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

Mar 10 2009

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

Published by Jason Welker at 9:31 am under Cost/Benefit Analysis,Exports,Externalities,Market failure

Some Britons Too Unruly for Resorts in Europe – NYTimes.com

According to the article above, Great Britain exports more trouble to the rest of Europe than any other nation.

A recent report published by the British Foreign Office, “British Behavior Abroad,” noted that in a 12-month period in 2006 and 2007, 602 Britons were hospitalized and 28 raped in Greece, and that 1,591 died in Spain and 2,032 were arrested there.The report did not distinguish between medical cases and arrests associated with drunkenness and those that had nothing to do with it. But it did say that “many arrests are due to behavior caused by excessive drinking.”

The unruly behavior of Britons does not always end when the vacation is over, either:

Earlier this summer, flying home to Manchester from the Greek island of Kos, a pair of drunken women yelling “I need some fresh air” attacked the flight attendants with a vodka bottle and tried to wrestle the airplane’s emergency door open at 30,000 feet. The plane diverted hastily to Frankfurt, and the women were arrested.

How is this story related to economics, you may be wondering? Well, it’s really about a market failure. The over-consumption of alcohol by British tourists is creating spillover costs for the societies (and police forces) of the nations in which the tourists get themselves into trouble.

As governments often do when market failures exists, some British consulates have begun taking action to reduce the negative externatlities associated with their nationals’ drunkenness.

Worried about the increase in crimes and accidents afflicting drunken tourists, the British consulate in Athens has begun several campaigns, using posters, beach balls and coasters with snappy slogans, to encourage young visitors to drink responsibly.

“When things do go wrong, they go wrong in quite a big way,” said Alison Beckett, the director of consular services. “What we’re trying to do here is reduce some of these avoidable accidents where they have so much to drink that they fall off balconies and are either killed or need huge operations.”

Because British tourists only consider their own enjoyment (benefits) while on vacation, they consume alcohol at a level that fails to take into account the social costs of their behavior. In economic terms, the marginal private benefit of alcohol consumption exceeds the marginal social benefit, representing an overallocation of resources towards alcohol in tourist towns. Government action by British consulates is aimed at reducing demand (marginal private benefit) among tourists, shifting the MPB curve back towards the MSB curve, in the hope that alcohol consumption will decline to the socially optimal level, where marginal social benefit equals marginal social cost.

There seems to be a fine line between too much drinking and not enough in the tourist spots of Europe. As far as the impact that British drunkenness has on business, some in the tourist trade believe the very prospect of wild parties and cheap booze is what keep the local economies afloat. Crack down too much on the wild Britons, and business could collapse as customers attracted to the anarchy stop arriving.

Discussion questions:

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

About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

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# Horia Stanescuon 27 Aug 2008 at 5:52 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.

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# Joelon 27 Aug 2008 at 6:51 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.

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# Alex Telfordon 27 Aug 2008 at 7:02 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.

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# Sean Isaacson 27 Aug 2008 at 7:09 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.

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# Joelon 27 Aug 2008 at 6:05 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.

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# Matteoon 28 Aug 2008 at 2:40 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.

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# Jean Kiekelon 28 Aug 2008 at 4:45 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.

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# Wilhelm Nykoppon 28 Aug 2008 at 5:23 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.

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# Joelon 31 Aug 2008 at 10:43 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).

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# Wilhelm Nykoppon 03 Sep 2008 at 4:30 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

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# Ollieon 13 Mar 2009 at 8:08 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!

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# Amiton 13 Jan 2010 at 9:54 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.

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# Jasonon 14 Jan 2010 at 4:17 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.

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# Thomason 15 Jan 2010 at 2:50 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.

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# Gabeon 15 Jan 2010 at 3:23 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

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# Gelando Makrideson 19 Jan 2010 at 6:56 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.

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# Meiling.echl.f09on 24 Jan 2010 at 1:06 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.

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# Laura Yilmazon 25 Jan 2010 at 1:01 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.

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# Laura Yilmazon 25 Jan 2010 at 1:03 am

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

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# Trevor.echl.f09on 25 Jan 2010 at 10:17 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

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# Trevor.echl.f09on 25 Jan 2010 at 10:25 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

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# Masaya.echl.f09on 25 Jan 2010 at 1:43 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.

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# Masaya.echl.f09on 25 Jan 2010 at 1:59 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

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# Jacob.echl.f09on 26 Jan 2010 at 5:10 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.

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# Jacob.echl.f09on 26 Jan 2010 at 5:12 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.

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# Mattea.echl.f09on 26 Jan 2010 at 5:20 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.

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# Mattea.echl.f09on 26 Jan 2010 at 5:24 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.

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# Meiling.echl.f09on 26 Jan 2010 at 7:28 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.

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# Dennis.echl.f09on 27 Jan 2010 at 1:32 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-

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# Dennis.echl.f09on 27 Jan 2010 at 1:36 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-

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# chamonix.echl.f09on 27 Jan 2010 at 5:53 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

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# chamonix.echl.f09on 27 Jan 2010 at 6:09 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

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# Ralph.echl.f09on 29 Jan 2010 at 2:44 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.

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# sara.echl.f09on 31 Jan 2010 at 12:44 am

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.

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# sara.echl.f09on 31 Jan 2010 at 12:48 am

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

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# daniel.echl.f09on 01 Feb 2010 at 11:46 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.

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# daniel.echl.f09on 01 Feb 2010 at 11:50 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

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# victoria.echl.f09on 02 Feb 2010 at 5:11 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.

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# victoria.echl.f09on 02 Feb 2010 at 5:24 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

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# Eline.echl.f09on 02 Feb 2010 at 12:44 pm

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.

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# Armando.echl.f09on 02 Feb 2010 at 1:12 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.

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# Armando.echl.f09on 02 Feb 2010 at 1:14 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.

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# Eline.echl.f09on 02 Feb 2010 at 11:22 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

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# Marcelo.echl.f09on 03 Feb 2010 at 6:14 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.

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# Marcelo.echl.f09on 03 Feb 2010 at 6:28 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.

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# Catherine.echl.f09on 04 Feb 2010 at 3:21 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.

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# Catherine.echl.f09on 04 Feb 2010 at 3:24 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

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# Issa.echl.f09on 09 Feb 2010 at 12:52 am

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.

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# Issa.echl.f09on 09 Feb 2010 at 1:01 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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# Yuto Takaokaon 01 Nov 2010 at 8:57 pm

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

Over consumption of alcohol is a market failure unless the government intervenes the market to correct the market failure. This is classified as negative externalities of consumption as the alcohol the consumer drinks have negative spill over effect to the society.

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 economic action they can take is definitely raising the tax up for the alcohol. By doing so, less tourists will get drunk and also get revenue from the tax so they can use it to fix any damage caused by the drunk people in the society.

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 are benefiting at the expense taxpayers basically because they can earn profit. Even though the society has to pay for the social spillover costs that arise with the drunk people, this does not affect the proprietors greatly.

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# konstantin.zon 08 Dec 2010 at 11:51 pm

1) Yes Over consumption of Alcohol is example of market failure because it creates negative externality which isn’t paid by British traveler but by society of a host country. Especially tax payers are host countries whose tax money is spent on extra policy costs along with it producers of the host countries may also suffer because drunk British Tourists may behave badly( fight, scream) frighten away other potential costumers ( visitors ).

It is a negative Externality of consumption.

2) I see two ways of how to crank down drunk tourist.

a. My first idea is a small discriminative I think that putting a tax on Alcohol for non country citizens this will make tourist/visitors spend more money or drink less in both ways it will be positive for a host country

b. Another way could be putting serious fines for behaving inappropriately under influence of alcohol though causing trouble to other tourists and local residents.

Policies.

Not allowed to drive car drunk

Not allowed to shout in streets after 12.pm

Not allowed to walk drunk in streets without a sober companion( you must either call a taxi or stay where you are till you will feel more controlling of yourself.

Not allowed to fight or destroy other people’s property

Not allowed to offense Policy

Not allowed to cell alcohol till 25

These policies could also help my country (Georgia)

3) A British tourist is a good costumer for owners of Bars and Clubs in Touristic Resorts of Greece Egypt Monaco etc. The more they drink More money they spend So more revenue for Bar and club owners the owners of Bars care only about their Private benefit they don’t think about trouble that the tourist may cost when they live the bar because they don’t pay anything for damage a drunk man can cause, other Tax payers in host country Pay for it. The private cost of running a bar in a tourist country doesn’t reflect the social cost because social cost is paid by Host countries Tax payer( not the owner). However The British drunk tourists aren’t the only costumers in bar their behavior is disturbing their clients which may cause the loss of profit of a certain bar.

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# Sondoson 10 Dec 2010 at 11:57 pm

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

Overconsumption of tourists in foreign countries in this case would very well be considered to be a market failure. This is demonstrated by the fact that the consumption of excess alcohol has a negative effect upon a third party (the bars & clubs lose customers due to the tourists’ irritating behavior, the host country police are distracted from their routine duties towards their country to be occupied by the drunken tourists, etc.). This is defined as a negative externality, one among the many sources of market failure. A negative externality also implies that the there is an external cost that should be added to the private costs of alcohol consumers to reflect the full cost of excessive alcohol consumption of tourists on the host society.

To be more specific, alcohol consumption is a negative externality of consumption, for when consumed by individuals (tourists in this case), adversely affect third parties. It is also a mixed externality due to the fact that the negative externality is initiated in production but received in consumption.

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

Firstly, it’s important to note that the host country will most likely not take drastic measures in order to reduce the negative externalities caused by drunken tourists since this would trigger an undesirable effect on the bars and clubs which depend on alcohol consuming tourists for their revenue and subsistence, which, if plummets drastically, will perhaps jeopardize the host country’s economy.

One should also consider the fact that alcohol is an easily addictive product, and will therefore have a fairly inelastic demand. This implies that although taxes may not be very effective in decreasing demand, it will decrease nonetheless, even though the percent decrease would be proportionally less than that of the increase in price, which is exactly the effect desired in this case. So my first proposition would be imposing a ‘tourist’ tax on alcoholic beverages. What type of tax? I personally think that an ad-valorem tax would be the best type of tax the host government can impose, given that the more drinks you buy, the more expensive they become, and so the consumers would be less inclined to drink as many alcoholic beverages. They would still be relatively cheap at first, but then the rapid increase in their respective price would certainly urge tourist to reconsider the number of drinks they intend to have.

Another option that can be taken into consideration by host countries to reduce the negative consumption externalities is to provide negative advertisement for excess alcohol consumption in attempts to reduce its demand.

Quotas can also be imposed as to the maximum number of drinks a male/female tourist may have, corresponding to their respective physiology.

• How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 money collected from the host country’s tax payer usually goes into government investment in health care, contraction of public infrastructure, the offering of certain services such as protection from national police, the upholding of the country’s economy, etc. However, when drunken tourists ‘unconsciously’ destroy public property, are injured and admitted to a hospital, or must be recruited by the national police, the proprietors of the clubs and bars who allowed their customer to reach this state, are free from the fees of any of the mentioned social costs, all financed by the tax payers, and gain high rates of revenue nonetheless.

Personally, I would think that given the mentioned example, the social cost does not reflect the private cost of running a bar in a place such as Malia or Greece due to the negative externalities of consumption that must be considered as part of the social cost, yet excluded from the private cost. Perhaps the only scenario where the social cost may be reflected by the private cost is when the bar owner must pay for any damages caused by drunken consumers.

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# Sondoson 11 Dec 2010 at 12:06 am

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

Overconsumption of alcohol by tourists in foreign countries in this case would very well be considered as a market failure. This is demonstrated by the fact that the consumption of excess alcohol has a negative effect upon a third party (the bars & clubs lose customers due to the tourists’s irritating behavior, the host country police are distracted from their routine duties towards their country to be occupied by the drunken tourists, etc.). This is defined as a negative externality, one among the many sources of market failure. A negative externality also implies that the there is an external cost that should be added to the private costs of alcohol consumers to reflect the full cost of excessive alcohol consumption of tourists on the host society.

To be more specific, alcohol consumption is a negative externality of consumption, for when consumed by individuals (tourists in this case), it adversely affects third parties. It is also a mixed externality due to the fact that the negative externality is initiated in production but received in consumption.

