail, and emergency medicine” are social costs which are indeed quite costly, but not more than losing clients, having property destroyed, having the police question you about the given incident and consequences in general.

45. # Marcelo.echl.f09on 03 Feb 2010 at 5:28 am

    Victoria,

    I believe that banning the sale of alcohol or increasing the prices will not reduce the amount of tourists as much as you imply, or at least not as much as to find a perceptible difference in the statistics. I mean that, as far as I know, very few people go to Greece because of the alcohol… I think that they go for some other reason actually… Getting drunk is only an additional consequence of partying and vacations, which will not discourage any tourist from visiting Greece. There are many other things to do Greece than getting drunk. All right, bars will lose some money, but not because of the lack of tourists but because nobody wants to buy such expensive alcohol.

46. # Catherine.echl.f09on 04 Feb 2010 at 2:21 pm

    1.) The overconsumption of alcohol creates many negative externalities – like crashes and such. While the market may not necessarily have negative externalities in production, it certainly creates a marked failure with overconsumption.
    2.) The main economic action I can think of here is the prohibition of alcohol. While prohibition would certainly take away some profits, it would protect the consumer and the general community. If prohibition is too harsh of a measure for resort communities, the government could place a limit on how much alcohol a consumer could purchase at a time. That way, overconsumption would be much harder than it is now.
    3.) Taxpayers must often cover the costs of police, ambulances, health care, etc. of others. So, when a tourist gets drunk and makes stupid decisions, the costs of those decisions are often carried by the taxpayer. However, overconsumption of alcohol does not affect the bar negatively. The owner of the bar generally does not have to pay for the police intervention, ambulance, hospitalization, jail, etc. of the tourist. Therefore, the private costs of running a bar do not necessarily reflect the social costs. The owner of the bar will sell alcohol and therefore make a profit, while the taxpayer must carry the burden of the overconsumption of alcohol.

47. # Catherine.echl.f09on 04 Feb 2010 at 2:24 pm

    Hey Marcelo,
    We have pretty different responses for the third question here. I really like your take on it – that the social and private costs will be equated. However, do you think the loss of customers or the other examples you have will balance with all the people who are arrested or damage property outside of the bar? It seems like more happens once the customer leaves the bar drunk… but I may be completely wrong here. I know that last year, the most costly damage caused by a drunk tourist where I live occurred almost 20 miles away from the bar. That was definitely more of a social cost than a private cost.

    Catherine

48. # Issa.echl.f09on 08 Feb 2010 at 11:52 pm

    1. Is overconsumption of alcohol a market failure? If so, what type could it be classified as?

    Over consumption is a market failure as it leads to negative externalities. It could be classified as a mixed consumer initiated negative externality as it is caused by consumers overdrinking alcohol and engaging in utterly stupid activities. These activities adversely affect other consumers as they have their vacation experiences disturbed, but they also adversely affect tax payers and may lead to added regulation which affects bar owners.

    2. If the tourist nations were serious about cracking down on drunk tourists, what economic actions could they take in the resort communities where most of the trouble occurs?

    The tourist nations could impose higher minimum drinking ages or put quotas on the amount of drinks that a person is allowed to purchase and consume every night. This would probably serve to drastically decrease the drunken behaviour.

    3. How are proprietors of bars and clubs in resort communities benefiting at the expense taxpayers from other parts of the tourist nations? Does the private cost of running a bar in a place like Malia, Greece reflect the social cost? Explain.

    Proprietors of bars and clubs in resort communities greatly benefit from the drinking excess because can sell a lot more alcohol. Their success does not take into account, however, the costs incurred by other sectors of the society from the drunken tourists. This means that they can charge lower prices than they would if they had taken into account the social costs in addition to the private costs. This means that they over produce.

49. # Issa.echl.f09on 09 Feb 2010 at 12:01 am

    Hey Catherine,

    re: marcelo

    I agree with what you said with regards to Marcelo’s comment. I think that his interpretation of the question is interesting, but I agree more with your interpretation. The problems caused by the drunken tourists occur some ways away from the actual bars that supply the alcohol. Plus the sight of drunken tourists probably would act as a deterrent to other tourists who want to become drunk, but like a signpost for where the past is.

    -Issa

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