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

Firstly, it’s important to note that the host country will most likely not take drastic measures in order to reduce the negative externalities caused by drunken tourists since this would trigger an undesirable effect on the demand clubs who depend on alcohol consuming tourists for their revenue, which, if plummets drastically, will perhaps jeopardize the host country’s economy.

One should also consider the fact that alcohol is an easily addictive product, and will therefore have a fairly inelastic demand. This implies that although taxes may not be very effective in decreasing demand, it will decrease nonetheless by a proportionally smaller decrease in demand than raise in price (the effect desired in this case). So my first proposition would be imposing a ‘tourist’ tax on alcoholic beverages. What type of tax? I personally think that an ad-valorem tax would be mopst effective, given that the more drinks you buy, the more expensive they become, and so the consumers would be less inclined to drink as many alcoholic beverages. They would still be relatively cheap at first, but then the rapid increase in their respective price would certainly urge tourist to reconsider the number of drinks they intend to have.

Another option that can be taken into consideration by host countries to reduce the negative consumption externalities is to provide negative advertisement for excess alcohol consumption in attempts to reduce its demand.

Quotas can also be imposed so as to the limit maximum number of drinks a male/female tourist may have, corresponding to their respective physiologies.

•How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 money collected from the host country’s tax payer usually goes into government investment in health care, construction of public infrastructure, the offering of certain services such as protection from national police, the upholding of the country’s economy, etc. However, when drunken tourists ‘unconsciously’ destroy public property, are injured and admitted to a hospital, or must be recruited by the national police, the proprietors of the clubs and bars who allowed their customer to reach this state, are free from the fees of any of the mentioned social costs, all financed by the tax payers, and gain high rates of revenue nonetheless.

Personally, I would think that given the mentioned example, the social cost does not reflect the private cost of running a bar in a place such as Malia or Greece due to the negative externalities of consumption that must be considered as part of the social cost, yet excluded from the private cost. Perhaps the only scenario where the social cost may be reflected by the private cost is when the bar owner must pay for any damages caused by drunken consumers.

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# Sondoson 11 Dec 2010 at 12:11 am

Re: konstantin.z

The imposition of strict regulations concerning the age and accepted behaviour by the host government was a clever idea, a direct way of tackling the issue. Accompanied by appropriate advertisement of the regulations, they seem to be the most effective way of reducing the negative externalities caused by tourist alcohol over-consumption. Of course only if there will be a considerable fine given to those who do not respect the given regulations, would there actually be an effect on alcohol demand.

Moreover, I found it interesting that you considered public disturbance caused by drunken tourists both inside and outside the bar as a portion of the negative externalities which could possibly decrease demand; a point I hadn’t considered at first.

Re: Marcelo

I was intrigued by your suggestion that: “losing clients, having property destroyed, having the police question you about the given incident and consequences in general was more costly than “street cleanup, police actions, lawsuits, jail, and emergency medicine”.” I was under the impression that they were all possibilities of negative externalities of excessive alcohol consumption, and nearly all financed by the taxpayers, regardless of which is more costly.

I also agree with you when you mention that scaring alcohol consumer tourists with the law would be by far among the most effective measures considered, as mentioned by Konstantin, not likely to decrease the demand for vacations at the host country in question. Furthermore, strict regulations may give out a stronger sense of security in the country, which could perhaps even stimulate demand for vacations…

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# Frederico Con 13 Dec 2010 at 11:56 pm

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

Yes, in this case it can be seen as producing negative externalities, and an over-provision of demerit goods. Thus there is an oversupply of alcohol in the market, that causes huge disturbances.

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 first step would be to raise the taxes of drinks so that the customers would think twice before taking a chunk out of their wallets. The government could limit the amount of alcoholic beverages that the resorts could buy; thus reducing supply in the resort.

3. How are proprietors of bars and clubs in resort communities benefiting at the expense of 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.

They are benefiting from taxpayers, because a lot of the money paid goes to providing police support and health services to those areas. Thus the inhabitants of the resort communities get better health services and year round security that is better than the rest of the nation.

The private cost of running a bar in Malia does not get even close to the social cost. This because society gets all the negative externalities shunted on them; on the other hand the bar owners simply kick ruffians out of the establishment, leaving them to wreak havoc in the town.

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# Frederico Con 13 Dec 2010 at 11:59 pm

RE: Konstantin

Your second answer is good, but it is more of a legal matter than an economic one, any more ideas?

I agree with everything else you say though, and your last answer is quite similar to mine. The last sentence about paying for damage done is actually not a bad idea for use in the second question, you could perhaps make it a law, and fine tune it so that the police would know where the "hooligan" had been to so that that bar would pay for the damage.

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# Noahon 14 Dec 2010 at 10:16 am

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

Overconsumption of alcohol is a market failure since it contributes to a loss in social welfare. The overconsumption of alcohol is an example of an “over-supply of demerit goods”, which leads to a market failure. Since overconsumption of alcohol is a demerit good (a good the government does not want and thinks it affects consumers and society negatively), the government would like to stop it in order to lessen the costs of hospital fees and other problems.

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

Authorities could start fining the drunken tourists much more for disorderly conduct. By handing out fines at much higher prices, the incentive will be to not pay as much by not getting as drunk. The higher fines on drunks around the resorts could also help pay for their hospital fees. Another tactic is to tax people more to enter and exit the country and these extra taxes could pay for more police and hospital fees.

How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 of bars and clubs are benefiting from all of the drinking tourists do at the expense of taxpayers in other countries because often times it is the taxpayers in the host countries who pay for the health care of all of the health care needed for those tourists who drink to much.

In Malia, Greece the cost of running a bar does not come close to the social cost. The 8$ bundles tourists can buy at bars are not even close to the money needed to pay for drunken tourists mishaps and rowdy behavior.

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# Noahon 14 Dec 2010 at 10:19 am

Re: Frederico C

You say that "the inhabitants of the resort communities get better health services and year round security that is better than the rest of the nation." I would think that it would be worse or that they are losing out because their money is actually going towards these drunk tourists who bar owners benefited from. What are your thoughts?

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# abhinav_sahon 14 Dec 2010 at 7:34 pm

Is overconsumption of alcohol a market failure?

Market failure arises when there is a misallocation of resources in an economy resulting from over/under production or consumption. In the case of alcohol, the marginal private benefit from consumption exceeds the marginal social benefit and thus results in an overconsumption of alcohol, above and beyond the optimum amount for society. Thereefore alcohol over consumption is a cause of market failure as the market would be better off from less alcohol consumption.

If so, what type could it be classified as?

It would be a mixed negative externality (accruing to consumers and producers of night clubs by consumers of alcohol).

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?

An indirect tax could be placed upon the sale of alcohol in those areas thus increasing the private cost to consumers, thus reducing demand for the product. Furthermore, a quota could be levied upon the sale of alcohol disallowing more than a certain quantity of bottles to be sold to tourists.

How are proprietors of bars and clubs in resort communities benefiting at the expense taxpayers from other parts of the tourist nations?

Taxpayers in other parts of the tourist nations fund the provision of police services in the local areas to regulate the actions of the drunk tourists. Furthermore, they indirectly fund the healthcare benefits that drunk tourists may receive if need be in the tourist areas. Proprietors of bars and clubs however benefit as the tourists pay them for the alcohol (their revenue increases yet the external costs e.g. healthcare do not accrue to the proprietors). Thus, they benefit at the expense of taxpayers in other parts of the nation.

Does the private cost of running a bar in a place like Malia, Greece reflect the social cost?

No, as the private costs only include those that accrue directly in financial terms to the proprietor of the bar. These include wages, cost of electricity, rent for premises. However, the social cost includes the costs that accrue to society as a whole as a result of the consumption of alcohol. Costs result due to irrational action of drunk tourists e.g. accidents, vandalism, inappropriate behaviour, in addition to external costs of the bar e.g. loud music, congestion in the area. These external costs constitute the true social cost to society of running a bar but are not factored in the monetary private costs. Thus, if social costs exceed private costs, overproduction takes place and thus the supply of bars is allocated inefficiently; there are more bars than are optimum for society's greater good.

Explain.

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# abhinav_sahon 14 Dec 2010 at 7:34 pm

Is overconsumption of alcohol a market failure?

Market failure arises when there is a misallocation of resources in an economy resulting from over/under production or consumption. In the case of alcohol, the marginal private benefit from consumption exceeds the marginal social benefit and thus results in an overconsumption of alcohol, above and beyond the optimum amount for society. Thereefore alcohol over consumption is a cause of market failure as the market would be better off from less alcohol consumption.

If so, what type could it be classified as?

It would be a mixed negative externality (accruing to consumers and producers of night clubs by consumers of alcohol).

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?

An indirect tax could be placed upon the sale of alcohol in those areas thus increasing the private cost to consumers, thus reducing demand for the product. Furthermore, a quota could be levied upon the sale of alcohol disallowing more than a certain quantity of bottles to be sold to tourists.

How are proprietors of bars and clubs in resort communities benefiting at the expense taxpayers from other parts of the tourist nations?

Taxpayers in other parts of the tourist nations fund the provision of police services in the local areas to regulate the actions of the drunk tourists. Furthermore, they indirectly fund the healthcare benefits that drunk tourists may receive if need be in the tourist areas. Proprietors of bars and clubs however benefit as the tourists pay them for the alcohol (their revenue increases yet the external costs e.g. healthcare do not accrue to the proprietors). Thus, they benefit at the expense of taxpayers in other parts of the nation.

Does the private cost of running a bar in a place like Malia, Greece reflect the social cost?

No, as the private costs only include those that accrue directly in financial terms to the proprietor of the bar. These include wages, cost of electricity, rent for premises. However, the social cost includes the costs that accrue to society as a whole as a result of the consumption of alcohol. Costs result due to irrational action of drunk tourists e.g. accidents, vandalism, inappropriate behaviour, in addition to external costs of the bar e.g. loud music, congestion in the area. These external costs constitute the true social cost to society of running a bar but are not factored in the monetary private costs. Thus, if social costs exceed private costs, overproduction takes place and thus the supply of bars is allocated inefficiently; there are more bars than are optimum for society's greater good.

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# abhinav_sahon 14 Dec 2010 at 7:35 pm

Market failure arises when there is a misallocation of resources in an economy resulting from over/under production or consumption. In the case of alcohol, the marginal private benefit from consumption exceeds the marginal social benefit and thus results in an overconsumption of alcohol, above and beyond the optimum amount for society. Thereefore alcohol over consumption is a cause of market failure as the market would be better off from less alcohol consumption.

Consumption of alcohol would be a mixed negative externality (accruing to consumers and producers of night clubs by consumers of alcohol).

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?

An indirect tax could be placed upon the sale of alcohol in those areas thus increasing the private cost to consumers, thus reducing demand for the product. Furthermore, a quota could be levied upon the sale of alcohol disallowing more than a certain quantity of bottles to be sold to tourists.

Taxpayers in other parts of the tourist nations fund the provision of police services in the local areas to regulate the actions of the drunk tourists. Furthermore, they indirectly fund the healthcare benefits that drunk tourists may receive if need be in the tourist areas. Proprietors of bars and clubs however benefit as the tourists pay them for the alcohol (their revenue increases yet the external costs e.g. healthcare do not accrue to the proprietors). Thus, they benefit at the expense of taxpayers in other parts of the nation.

No, as the private costs only include those that accrue directly in financial terms to the proprietor of the bar. These include wages, cost of electricity, rent for premises. However, the social cost includes the costs that accrue to society as a whole as a result of the consumption of alcohol. Costs result due to irrational action of drunk tourists e.g. accidents, vandalism, inappropriate behaviour, in addition to external costs of the bar e.g. loud music, congestion in the area. These external costs constitute the true social cost to society of running a bar but are not factored in the monetary private costs. Thus, if social costs exceed private costs, overproduction takes place and thus the supply of bars is allocated inefficiently; there are more bars than are optimum for society's greater good.

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# abhinav_sahon 14 Dec 2010 at 11:56 pm

Re:Noah's comment

Noah, I completely agree with your idea of a fine. Sharper fines for higher consumptions of alcohol will not only limit the consumption of alcohol but will also make people more cautious of their actions as they face the fear of a fine. I initially thought an indirect tax would function better, however given your answer, I feel an indirect tax would not have a direct/immediate impact on the situation and therefore a fine is much better suited for short term purposes. I also think a fine is more effective as alcoholics cannot ignore it – with an indirect tax the 'tax' portion is often considered as part of the price and so alcoholics may not always realize its significance. Also, a tax would not have much effect as demand for alcohol would tend to be inelastic – so quantity demanded would reduce at a less than proportionate rate to an increase in price. I therefore completely agree with your idea of a fine instead of a tax.

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# Michael_Mayeron 15 Dec 2010 at 12:41 am

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

Overconsumption of alcohol is a market failure due to consumption externalities. People consume too much alcohol, and begin to hurt the general public. The market failure occurs because there is a high demand for alcohol, but the companies do not have an increased price of production, so they feel no need to alter their price, and their supply is able to match the demand. Therefore, there is an over-consumption of alcohol.

• 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?

Tourist nations could not allow people who are excessively drunk to enter tourist areas; they could hire police officers to stand at the door and measure the B.A.C. of each tourist who entered the area. Also, they could decrease their sales of alcohol to decrease the supply. That would help keep the amount of drunk people at a minimum.

• How are proprietors of bars and clubs in resort communities benefiting at the expense of 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.

There is a social cost that is not a part of the private cost of running a bar, because the bar is not responsible for destruction due to drunkards. Therefore, the proprietors of bars benefit at the expense of taxpayers because they can make a profit off of selling their alcohol without having to worry about paying for the destruction that the people cause after drinking the alcohol. Instead, that cost falls into the laps of taxpayers.

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# Michael_Mayeron 15 Dec 2010 at 12:44 am

(Reply to Noah)

That is a great thing to bring up, the 8$ bundles that tourists can buy. People spend a mere 8 dollars to put themselves in a state of complete inebriation, and then proceed to run around destroying public property. If they so much as break a window, they have already caused hundreds of dollars of damage that will likely have to come out of taxpayer's pockets.

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# Javier Alberiteon 15 Dec 2010 at 5:44 am

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

In my opinion overconsumption of alcohol is clearly a market failure in which the private marginal analysis doesn’t take in account social factors. As it’s stated in the text the acquiescence of the social result of overconsumption of alcohol, the health damage, would shift the demand curve (MPB) to S1 (MSB) leftwards reducing the consumption and leading to an overproduction or oversupply of alcohol.

• 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?

Mainly, the easiest measure to take in order to reduce the problem with drunk tourists would be to reduce the supply of alcohol to tourists, asking for a local ID in order to sell them alcohol and rationing the alcohol quantity allowed to the tourists to buy.

• How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 are clearly benefiting because they’re getting high incomes of the sell of alcohol because tourists are willing and able to buy alcohol, but the other taxpayers are only having the outcomes (that also have the proprietors) of paying the extra police needed to control the tourist once they are drunk, and although the proprietors do pay taxes extra for the police, their incomes are way higher than their outcomes.

No, because the private cost is much higher than the social cost as they are damaging society as a whole and in result the MSC would be much higher than the MPC, which means that the supply curve would be shifted leftwards and there would be a virtual overproduction of alcohol in social terms.

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# Javier Alberiteon 15 Dec 2010 at 5:47 am

Reply to Michael_Mayer:

Thank you for suggesting the measure of controlling the B.A.C of the tourists in order to let them in. It's a very smart measure and that would reduce alcohol consumption in the middle and long range instead of in the short one.

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# Mitchell_Broughtonon 15 Dec 2010 at 8:16 am

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

Yes, it is market failure because the benefits gained from people buying the alcohol do not outweigh the costs. This would make drinking a negative externality and more specific a negatively mixed externality.

-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?

If the bar owners cared they could stop people who were over a certain blood alcohol limit before entering the bar. There could also serve a limited amount of drinks to people inside, possibly putting a sharpie mark on the person’s hand for every drink they buy.

-How are proprietors of bars and clubs in resort communities benefiting at the expense of 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.

Though the bartenders and club owners have to pay higher taxes due to the increase in police force, this also applies to the residents who are not partaking in the late night partying. Therefore, the residents are unjustly paying higher taxes. This late night binging not only increases taxes, but gives a bad name to Malia, Greece.

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# Mitchell_Broughtonon 15 Dec 2010 at 8:30 am

Reply to Michael Mayer:

Very good idea about measuring the B.A.C. (as you can tell it's also in my post so I definitely think it's an excellent idea), and I like your reason for why the taxpayers will suffer. Many other things will affect the citizens taxes as well such as police force and possible indirect taxes on alcohol.

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# Javier_Alonso_Martinon 15 Dec 2010 at 9:55 am

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

It is due to the fact, such overcompsumition being produced by alcohol is absolutely considered to be a market failure. The reason for such, would be that a negative externality has happen, where the government is already seeking to intervene in the situation to control the aspects of it.

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 real problem behind such idea should be that day by day, more tennagers are starting to drink alcohol on parties, clubs, street often and in high quantites. It means that what the goverment should be doing is allocating police controls on main points of the streets, such that these controls would be able to check the ID of the people going by it, just in case of teenagers. Moreover, such controls, could be better controlling the aspects of shops taht sell alcohol at low prices and high quantities, such that they can see if the process is legal and moreover, if the ratio between person and alcohol is rational. If not they could be penalizied.

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 of bars and clubs would be super benefited from this, due to teh fact the alcohol they seel could be at high prices, but because people just want to get into the mood´s party as fast as the can, then they be willing to pay for it, so it is worth it afterwards.

Private cost and social cost are two opposite things, so the answer should be no. Private aspects should be mainly, the ones taht are based on the maintenace of the bar, while the social would be connected to the aspects being produced on the people by alcohol after the party is over, during the street time where vandalism or things like that are showed.

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# Javier_Alonso_Martinon 15 Dec 2010 at 9:59 am

Reply to Mitchell_Broughton:

I found your explanation very accurate and explanatory towards such issue. I really liked the idea of the sharpie mark for each drink. But how is going to be able the owner of knowing whether a guy is being affected by over blood alcohol limit? Like I do not think people would like to be followed and interrupted during a party…What do you think about it?

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# Jackson_Moteon 15 Dec 2010 at 1:39 pm

Overconsumption could be classified as a form of market failure. In this case, it would be a negative externality because it is the unintended effect of the product. If consumption is over the social optimum, it has a possibility to increase crime, bad decision making and general drunkenness.

The government could levy a high tax on the sale of alcohol. This would most likely lower the consumption. However, not in all cases because alcohol is an elastic item for some and an inelastic item for others. Unfortunately, if this tax worked in lowering consumption, this would mean that local businesses that sell alcohol will have lower revenue and will report losses in profit caused by the tax.

The local taxpayers are bearing the brunt of the inebriated Brits. The tourists wont have to deal with the long term effects that their over consumption causes. Although revenue will increase during tourism seasons, the cost of accidents and other misfortunes that happen after overconsumption of alcohol will increase the cost spent on fixing these. Overall, they drink too much: It must be taxed.

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# Jackson_Moteon 15 Dec 2010 at 1:46 pm

Reply to Javier_Alonso_Martinez:

1. I agree with you here.

2. Are teenagers the main cause of this overconsumption though? From what I read in the article, it seemed to be the tourists and not necessarily the teenagers. However, I do also recognize that underage drinking could easily contribute to the overconsumption if it is left unchecked.

3. The bars themselves will gain revenue however the government and taxpayers will lost money on paying for these social costs. Therefore from the standpoint of a bar owner, it seems as if it would be very profitable for them to sell alcohol regardless of the price and the implications that are said to be beyond their control.

Your thoughts?

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# Deepa_Johnon 17 Dec 2010 at 2:09 pm

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

In my opinion overconsumption is a market failure as when consumers consume too much they tend to do things that affect people around them. The government knows this and would intervene to reduce the consumption of alcohol by increasing prices. This would be classified as a negative externality.

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?

If they were serious they should put more police on the job as more people are going to visit more and over consume. Checking IDs is a good way to minimize over consumption of alcohol for underage drinkers.

How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 of bars and clubs benefit from this because they get a profit and they do not need to worry about the external damage caused by costumers from their store except the resorts as they are part of community and will be help responsible. The price might affect because places like Malia and Greece are not 'popular' places to go so they need the money that they make from the few customers that go there.

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# Merab_Khideshelion 18 Dec 2010 at 12:21 am

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

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?

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.

1)Yes of course it is a market failure, because it creates a negative externality of consumption. Which means that tourists who consume alcohol may damage the bars/pubs, by frightening the local clients. The bar/pub would lose its clients and the market would be damaged.

2) Government could raise taxes on alcohol consumption for tourists and it would keep them from getting extremely drunk. When the alcohol will be too expensive for them, they won't start drinking, because of their money.

3) The proprietors of bars and clubs are benefiting by selling alcohol to British tourists. When the drunk tourists have to pay taxes for drinking alcohol, this money goes to host countries and is spent on improving health/security services.

The private cost of running a bar in Malia/Greece doesn't reflect the social cost, because social costs are payed by alcohol consumers.

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# Merab_Khideshelion 18 Dec 2010 at 12:26 am

Sondos,

In first question you say that the drunken tourists make the bars lose customers and then you say that bars depend on alcohol consuming tourists for their revenues. So what would be the best way for keeping the alcohol consuming tourists in and also keeping the local consumers?

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# Jaewan hongon 25 Dec 2010 at 12:07 am

1) Of course the overconsumption of alcohol is a market failure. This is considered as negative externalities of consumption. Negative externalities of consumption are when they are consumed by individuals, adversely affect third parties. Britons over drank alcohol and they make noise, damage stuff like tables in a bar, irritating other tourists etc. Britons who drink a lot presumably enjoy some private benefits of drinking, but this will create external costs for other tourists and resorts. Therefore this case must be considered as a market failure. The allocation of alcohol failed.

2) If the tourists were serious about this situation, resort would handle it by contacting the British Foreign Office or police. Another action that would occur in this situation is the extra tax on the alcohol so the demand on alcohol will fall among the British. But in my opinion since it is only British people who are making the problem, they should ban British drinking alcohol until certain amount so other tourists will not get any disadvantages of paying extra charge because of British.

3) The proprietors of bars and clubs get benefit from British by selling them alcohol and getting the expense tax on alcohol. They also do not have to worry about other tourists getting irritated and not come to their bars or clubs because of over drunken British. Private cost of running a bar in a place like Malia, Greece does not reflect the social cost because bar and clubs are not responsible for the damaged articles. The destruction is paid by the British.

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# Jaewan hongon 25 Dec 2010 at 12:12 am

Depa,

for the second question you said stationing police and checking the ID will decrease the problem caused by drunk British. But i don't think these are econoic actions (maybe not). the economic action that would come in this situation would taxing on alcohol by the governments.

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# Fikeon 01 Feb 2011 at 12:30 am

Really, great stuff to read, hands of

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# Kang_San_Keumon 03 Feb 2011 at 9:50 pm

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

The overconsumption of alcohol is indeed an example of market failure. It brings about a negative consumption externality because after a tourist drinks a sizeable amount of alcohol, he or she could eventually damage property, cause riots, or create disasters. Not only that, the overconsumption will also lead to a decrease in demand for the conflictive pubs and so the profit from the local businesses will be affected.

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 sales taxes on the alcoholic beverages in the troubling areas. This would lead to a decrease in demand because of the price raise. Additionally, the pubs and bars will tend to sell less because they will also have to pay a large amount of tax.

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 of bars and clubs in resort communities benefit at the expense of taxpayers from other parts of the tourist nation mostly by the taxing of the alcohol. The private cost of running a bar in tourist regions will be less than the social cost because the private costs that the bars have are relatively less than the social cost drunk people getting in mishaps or accidents.

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# Kang_San_Keumon 03 Feb 2011 at 9:52 pm

@ Merab_Khidesheli

I agree with most of your points but I just don't believe that the private cost and social cost do not reflect on each other. Clearly the social cost is higher causing the negative externality. This means that the social cost of drunk people destroying stuff and getting in car accidents is higher than the private cost of the businesses.

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# mboadeon 04 Feb 2011 at 9:52 pm

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

Yes, overconsumption of alcohol is a market failure because of the negative externalities to the society. Some of this negative externalities are the damage to property and riots will affect the place which the British are doing tourism.

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?

An economic action the tourist nation could apply for reduction the drunk tourist in the resort communities could do an internalization in which the price of alcohol increment with a tax so the tourist will consume less provoking a decrease in the possibilities of trouble.

How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 of bars and clubs in resort communities are getting benefit at the expense of taxpayers because the economic benefit is bigger than the social benefit. The proprietors are gaining more economic benefit than the social benefit because many negative externalities are related with alcohol.

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# mboadeon 04 Feb 2011 at 9:56 pm

Hi, Kang San I agree with your last point in which you defend that the proprietors are gaining benefit at the expenses of the taxpayers. As well I agree with your second point but the nations are not willing to increment the taxes because the result will be less tourist visiting their nation.

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# Lukasz_Zajaczkowskion 05 Feb 2011 at 7:08 pm

It's obvious that overconsumption of alcohol is a market failure. As the article mentions, the private benefit (MPB) is much bigger than the social benefit (MSB), because "British tourists only consider their own enjoyment (benefits)", which means that they do not care what is the socially efficent output.

Because the article is about overusing alcohol, this means it's an externality of consumption, and, as mentioned before, because the society has a smaller benefit than the consumers, it is a negative externality of demand.

In order to reduce the amount of drunken people on holidays, the tourist nations has a few economic options they could do. First of all, they could impose a tax on alcohol, which would slightly decrease the demand, and the social benefits would be much closer to private benefits. Another option would be adverstising responsible drinking of alcohol (which is mentioned in the text). Lastly, there could be limits for consuming alcohol, which would require the tourist nations to introduce something like permits.

The proprietors of bars and clubs would benefit, because the consumption is huge and people drink as much as they want not caring about the society. The cost of running a bar includes mostly things, which can be bought with money, however if people overuse alcohol, the cost of the society would be people's health or life, because drunken people often can't control themselves.

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# Lukasz_Zajaczkowskion 05 Feb 2011 at 7:11 pm

@Issa.echl.f09

I totally agree with what you said, reading your response gave me some new ideas. I think that raising the minimum drinking age would be the best solution. Even though it is not mentioned in the article what age group of people usually do such silly things, I think those are mostly young adults, between 18 and 21. Raising the drinking age would be a good solution.

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# Daniella Majlufon 05 Feb 2011 at 9:50 pm

1. I believe that overconsumption of alcohol is a market failure classified as negative consumption externality. This is because when consuming so much alcohol people tend to do things they may not do when they are conscious, like jumping off a building, or driving at a very fast speed in places they shouldn’t. These types of actions sometimes lead to death or serious damage. So there is a negative spillover because not only does the drunken person get hurt, but other people may suffer because of his actions.

2. The economic actions that they could do to prevent so much alcohol consumption is imposing taxes on alcohol so that less people are willing to buy it or so that they buy alcohol in smaller quantities. They could also make advertisements like they do with cigarette advertisements, that they show the negative effects on the human body.

3. The proprietors of bars and clubs in resort communities benefit at the taxpayers they are able to charge more for the alcohol that they sell and they can convince them to but more and more alcohol one they are drunk and can’t think clearly. They also earn a profit from the people that come from Britain to drink. The private cost of running a bar in a place like Malia does not reflect the social cost since they don’t really care what the drunken people are going to do after they exit the bar, the only thing that they care about is earning money, and the more alcohol the tourists buy, the happier the people from the bar are. They do not take into account that they could be sued for any accident. They also have to take into consideration the money that they need to pay for the bar damages.

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# Daniella Majlufon 05 Feb 2011 at 9:52 pm

@mboade

You have a great understanding of what is happening and I like your answer to question number one, in which you state examples of negative externalities that could be faced, like damage to property and riots.

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# Nicole_Sonderegger_Non 07 Feb 2011 at 2:26 am

1.Overconsumption of alcohol is a market failure. It could be classified as a negative externality, because it brings about additional costs for society. Private benefits are a lot greater than social benefits, meaning that resources are not efficiently allocated and there is overconsumption of alcohol. Drunk people often have accidents which involve expensive treatments and operations, are a threat on the road, and are a disturbance for other people, which is why the social benefit of drinking is much smaller that its private benefit.

2. Tourist nations could use the police force to stop tourists from drinking too much. They could enforce a law which prohibits people from drinking over a certain amount of alcohol and if they do, punish them with fines. Tourist nations could also place a high tax on alcohol to try and keep consumers from purchasing alcohol. Tourists would probably continue buying alcoholic beverages despite the price increase, but the amount they consume may be smaller because it becomes too expensive to many drinks.

3. Proprietors of bars and clubs would make a lot of money at the expense of tourists who would be forced to pay taxes if they want to purchase alcohol. No, running a bar at a tourist location involves having higher social cost compared to the private cost. Bars in popular tourist locations are bound to attract a large amount of costumers, especially at night and during vacation season. This would mean that a bar is very likely to earn large sums of money by serving to so many costumers and so they can easily cover all their costs and even enjoy plentiful profits. However, the social cost involves a large amount of annoying and dangerous drunks. Drunks can disturb residents of the areas simply by being loud and obnoxious, or even by causing damages to property. Drunks also have a high risk of somehow being hurt. This means that the private cost is smaller in comparison to the social cost brought by a bar which serves to tourists who really like to party.

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# Nicole_Sonderegger_Non 07 Feb 2011 at 2:32 am

@Daniella Majluf

Very good thinking about how bars take advantage of their costumers by encouraging them to buy more and more alcohol, when they are drunk and are not thinking about how costly the drinks are. Bars can also take advantage of consumers because they know that their demand for alcohol is not very elastic as the majority of their costumers are people who are on vacation and are seeking to have a great time. This means that proprietors of bars are aware that increasing their prices will not cause much of a drop in demand and rather will increase their revenues.

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# Fabian_MontoyaFendton 07 Feb 2011 at 6:04 am

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

The overconsumption of alcohol is difficult to solely classify as a market failure. This is because the Utility of alcohol is not as the one of a common product since alcohol is addictive; people are more likely to start buying more and more alcohol. It actually is a very well designed product since the producer enjoys a high partly inelastic demand. At a social level its excess produces trouble.

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?

There is a limited course of action for this since laws have to apply to everyone, not just the resort communities or a tourist sector. Depending on the current government of the place a tax could be imposed on the alcohol or if there already is a tax to make it higher because this will disencourage its consumption and the funds from the tax could be used as a social fund to cover all troubles from alcoholism.

How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 owners of the bars and clubs Benefit a lot because they sell the alcohol and usually there all problems happen so the government uses taxpayer funds and resources to pay reparations to this area. So the bars and clubs sell the alcohol and then get benefits to avoid or repair from social issues.

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# Fabian_MontoyaFendton 07 Feb 2011 at 6:07 am

@Nicole Sonderegger Norris

Very good answer, the negative externality is a very good point. next the analysis on why resources are inefficiently allocated is very interesting and helps explain why some taxpayers end up paying for social problems of drunk tourists.

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# Tomoya_sekineon 07 Feb 2011 at 2:54 pm

1.It all depends on whose perspective this question is viewed as. From an economists’ point of view, the overconsumption of alcohol would be a market failure due to the fact that people are causing spillover costs for society and also the “police forces” of the nation. It would be classified as a negative externality as it causes side effects to third parties. However I personally believe that these people just do not have morals and ethics of what a responsible human being would have. So even though this article was based on British tourists, all tourists in general obviously have vacations and only consider their “own enjoyments”, just specific people have no control over themselves, not ALL “British tourists”.

2.If the tourist nations were ‘serious’ about cracking down on drunk tourists, one of the actions they could take is to just ban alcohol entirely as that would cut down the problem (even though the downside is that the tourism industries and several firms would lose money due to the loss of customers). Another action could be the government putting high tax on alcohol, this would increase the price of alcohol and therefore consumers would try to avoid the consumption of alcohol due to the high price (however high price would mean low demand for the product in which the providers/sellers would not make a lot of profit). Another action (mentioned by Alex Telford) could be the tourists getting harsh punishments for any vandalism, troubles they make (Ex: In Singapore, caning is a form of punishment. It is very harsh but this is why the crime rate is low and a lot of people avoid trouble).

3.Proprietors of bars and clubs would benefit at the expense of the taxpayers, as they would be able to make more profit due to the increase in price of their products. The private cost of running a bar in places like Malia, Greece, and other parts of Europe does reflect the social costs as explained in the article above. Some of the examples of social costs due to excessive alcohol consumption are the cost of healthcare (in some situations – fights, alcohol poisoning, etc), security/police (because of drunk tourists in Europe, the police department must be aware and careful of nearby bars that may cause further trouble than the arrest), and generally, public display of affection is disturbing for many people.

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# Tomoya_sekineon 07 Feb 2011 at 3:02 pm

To: Javier Alonso Martinez

To the response of your second question, I believe that this article has nothing to do with teenagers and underage drinkers. It just mentions "British tourists". Even though the nation does allocate police control to main streets and such, that would be the social cost itself wouldn't it? Also if there is more patrol and control over the main street, I would imagine all the "teenagers" or drinkers to go elsewhere, where there is less security. And the fact that so many "teenagers" carry 'fake' IDs would counter your argument.

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# Francisco_Jose_Carilon 07 Feb 2011 at 9:28 pm

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

Of course it is, it is a consumer negative externality, where, thanks to an irresponsible consumer, other consumers (that have nothing to do with him) are affected negatively. It is consumer externality because the consequences do not affect suppliers, (unless people start going to work drunk).

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 rest of communities could impose a limit on the amount of alcohol they can consume. That occurs now, there is a limit on the amount of alcoholic beverages people can consume on a plane. If this does not work they could increase the price of alcohol. They could even create severe laws that punish this type of people.

How are proprietors of bars and clubs in resort communities benefiting at the expense of 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.

They are getting increased profits from these tourists. I don't think that the private cost of running a bar reflects on the social cost. This is because the bar is not the one doing irresponsible things, its their costumers. In some situations it may be true, a bar can be a good business.

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# Francisco_Jose_Carilon 07 Feb 2011 at 9:32 pm

To Fabian:

Regarding question number two.

I support your argument, a change on laws is something difficult to do. Maybe creating a contract that they have to sign upon entering the country regarding alcohol consumption may work. If they disobey this contract they would be subject to a special set of laws. I don't know if that is legal but it may be a solution.

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# Juan_Manuel_Arguedason 08 Feb 2011 at 3:48 am

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

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?

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.

Overconsumption of alcohol is indeed a market failure. It can be classified as a negative externality. It is indeed a market failure because of one main reason. This is because if there is one person that drinks too much in a bar, it affects the other people in the bar.

The economic actions that they will take in the resort communitites where most trouble occurs is raising the prices of alcoholic beverages. This would make the consumption be much less, and have less drunk tourists.

They are benefiting at the expense taxpayers from the other parts of the toursits nations by not raising the prices for the alchololic beverages, or even offering more and more to these tourists that what they like is to get drunk.

The private cist of running a bar in a place like Malia, Greece does not relects the social cost because there the prices won't make a change in the conomic stability of the country, this is a very rich country where this type of things won't affect.

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# Juan_Manuel_Arguedason 08 Feb 2011 at 3:57 am

@ Horia Stanescu:

I agree with your points, but its "easier" to classify it as a negative externality. Lets remaind that a negative externality is when an action taken by an entity negatively effects an uninvolved 3rd party. In this case, there woul be a tourists who drinks a lot in a bar, then this would be affecting the other people at the bar. I see it like this, it's just my opinion.

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# tiffany_williamon 08 Feb 2011 at 5:21 pm

It is a market failure as it gives bad effects to consumers. This will encourage other people bar to be involved in drinking which is not healthy at all.

The rest of communities could impose a limit on the amount of alcohol they can consume. It can be done by lowering down the numbers of alcohol drinks purchase from suppliers, imposing several laws and many others.

Their profits are increasing as a result of the tourists. It's not a social cost in running bars. And bars are not categorized as a bad place to go. As long as the business is doing its responsibility and it will be fine.

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# tiffany_williamon 08 Feb 2011 at 5:21 pm

@Juan_Manuel_Arguedas_Rodriguez

I love your responses

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# cleoon 09 Feb 2011 at 2:42 am

Discussion questions:

Is overconsumption of alcohol a market failure? If so, what type could it be classified as? Overconsumption of alcohol is a market failure, and it would be considered a Negative Externally of consumption.

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 ban alcohol altogether, but this wouldn't be a very good solution because the market for alcohol would disappear and would cause a loss of jobs. They could also impose taxes and use the money to counter the the damage caused.

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 of bars and clubs in resort communities are benefiting because the tourists that buy their alcohol do not pay taxes, and therefore do not have to pay for the damage, the cost of which is handed down to the taxpayers. The private cost of running a bar in Greece does not reflect the social cost because the bar pays little to no tax, so the expenses of drunk tourists are once again forced onto the citizens.

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# cleoon 09 Feb 2011 at 2:47 am

@ tiffany_william

i do not agree with your third answer. there could easily be social costs if people in bars get drunk and go off and get into a cart accidents and hurt people or public property/

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# Talia_Greeneon 09 Feb 2011 at 3:12 am

1. It could be considered a negative consumption externality, as the overconsumption by the consumer goes beyond the consumer and harms the public.

2. They could limit or tax the sale of alcohol to discourage the overconsumption.

3. The proprietors benefit from the extra sales from the business while the taxpayers have to pay the costs for the drunken behavior. The private costs are probably significantly less than the social costs of the hospital visits, law enforcement, and other costs.

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# Talia_Greeneon 09 Feb 2011 at 3:14 am

@ Cleo:

I agree with you that banning the sale of alcohol would probably not be a good idea. In addition to cutting the jobs, in significantly increases lawlessness because people will drink anyways, as seen with Prohibition. I like your idea about using profits from taxes to pay for damages. It’s very practical.

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# Merve_Akpinaron 09 Feb 2011 at 9:06 pm

I cannot deny that alcohol consumption could be stated as market failure. It can be negative externality in consumption. To be clearer, alcohol is over consumed. Therefore it jumps over the optimum level which is accepted by the society. It caused a spillover effect which is negative.

The government can put a tax which must destroy the inelasticity of the alcohol. This indirect tax will make alcohol very expensive. Therefore people will not be able to drink more than two or three drinks per a night. That could be an effective way in order to divert people; however the tourism sector will be affected in a bad way. The government can also make negative advertising, but it is not an aversive way.

Because bars and clubs in alternative communities are likely to be fully burdened, especially during holiday season when many tourist arrive, therefore, their profits made is extremely large. However, the profits they make do 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 payments.

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# Merve_Akpinaron 09 Feb 2011 at 9:15 pm

@ Cleo & @ Talia

I agree with you about banning the sale of alcohol. It causes several problems in terms of economics and social life. unemployment will take place and people gonna drink anyways. Also how can we talk about freedom while we ban? I must add that; we live in a capitalist world. And capitalism is the advanced version of liberalism. No one can deny that liberalism contains the idea of freedom and individual economy. Therfore; capitalism-> liberalism->freedom, individual economy. Therfore no more banning, no more government intervention

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# Asucan_Odcikinon 10 Feb 2011 at 12:49 am

1) Of course it is an example of market failure. And it can be classified as negative externality as it causes additional costs to the society. There is an obvious overconsumption of alcohol which brings damages to the society with high costs. There are a lot of accidents which require expensive operations meaning additional costs and not having any social benefits at all. So it is an obvious market failure by not being able to allocate the resources efficiently causing overconsumption.

2) I think if we should do something economically to stop this trouble about alcohol the government should apply high amounts of taxes to the alcohol prices. This can decrease the amount of alcohol that is being sold at the markets as the price is becoming very expensive. Of course tourist will not stop buying alcohol but because of the high prices the amount of alcohol that they can be able to purchase will decrease. Also there can be some legal actions that can be applied on selling alcohol like restricting the amount can be sold to a person. So that people can only get little amount of alcohol which is not dangerous for the person who get it and for the other people’ lives.

3) Proprietors of bars and clubs make loads of money as they have a lot of costumers who are tourists and buying a lot of alcohol by paying taxes. So they are benefiting at the expense of taxpayers. I think the private cost of running a bar in a place like Malia, Greece is a lot less than the social cost that a bar can have. Because as it is clearly stated in the article a very popular tourist place can sell a lot of alcohol and make loads of profits that can cover its private costs but when it comes to social costs like disturbance of people by drunk costumers and even drunk people destroying the place and hurt others or themselves cannot be covered easily. So I think private cost of a bar is much less than a social cost of the same bar in a very touristic place.

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# Asucan_Odcikinon 10 Feb 2011 at 1:01 am

@Juan_Manuel_Arguedas_Rodriguez

I agree with you about your answers to the first and second questions. I think your third answer is very interesting as you answered it in a very different point of view. I did not think of economic stability and country's richness when I first read the question but after reading your answer, you could be right about that if you stated it two or more years before as you stated prices won't affect the country because of the richness. But I think we should not make any generalizations about a country especially about Greece in these days because the economic situation of Greece is not bright as you think as I read and follow from the news and articles.

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# Ozge_Elif_Ozeron 11 Feb 2011 at 2:33 am

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

Yes, the overconsumption of alcohol is a market failure, because it results in some extra costs to the society and even to society. Thus, we can classify it as negative externality. For example, there are a lot of car accidents because of the overconsumption of alcohol and it cost a lot of expensive stages to recover damages to everything.

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?

To stop that, government can apply high taxes on alcohol. It can decrese the amount of alcohol that is sold. People are not willing to pay high prices, so there will be less people who are consuming alcohol and they will consume it less.

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 of bars and clubs is to benefit from the tourists which are not paying taxes. Thus, private cost of running a bar in a place like Malia, Greece does not reflect the social cost, because this place is not a popular touristic place which can cover all of its cost by the tourists.

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# Ozge_Elif_Ozeron 11 Feb 2011 at 2:35 am

@merve akpinar

Merve I like the way you reflected real world in an obvious way in your comment to Talia and Cleo. I agree with you that we are living in a capitalist world and it is a version of liberalism.

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# Bahar Erdo?duon 11 Feb 2011 at 9:31 pm

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

Yes it is an example of market failure. It is not only market failure, but also it is in the title which is negative externality because of high prices of the alcohol. In the society there are a lot of people consuming alcohol and it has a bad affect because of health and high cost. There is no benefit which is coming from too much alcohol consuming so that it is market failure.

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?

There can be high amounts of taxes which is applied to the alcohol prices and it can decrease the amount which is consumed. If this doesn’t stop the tourists then there can be strict rules. For example; a person can only drink … amount of alcohol and more of that amount won’t be sold to people. Other thing is if someone makes a trouble because of high amount of alcohol which she/he consumed there should be serious legal actions. After that people can know their limits and consumption may decrease.

3.How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 benefiting from the tax payers from other parts of the tourist nations, because when they buy alcohol they also paying for the taxes as it is named.When proprietors have a lot of costumers they have a lot of profit from that.In my opinion,the private cost of running a bar in a place like Malia, Greece is lower than it should have social cost,because people are having too much alcohol and after that there are a lot of people who don’t know what they are doing and they generally hurt others, themselves or damage the place. Private cost is very high because in the article it is mentioned that tourists prefer that bar.

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# Bahar Erdo?duon 11 Feb 2011 at 9:33 pm

Asucan,

I agree with you about second question. There should be limits for people to have alcohol and price of the alcohol should be increased.

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# Mehmet_Mert_Sumaon 12 Feb 2011 at 6:43 pm

1. It is a negative consumption externality. The suppliers don't get affected by the behaviors of the consumers. On the other hand, over- consumption of alcohol has an impact on the society. We can consider the two women who tries to get some fresh air in the airplane as an example. Their behavior made the pilot to land in Frankfurt and affected the other passengers.

2. The government might ban the consumption of alcohol, increase the taxes on alcohol, increase the legal age of drinking to prevent young people from having a drinking habit. Lastly, severe punishments may be given to the vandals.

3. The owners of the clubs and bars benefits the expense taxpayers. For example, if a drunk person destroys the chaise lounges in a public beach, then the citizens will be paying the taxes to cover the costs, not the owners.

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# Mehmet_Mert_Sumaon 12 Feb 2011 at 6:47 pm

@Daniella Majluf you are right that the proprietors don't take the social cost into account. Their only concern is the private cost and their profits.

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# Huanni_Wuon 13 Feb 2011 at 3:33 am

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

Yes. The effect brought by overconsumption of alcohol exists as negative externality since the social costs are pretty large, damage to property, arrests, accidents, etc. This makes marginal private benefit of alcohol consumption excess the marginal social benefit, representing an overallocation of resources towards alcohol in tourists towns. This is a type of market failure with negative externalities initiated in consumption but received in production.

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?

A direct way to reduce the consumption of alcohol is to introduce an indirect tax onto alcohol, resulting in a significant increase in price. However, it would be argued that this measure would damage local businesses. In my opinion, the government could set quota of alcohol being sold to the tourists in order to control the consumption of alcohol in a rational range, instead of turning alcohol to a luxury good.

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 bars and clubs receive revenue from holiday drinkers, but they don’t need to pay for the extra social costs brought by the consumption of alcohol which includes damage to public property, distribution of police force, etc. These costs are spread by taxpayers. The private cost of running a bar does not reflect the social cost.

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# Huanni_Wuon 13 Feb 2011 at 3:43 am

@Sean Isaacson

Your idea is an innovative one. Having Hotels specifically designed for people who like to go clubbing would definitely decrease the externality brought by drunken behavior and avoid an damage to the nightclubs business. Also, regulaitng the spirits levels is a good way to prevent people from getting too drunk. I think increasing the legal age of drinking is also a good way of decrease drunken behavior.

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# Muhammet_Murat_Sekbaon 14 Feb 2011 at 9:16 am

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

Overconsumption of alcohol is a market failure because the consequence has negative effects on the society. Sometimes, drinking alcohol can be beneficial for the individual, because there can be some people who are affected by lack of alcohol – personal positive externality – and this drunkenness can cause negative social externality.

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?

If the tourist nations were serious about cracking down on drunk tourists, they can limit the sale of alcohol. It would bring marginal private benefit and marginal social benefit. As a result of this there will not be overconsumption of alcohol. Moreover, banning the sale of alcohol also may have a negative effect.

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 bars and clubs in resorts are likely to be full, especially during the summer season, when many tourists come to there. At that time the profit that they make is really huge amount. Bu the profits that they make doesn’t reflect on the social cost.

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# Muhammet_Murat_Sekbaon 14 Feb 2011 at 9:20 am

@ Bahar Erdogdu

I agree with your second answer. As you said increasing the taxes will have effect on the consumption of alcohol.

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# Gunnhildur Ómon 20 Feb 2011 at 4:00 pm

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

This overconsumption of alcohol could be classified as a form of market failure since it affects the society. It would be said to be negative externalities in consumption. The overconsumption has negative affect on the society and they also create cost to the third party (the society). Examples of those costs and affects are the crime rates, other damage that drunken people cause, hospital costs and in some cases even death. The reason for why this is classified as a market failure is that the marginal private cost, which is the alcohol consumption exceeds the marginal social benefit curve. This means that there is not allocative efficiency, hence market failure.

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

If the tourist nations were to try to reduce alcohol consumption of tourists in the area they have several options. One would be negative advertisement as is said above in the article. Another, I think more effective way is to put high taxes on alcohol. It would perhaps cause people to drink less because it is more expensive. The burden of the taxes would only affect the consumers of alcohol and it is likely that the introduction of those taxes would reduce the costs for the environment, when the consumption of alcohol is lower, however it is not likely that it would eliminate it. This would however be a negative move for alcohol producers in the area since demand for their products (alcohol) would decrease.

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 of bars and clubs try to attract customers and the demand for alcohol is high in the areas and in many cases there is excessive drinking. The sellers of alcohol in the area compete in the market for alcohol and might for example offer lower prices to attract more customers. They do this for their own benefit, to earn more profit. However if they are earning more profit it means that there is more alcohol consumption going on and the excessive drinking causes costs to the society. Those are costs such as hospital stay, damage to public property and other. Therefore it is important for the government to intervene to fix this problem, the society should not suffer for private benefits.

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# Nathan R. and Nathanon 25 Feb 2011 at 10:16 am

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

Yes, overconsumption of alcohol is indeed a market failure, as the market fails to regulate itself and to make itself reach levels that suit both society and the private consumer. Since the benefits of over-drinking are much higher to the private consumer then to society. It could be classified as a negative externality of consumption as it is the fact that drunk Brits drink too much that is causing negative effects on the society of their vacation spots.

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?

Either tax or ban the purchase and consumption of alcohol in the most touristic resorts.

They could also follow the British Consulate's example and create negative advertisement campaigns.

They could increase legal sanctions against offenders and repeated offenders.

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 propietor of the bars sell a lot more alcohol and therefore make more profits then bar-tenders in other parts of Greece. But, this increased consumption of alcohol also has a heavy burden on other tax-payers as their needs to be a bigger and better equiped police force, as well as emergency medical assistance in those areas to deal with all the inebriated tourists. Since in most countries such services are paid by tax, then becasue of the abundance of alcohol in Malia, people in Athens have to pay higher taxes to deal with that increase. Therefore the private cost of running a bar is a lot lower then the social cost, creating a negative externality of production.

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# Nathan R. and Nathanon 25 Feb 2011 at 10:20 am

Referring to question 2:

Another way that the Greek authorities could lower the level of alcohol consumption is tourist resorts is by regulating, such as through official licences and taxes the number of bars in those areas. Less bars means less booze available, and the higher cost of opening a bar will also increase the price of the booze itself.

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# Nicholas Milliganon 25 Feb 2011 at 4:40 pm

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

The overconsumption of alcohol is a market failure, as it represents a cost society pays as a result of Britons drinking too much. Thus, it represents a market where the private benefit is much higher than the social benefit.

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 nations could increase sales taxes on alcohol so that less is consumed. Also, the nation could consider running a so-called "booze bus", a vehicle that deals with rowdy tourists so that ambulances can focus on more worthy cases. Finally, the British government should be forced to pay indemnities for damage caused by her citizens; she would then have an incentive to control her citizens.

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.

Obviously, owners of establishments that sell alcohol to foreigners profit on a financial level, while other businesses, individuals, and institutions are forced to foot the bill for damages.

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# Markel Zuritaon 26 Feb 2011 at 6:08 pm

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

- Overconsumption of alcohol is a market failure and can be classified as a negative externality of consumption since it creates costs to society. This is because the benefit enjoyed by consumers of alcohol is greater than the benefit enjoyed by society.

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?

- If the tourist nations were serious about cracking down on drunk tourists, they could price discriminate by charging tourists higher prices than for locals. This would shift the marginal private benefit curve closer to the point where marginal social benefit equals marginal social cost since the tourists would have to pay more money for the same products locals due which would therefore reduce the benefit of getting as drunk.

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 are benefiting at the expense of taxpayers from other parts of the tourist nation because they are profiting from the alcohol being bought by tourists. The private cost of running a bar in a place like Malia is therefore much lower than the social cost because society pays taxes for the damage tourists are doing. The production of alcohol by bars and clubs in resort communities creates a negative externality of production since they are externalizing their costs by creating spillover costs to society which must pay taxes to pay for medical services the tourists receive when inebriated.

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# Christian Camarilloon 28 Feb 2011 at 12:49 am

1. I believe that overconsumption of alcohol is a market failure. It can be classified as a negative externality. The tourists’ overconsumption of alcohol has caused social costs to rise because money has to be spent on them by the police force and other agencies from their home country. They are affecting not only their country but also the country that they are visiting.

2. The nations can place a higher tax on alcohol as an economic strategy to reduce tourists getting drunk and coasting everyone money. The higher tax will most likely reduce the amount of alcohol consumed by the tourists.

3. They are receiving more money, which is beneficial in a lot of ways. The private cost of run a bar can reflect the social cost because if future tourist read about one bar in Greece always having problems with drunks, then that will give the tourist a second thought on whether or not to go to Greece.

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# Christian Camarilloon 28 Feb 2011 at 12:53 am

@Issa.echl.f09

Great answer for the second question. Putting quotas and raising the drinking age will definitely lower the consumption of alcohol which will produce less and less drunks.

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# Ashinion 02 Mar 2011 at 12:59 pm

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

Overconsumption of alcohol is a market failure; it can be classified as a negative externality. Overconsumption of alcohol could be harmful for the society, it could create alcoholism and alcoholics could cause much damage for the society.

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?

A tax could be levied on alcohol beverages. Also several minors could be prevented from drinking if they carried out a thorough check on the ID of the tourist.

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.

Bars and clubs are benefiting by selling alcohol to tourists. The private cost is less and the social cost is more as the society has to bear with more alcoholics around it could increase the number of cases of drunk driving and accidents.

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# Ashinion 02 Mar 2011 at 1:01 pm

@ Christian Camarillo

as an economics strategy it is a wise choice to levy a tax of alcohol

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# Beni B.on 02 Mar 2011 at 10:51 pm

Was quite interesting to read the article and it's nice how it shows that externalities are present in such different areas.

1.

Overconsumption of alcohol is a market failure. The overconsumption of alcohol produces negative externalities on the market coming from the consumption.

2.

The tourist nations could take a few different actions to decrease the amount of drunk tourists in some of the resorts.

One strategy would be for the government to increase the taxes on the alcohol in those resorts, in order to lower the supply of alcohol but also to lower the demand for alcohol. Though that approach could give the bars and clubs in those resorts some trouble because it lowers their demand and supply and therefore revenue.

Another strategy would be to increase the awareness of the dangerous side-effects of the overconsumption of alcohol to the British tourists, which is actually what is done now. This can be done by advertising the fact that the tourists should drink responsibly.

A different approach would be to ask the tourists that actually cause costs to the economy through their overconsumption of alcohol (e.g. arrest, hospitalization, vomit in the corners needed to be cleaned up…) to pay those costs with their own money. This way the government would receive the money back it has to spend on some of the tourists which over-consumed alcohol and the costs wouldn't fall on the native tax payers.

3.

The owners of the bars and clubs charge the consumers only what they need to cover their own costs of the alcohol and running the club and even gain a profit. For example though, if the consumer drinks too much alcohol in the club and has to vomit all over the street outside after leaving the club and possibly even be hospitalized, the cleaners have to clean the mess on the next day, which are paid by the government (tax payers) and also the time in the hospital might put costs on the government (tax payers) – the Club won't be charged any money to cover the government's costs generated by their consumer. This way the real social cost, which includes cleaning up the mess and the hospitalization of the consumer, will be partly paid by the (social) tax payer's money and exceed the private cost of the bar which only includes the hosting of the consumer and the ingredients bought for the consumer's drinks.

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# SuyeonSoon 07 Mar 2011 at 3:03 am

Overconsumption of alcohol could be considered as a market failure, as the economic behavior (consuming alcohol) causes many side effects in the society and has so much social costs, such as crimes caused by drunken people and such and police force needed to settle the situation down. The type of this market failure would be involving moral values and degree of self- control of consumers, because it is totally up to individual’s decision to control one’s drinking.

If the government wants to reduce the number of drunken tourists, the most important thing for them is to limit the sale of alcohol. The best way would be imposing high tax on the drinks so people would not buy drinks. However, this would affect the revenue of resorts, as the amount of alcohol they could sell would be decreased.

The private cost of running restaurants, bars and such would not be that high in nations that tourism is developed, because the government would support those business since it is one of the most business in the nation. The social cost, however would be really big because as this article states, more selling in bars means more drunken people and this would eventually led the increase of social costs.

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# SuyeonSoon 07 Mar 2011 at 3:08 am

@Beni.B

I think your explanation about the question 3 explains the economic principles involved in this situation really well.

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# Gökçe G&on 18 Mar 2011 at 8:41 am

? believe that we can therefore determine that alcohol is Price inelastic.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.

However, 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 that an increase in price does not serve as enough of a disincentive to outweigh those private benefits.

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

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# Nesibe Zirzak?ranon 18 Mar 2011 at 9:12 am

Yes, overconsumption of alcohol is an externality. It is an negative externality. The consequences will be harsh on society. There will be health costs of it and also public places will be affected too. Drunk people will cause noise and unwanted situations to happen in public place which will disturb people.

Sure they will limit the sale of alcohol which will bring the marginal private benefit back as the same level with the marginal social benefit and make sure that there is no overconsumption of alcohol, at least on the hotel’s premises.

Bars in resort places are getting low taxes than it is in popular areas that attracts tourists. Because since the demand is high in bars in touristic places, government want to put a limit on consumption and encourage other bars to make business to. By this way, economy will flourish.

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# AydaKansuon 18 Mar 2011 at 3:31 pm

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

Overconsumption of alcohol is a one of the negative consumption externality and so market failure, the reason why it is a market failure that it just affects the consumer, not 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?

Raising the tax up for alcohol will be wise for them to take as an economic action. So that drunk peoples rate would be reduced, because they may not want to give that money to a certain product. so the damage to peoples health would be fixed in a way.

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.

Tourist means a great benefit for those people who run bars or pubs, but it also affects community outside the bar. So that shows private cost does not reflect the social cost

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# Ece_Erdemon 18 Mar 2011 at 3:47 pm

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

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?

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.

——————————————————————————–

1. Yes it is a market failure and a negative externality. It does not affect the producer but it affects the consumer. Alcohol consumption will cause for people who use it to act violently, or if they are using cars it will cause a traffic problem. Therefore it will also affect the innocent people and the environment as well.

2.I believe that enormous taxes on the alcohol can reduce the consumption, but it is addictive so people can pay for it anyway. Or there can be negative advertisements about the alcohol.

3The bars will get low taxes because the demand for those bars are too high and the government want to benefit from it. So that the economy is going to be developed if there is low taxes in the bars.

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# Negative Externalities of Consumption | The Economics Classroomon 24 Nov 2011 at 11:37 am

[...] To read more about the external costs of over-consumption of alcohol, read the blog post: Negative Externalities of Consumption: Britain’s Inebriated Masses [...]

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# Charles Roberton 28 Nov 2011 at 6:57 pm

Well, obviously people on holiday in Greece are going to drink too much. However, i think it might rather be a social problem rather than an economical one. For England, it's rather a reputation problem than an economic one, since i doubt the British government is paying anything towards these people. Insurances and private consumers might have a hole in their pockets when they need an operation or need to be bailed out of jail, and that might become a financial problem. Then, i think that there is a welfare loss. However, advertising responsible drinking will not dissuade a British group to drink less, because their purpose for coming to Greece is mainly to drink. Raising a tax will annoy the locals more for having to pay the price plus tax for a beer than the tourists themselves who are going to spend a lot anyhow. Anyways, everywhere that there will be young tourists, there will be drunk tourists, whether it's in Greece or anywhere else. Therefore, if this is a market failure, the failure can be seen everywhere and as far as tourists go, i'm not sure a tax or advertising will change anything if not increasing the welfare loss. As a matter of fact, i dont think anything will.

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# Prahnavon 28 Nov 2011 at 9:05 pm

Well, I think that was slightly pessimistic concluding approach to the problem. Looking at the situation in basic terms, if the price of a good increases, in this case alcohol, then according to the law of demand, the quantity demanded should decrease. When a tax is placed on the production of the alcohol, then this will increase the price of consuming alcohol. Naturally, a higher price will discourage people who would once have considered consuming it. With them out of the market, the amount of externalities faced by society would reduce. You make a good point mentioning that locals will have to pay more money too when they want to consume alcohol, but if they are truly annoyed by the foreign, British drinking in their country, then they should be willing to put in a bit of sacrifice for the greater good. Weighing the local peoples marginal cost to marginal benefit, they reap more benefit than cost, with the tax in place. That's my opinion to the situation…

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# Serraon 29 Nov 2011 at 9:40 am

I agree with Prahnav and would just like to include the fact that although drinking alcohol is not good for the individual because the lower the price of the alcohol, the more people will drink it. Like Prahnav said if there was a tax on a bottle of alcohol than the demand would decrease. However this would not benefit the society because if people stop drinking they will be healthy meaning that they will live longer. People paying for the healthcare and not drinking will collect the accumulated benefits in the longterm whereas people who drink alcohol will die younger than those who don't and they will not be able to collect their benefit which means that the society will benefit. Therefore we need to have people always drinking alcohol as it benefits the government in the longterm (government can use the accumulated benefit which couldn't be collected to improve services).

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# Sofieon 29 Nov 2011 at 5:51 pm

I agree with Chuck to an extent. Naturally, vacationers are going to drink, be it in England or any other vacation spot. Cracking down on the alcohol consumption by imposing a tax will help to a certain extent, however, if the tax is too high, it will have the opposite effect. If the tourists now have to pay a higher price for alcohol, they'll soon find another destination with lower prices and travel there, instead. On one hand, this may be good for the social benefit of the people, but now a primary source of money is eliminated, as stated in the post. Overall, I think government intervention in the form of police is more logistical than a tax. More police = less riots and ruckus while maintaining stable amount of beverage consumption and steady income.

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# sophie zhouon 02 Dec 2011 at 5:19 am

• Is over consumption of alcohol a market failure? If so, what type could it be classified as?
The over consumption of alcohol is a market failure since it is a negative externality of consumption. It is negative for the consumers rather than the producers.

• 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?
High taxes imposed on alcohol would tan efficient solution to the problem.
This is because when high taxes are imposed, it would decrease the quantity demanded. Another solution would be to provide a stamp card that people must show before they are served alcohol. Just like when people have to show their ids to reveal they are of legal age to drink, people must show their stamp card revealing how many drinks they had that day since the stamp will reveal the date. If the card is lost, stolen or tampered with, that person would not be able to drink.

How are proprietors of bars and clubs in resort communities benefiting at the expense of taxpayers from other parts of the tourist nations?
Proprietors of bars and clubs in resort communities benefit at the expense of taxpayers from other parts of the tourist nations since they are the ones making money from selling alcohol. However, these drunkards often causes damages to public properties and increase the number of law enforcements, which would result in higher ta xes.

• Does the private cost of running a bar in a place like Malia, Greece reflect the social cost? Explain.
Yes. When bars like the ones in Malia, Greece only cares about the bottom line, they would sell large quantities of alcohol to tourists, and often result in high social costs like damages to public property.

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# sophie zhouon 02 Dec 2011 at 5:23 am

By reading your third comment, I had a clearer picture of the social costs of alcohol consumption by tourists and make me think that the government should take a more active role in decrease these social costs.

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# Sam Jowetton 04 Dec 2011 at 5:51 am

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

Yes the overconsumption of alcohol is a market failure. The consumption of alcohol create negative externalities for the greek society.

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 put huge taxes on alcohol, raising the price of alcohol and therefore reducing the quantity demanded. They could also make laws and amend fines for people behaving really inappropriately in certain areas.

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 are benefitting from these situations as there only motive is to sell the most alcohol possible to get the biggest total revenue. However this is at the expense of the taxpayers, who are indirectly paying for the damage made by the drunk people. With the government spending there money on this, the taxpayers receive less social benefits (new roads, hospitals…). Yes the social cost does reflect the social cost in some way. The more incidences people here about in Greece bars and clubs, the less tourist will want to spend there holidays here. So the more social costs there are, the less private benefits there are.

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# Sam jowetton 04 Dec 2011 at 6:01 am

i agree with all you answers. i did not think of the idea of thoroughly checking al tourists ID's before entering the club or bar, but definitely agree with it! However I do think that the more people hear about tourists getting completely drunk in greek bars, the less tourists will want to spend their holidays in Greece. The private cost does reflect the social cost.

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# Alexandra Lifon 04 Dec 2011 at 7:35 pm

Is overconsumption of alcohol a market failure? If so, what type could it be classified as? Yes overconsumption of alcohol would be considered a market failure because alcohol is a demerit good and overconsumption of demerit goods results in market failures. It would be considered a negative externality.

If the tourist nations were serious about cracking down on drunken tourists, what economic actions could they take in the resort communities where most of the trouble occurs? They could impose huge taxes on alcohol in those resorts making it difficult for tourists to purchase large amounts of alcohol, thus reducing consumption of alcohol. They could also increase awareness of the dangerous side-effects that come with overconsumption of alcohol.

How are proprietors of bars and clubs in resort communities benefiting at the expense of taxpayers from other parts of the tourist nations? The proprietors receive profits from selling a lot of alcohol but they aren’t responsible for the repercussions that their alcohol may cause; for instance damage to the public property of the nation; instead the taxpayers are forced to pay for repairmen.

Does the private cost of running a bar in a place like Malia, Greece reflect the social cost? Yes it does reflect the social cost, because the main goal for the bars is to sell large quantities of alcohol to tourists; the private cost of running a bar is much lower than the social cost; because the society has to pay higher taxes to cover the damage that the tourists are doing, thus the production of alcohol is creating a negative externality of production.

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# Alexandra Lífon 04 Dec 2011 at 7:44 pm

Hi Gunnhildur, I agree with your points! I especially agree with your suggestion of imposing high taxes on alcohol; as it is a demerit good anyway and the bar owners aren't really taking any responsibility in the repercussions of the alcohol. Especially since the tourists are having such negative externalities in consumption by purchasing the alcohol, the society really needs to create stricter rules so their own taxes don't have to increase so they can pay for the damage done by the tourists. Well constructed and informative post, very nice!

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# tdeol2on 05 Dec 2011 at 2:24 pm

Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
The overconsumption of alcohol is definitely a type of market failure because it creates spill over effects. These are in the form of costs created by the consumers which would mean that this is a negative externality in consumption.

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 government in these nations could take a few different approaches. They could create advertising campaigns against alcohol, but I doubt that would be very effective. Governments could impose a tax on firms that produce alcohol in their nation. This would be the best solution because since alcohol is an inelastic good, the tax would create greater revenue for the government and at the same time tackle the problem of market failure by achieving allocative efficiency.

How are proprietors of bars and clubs in resort communities benefiting at the expense of taxpayers from other parts of the tourist nations?
Proprietors of bars and clubs in resort communities benefit at the expense of taxpayers from other parts of the tourist nations since they are the ones making money from selling alcohol.

Does the private cost of running a bar in a place like Malia, Greece reflect the social cost? Explain.
Yes it does, the spill over costs might be reflected in the damages to property and these would have to be paid by the private firms themselves and not the consumers.

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# tdeol2on 05 Dec 2011 at 2:29 pm

I thought you mentioned an interesting point about how the money collected from taxpayers would go to police forces that help maintain order. I also really liked how you explained that even though there can be measures taken to reduce the overconsumption of alcohol, they would not be very effective as they would decrease the satisfaction and take away the motive for tourists who go on holidays.

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# lzhang2on 05 Dec 2011 at 7:15 pm

Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
Overconsumption of alcohol is a market failure. It is classified as negative externalities of consumption. Because the consumption of alcohol creates negative effect on a third party.

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 can ban the selling of alcoholic drink in resort communities. The complete elimination of alcohol will possibly reduce the number of drunkards, hence, problems.
Taxing the alcohol can reduce the supply of alcohol, and possibly the consumption of alcohol. The increase in prices of alcohol will also decrease the demand for alcohol.
The government can create posters or slogans to educate people about the negative effects of consuming alcohol.
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 of bars and clubs in resort communities gain a lot of profits from selling alcohol. They are not responsible for any welfare loss of the community or people. They are not responsible for any unrests created by the drunkards. They only care about the profits. Therefore, the private cost does not reflect the social cost.

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# lzhang2on 05 Dec 2011 at 7:27 pm

There are other options the government could possibly take to reduce the negative externalities by banning the product, although there are problems such as the emergence of black market and a loss in tourism.
I agree with you that the proprietors of bars and clubs are not really affected by the drunk people.

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# morpanaon 05 Dec 2011 at 7:42 pm

1.It is evident that the British hooligans are consuming too much alcohol inflicting a cost on the society they are visiting through police forces, destruction of property etc. Due to this negative externality of consumption, the marginal social benefit must be significantly less than the marginal private cost. Therefore the market must be failing to allocate the socially desirable amount of the resources towards the product, and therefore is a market failiure.
2.The governments could take drastic measures of taxation of the products or legislating restrictions to the quantities of alcohol available.
3.The proprietors are exploiting the tax payer money of the citizens around the country because the input of the society to keep the places from falling apart allows the excessive consumption of alcohol sold by the proprietors to go on. Very possibly if the proprietors were forced to pay for the damage caused indirectly by them since they are responsible for the state of inebriation of their customers, the businesses would collapse.
Another way to think about it would be that if the customers were to be taxed to the point that they would actually be paying for not only the good, but the social cost as well, the demand would very likely plummet with the companies once again failing.
In either case, the bottom line is that the market would very likely not be capable of withstanding the cost they are currently inflicting on the taxpayers, and therefore are exploiting tax payers.

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# nvirani2on 06 Dec 2011 at 7:47 am

•Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
The overconsumption of alcohol is a type of market failure. It is a negative externality of consumption. The effects of alcohol is on the consumer as well as the people around them (a third party).

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# nvirani2on 06 Dec 2011 at 7:48 am

•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?
If in the budget, these nations could create a secondary police force to monitor public displays of drunkenness. This would help reduce incidents that happen because of overconsumption of alcohol and prevent excessive damage.
Nations could altogether ban alcohol in certain areas. This would create a black market of alcohol but at least they would only be able to consume it in certain areas without being arrested for the possession of alcohol.

•How are proprietors of bars and clubs in resort communities benefiting at the expense of taxpayers from other parts of the tourist nations?
Proprietors don't have to worry about the effect that alcohol causes to the people. They are simply making a profit on alcohol and not worrying about the Marginal Social Benefits of this Negative Externality of Consumption.

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# nvirani2on 06 Dec 2011 at 7:48 am

•Does the private cost of running a bar in a place like Malia, Greece reflect the social cost? Explain.

Because of all the damage that the drunk Britons are causing, the private cost reflects the social cost. The taxes will increase based on the fact that the government has to worry about damages that alcohol is causing. In addition, the bar will have to pay for damages to their property if anything were to happen.

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# nvirani2on 06 Dec 2011 at 7:54 am

Great response! In addition to the decrease in demand for alcohol when putting a tax in place, it could create a black market for alcohol.
Government could for sure raise awareness of the negative effects of alcohol. I think we see that a lot here in Vancouver with the ads about drinking responsibly. It helps to keep people under control and remind them when going out to events (like a hockey game) that they need to be responsible.
I understand your points about how private cost does not reflect the social cost; however, i think in some ways it could. The increase in damage from alcohol could cause the government to raise taxes of alcohol. Just something to think about.
Thanks!

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# Jamie Owenon 06 Dec 2011 at 4:56 pm

1. Is the over consumption of alcohol a market failure?
Yes, i would say it is and that it is a negative externality of consumption as it effects others around the drunken holiday makers.
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 tax the alcohol meaning that less would be able to be bought as it would increase the price. Although completely banning it would mean it would be harder to get so the market would fail.

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.
No because the tourists who get drunk and then wreck the place do not pay taxes in that country so it is not a beneficial scheme. So the cost of the damage is put on to the countrys tax payers.

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# Jamie Owenon 06 Dec 2011 at 5:00 pm

To Merve Akpinar
Yes but wouldnt banning alcohol mean that it would be harder for the tourists to get it. And there fore reducing the problem and numbers of drunken tourists. And people wouldnt be able to drink anyway if there was no alcohol easily available. Just a thought

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# bhejaichon2on 06 Dec 2011 at 5:45 pm

•Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
I do not believe that overconsumption of alcohol on the British level is a market failure. While there are costs to popular consumption of alcohol, I don't believe excessive demand for alcohol will create a breakdown of the market and cause it and the companies connected to fail. I believe there will always be a demand for alcohol, even when it is not legal. This baseline expectation of demand lends to the idea that a person needs money to buy their alcoholic entertainment. Without an income, there is no expectation of continued abuse. There is a limit to many people's partying, even when others find error in their short run acts of drunkenness.

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?
If the tourist countries wanted to make an impact on reducing drinking in resorts, they could impose curfews and restricted days of alcohol sales. They could reduce the hours when alcohol is available to force people to entertain themselves with gambling, sight seeing, or eating. The government could raise the legal age of drinking to discourage young people from visiting areas, which have low costs on alcohol for vacations. They could also raise the taxes on drinks bought from bars and clubs on resorts to curb the number of drinks people enjoy in a crowded resorts.

How are proprietors of bars and clubs in resort communities benefiting at the expense of taxpayers from other parts of the tourist nations?
While drinking alcohol stays inexpensive in resort communities, taxpayers are left to pay unpaid medical bills for emergency visits from fighting, rape, and other injury caused by someone intoxicated. People without insurance in medical need are paid for by the taxpayers of the nation, no matter where they live.

•Does the private cost of running a bar in a place like Malia, Greece reflect the social cost? Explain.
The private cost of possible legal trouble from underage drinking, damage to property, and the like are low. If the businesses have insurance to cover those things beyond their control. However, I think those businesses should be paying higher taxes to offset the irresponsibility of their patrons.

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# bhejaichon2on 06 Dec 2011 at 6:14 pm

@Ece_Erdem
Im agreed with all of your answers. Drunken people will also causes loud noises which will disturb people who are around them. Also, the idea of them driving at night that will be the main cause of accident on the street, highways at night is definitely true. However, even though if they make negative advertisements for alcohol, people who in needed for alcohol still going to buy them without caring about the consequences. Overall, great post!

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# Moniqueon 07 Dec 2011 at 2:00 am

Overconsumption of alcohol would be an example of a market failure, because society’s scarce resources are not being allocated in an optimal way. Due to the effect on a third part, from the consumption of alcohol, this presents negative externalities of consumption. The social cost is higher than the private cost, and so the consumers do not take this into account and over-consume. As well, it could also be considered over-provision of a demerit good, since alcohol is harmful to society.

One of the steps they could take would be to ban the alcohol. This may seem like it would really reduce the problems. However, this may just cause the sale of alcohol to go underground, and this could create even bigger problems. Another solution would be to tax the alcohol, because this would try to “internalize” the external costs, and make the social costs a private cost, which means people would consume less alcohol and potentially reach a socially desirable level.

The proprietors of bars and clubs in the resort communities are benefiting because they are making money off of the tourists, however the bar and club owners only consider the private benefit to themselves, which is the increase in revenue. What they do not consider is the social cost to others, and since the government has to take care of all the sick and injured people, it is the taxpayers who are paying the price. A third party is being adversely affected by the actions of the producers (suppliers) of the alcohol.

The private cost of running a bar in Malia does not reflect the social cost, because, as I stated above, the benefit for the owners would be the extra revenue, but they do not consider the social costs to the surrounding area, such as the injured people, the loud noises, and the law-breaking and other problems like that. Since the owners do not have to deal with that, they do not consider it a cost to them, and so their private costs do not reflect this additional social burden.

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# Moniqueon 07 Dec 2011 at 2:12 am

Good point about the fact that because of their plans to go on holidays to drink, price would not affect a tourist's consumption much. In this case, the alcohol has an inelastic PED, which means that when the government puts a tax on it, it would not decrease demand by as much, so the tax would not be as effective in causing people to drink less. However, it would be able to raise money for the government to deal with the situation, for example, what you mentioned about using the money to raise awareness about alcohol. Great points

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# Jtruex2on 07 Dec 2011 at 5:41 am

•Is overconsumption of alcohol a market failure? If so, what type could it is classified as?
Overconsumption of alcohol is an example of market failure while on a smaller scale. It would be classified under the over production of demerit goods. People are seeing their personal benefits (being intoxicated) over the social benefits (costs to the state for medicinal care). This causes the markets resources to be misused and can therefore cause market failure.

•If the tourist nations were serious about cracking down on drunken tourists, what economic actions could they take in the resort communities where most of the trouble occurs?
There are a few actions that could be taken in order to prevent drunken tourists from causing havoc. A larger taxation on alcohol in these areas would not prove to be efficient in preventing these problems due to the fact that it is an inelastic good and consumers will continue to purchase it. The government could however crack down and create large fines for being drunk in public. They could also fine the resorts and hold them responsible if the medical problem or damages are caused on their private property. This in turn would cause the individual resorts or bars to deal with these issues in order to maintain a healthy business and keep a profit.

•How are proprietors of bars and clubs in resort communities benefiting at the expense of taxpayers from other parts of the tourist nations?
While the drunkards are causing chaos in the resort communities the bars and clubs are benefiting without any consequence. They gain money from the tourists that drink large amounts of alcohol. They would be considered the ones that are privately benefiting from the over production of the demerit good of alcohol (reference to first question). They benefit while the tax payer suffers from the social consequences of the production of a demerit good.

•Does the private cost of running a bar in a place like Malia, Greece reflect the social cost? Explain.
I am not exactly sure on the regulations in Greece but it seems as if the private cost of owning a bar does not reflect the social cost in the slightest. A bar is a fairly profitable establishment that does not suffer very many consequences from the government (other than high taxation on alcohol). From what the article states, they are profiting while causing a very high social cost to the resort communities.

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# Jtruex2on 07 Dec 2011 at 5:45 am

@Merve_Akpinar
I like your post but I am wandering if when you talk about jumping over the optimum level you are talking about personal level or the overall consumption of a society. I was also wandering about your statement that we can destroy the inelasticity of alcohol. Would this then make alcohol elastic?

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# kedwardson 07 Dec 2011 at 4:02 pm

This situation is an example of a moral market failure because citizens are trusted with the decision to drink. Governments can always intervene and impose a tax, or strongly encourage citizens to avoid excessive use of alcohol (as they did here with advertising). However, free people are exactly that. They will not always listen to the government because they believe that strips them of their rights. People do not take kindly to the government telling them what and what not to do, especially in moral matters like these.

Serious tax imposition to encourage the communities not to purchase the alcohol, or a fine for the resort community if they are found with too many drunk tourists. The fine would encourage the resort administration to get more involved, however this would have to be a policy in all resorts or the ones with the rule would just lose their business.

Taxpayer money will have to be spent in order to repair either physical damage created by the drunk tourists, or in an effort to advertise against and truly prevent the over-consumption of alcohol. The bars and the clubs will receive more publicity, and even a subsidy from the government in an effort to stop the drunk tourists.

The price to operate the bar, and the profit acquired probably does impact social cost. The bars would gain more revenue by selling more alcohol, therefore increasing the number of drunk tourists. These drunk tourists are causing public issues and more social problems. The costs inflicted on the public services & the time of the government are all directly from the actions of these tourists, caused by the alcohol marketed in the bar.

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# kedwardson 07 Dec 2011 at 4:10 pm

@ Merve_Akpinar

These massive amounts of government payments caused by the over-consumption of alcohol may not be fixed by just increasing the price. That would harm the profit of bars and clubs, and I think they would be less than pleased with that. They could, in turn, demand a subsidy, which may result in costing the governments more money. If this subsidy to make up for profits doesn't exist in every single bar/club, in accordance with the policy, there will still be too many drunk tourists which will lead the government to dish out even more money.

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# jwinstanleyon 08 Dec 2011 at 10:49 am

1. I feel that the overconsumption of alcohol can be seen as a market failure in the sense that it causes negative externalities in the effect it has on the consumers and the environment around the consumer, including other holiday goers.
2. One action they could take would be to place taxes on alcohol to reduce the demand and thus the consumption, which would be better than a ban on alcohol as that would have a negative effect on the tourist industry.
3. As tourists do not pay tax to the country they are on holiday in, any damage they do is payed for by taxpayers within that counry. In private bars though, a lot of money is made on this business from abroad, so whilst there are costs to the people of the country, buisness's like this still prosper.

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# jwinstanleyon 08 Dec 2011 at 10:54 am

I agree with all of your points Jamie. Its very hard to draw a line between gaining profit and being ethical, but unfortunatly, for business to survive things must be put into practice such as selling vast ammounts of cheap alcohol resulting in damage, which as you said puts the cost on the countries tax payers.

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# Pcassidyon 08 Dec 2011 at 11:48 am

1. Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
I would say thast yes the overconsumption of Alcohol is a market failure. The effect on the consumer and third parties presents as a negative externality of consumption, it causes excess social costs and has major social costs. Athought the consumer might get short lived enjoyment from the overconsumpition of alcohol it does not weigh out with the cost placed on third parties for exapmle health care and for this reason I would say it is a negative externality.
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?
Well the obvious step they could take would be to completly ban the consumption of alcohol, but this could cause the market to fail as people realise alcohol is harder to get. Therefore I would say that adding taxes to alcohol would be a better idea as it would reduce the consumption but would still alow 'some' people to buy it. This works because people of a lower income won't be able to afford to buy alcohol therefore cutting the overconsumption by around half.
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 taxpayers from other parts of the tourist nations are indirectly paying for the damage caused to bars and clubs in the resort communities, proprietors of bars are benefiting from this because this means that with out 'wasting' their own money on repairs they can afford to keep running the bars and increasing their total revenue.
In my opinion yes private cost of running a bar does reflect the social cost because the bar owners are exploiting the taxpayers, they know that with out the tax payers they wouldn't be able to continue to run the bars and clubs because of financial issues.

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# Pcassidyon 08 Dec 2011 at 12:00 pm

Hello Monique,

I really liked how you pointed out how banning alcohol sounds like a great idea but can have some adverse affects, I also thought about this and how although it may seem like a great thing to do the consequences are far worse than we'd first expect. On your last answer I do not really agree with you here, surely the owner of a bar would consider the cost to the surrounding area as this could effect their total revenue? and also you put how they wouldn't consider the injuries to people? I again have to disagree as I think bar owners would be concious about people getting hurt on their premises because of the ability for the consumer to take legal action if they have hurt them selves. All in all I thought your response to the questions were very well thought out. Thank you.

Pamela

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# Guery Galantzevaon 09 Dec 2011 at 1:21 pm

hi Monique

I agree with your answers to hoe to solve the problem, and i especially like how you have considered wether the soultions would actually help. banning alcohol may not neccessarily decrease drunkenness, just increase illegal/black market.

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# Sebastian vWon 09 Dec 2011 at 1:32 pm

Yes it is a market failure. It could be classified as negative externalities of consumption. The using of alcohol has influence on the producers, consumers and others, known as a third party.

They could raise the price of alcohol. Since people in university don't have that much money, an very expensive trip to Greece would be less interesting/appealing to them.

The proprietors of bars and clubs in these resorts benefit from the tourists because they spend a lot of money on drinking. Though, a lot of them get sick and/or injured, which will be payed of government money. The taxpayers pay the government, so practicly their money ends up being health care for the drunk people.

Well, the bar owners get a lot of money from the tourists there, the social cost is that people are breaking the law, screaming and do other disturbing things. Also the taxpayers will have to pay for the people who end up injured. But this doesn't reflect the private cost.

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# SafonovaNon 10 Dec 2011 at 1:32 am

The overconsumption of alcohol I think can be considered a market failure, because it is a demerit good, and especially in Malia, Greece it is over produced and over consumed, especially by British vacationers. It can be put under two classifications for a market failure…it is the overproduction of demerit goods as well as there are many externalities that come with the over consumption of alcohol, such as sexual assault, violence, disruption of peace in towns, arrests, health issues, both from alcohol and reckless behaviour caused by alcohol.
If tourist nations wanted to crack down on drunken tourists, they would, I think, simply need to put a high tax on alcohol, a tax that is high enough to decrease consumption as well as make it less profitable for producers to produce alcoholic drinks. As soon as the price rises significantly, the demand for the drinks will decrease significantly too.

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# SafonovaNon 10 Dec 2011 at 1:33 am

The proprietors of bars and clubs in resort communities benefit at the expense of taxpayers from other parts of tourist nations because they are able to sell their alcohol and make a profit, however it is the tax payers in the nation that have to pay for the healthcare that is provided to the people injured when drinking.
The private cost of running a bar in Malia definitely does not reflect the social cost because of the big number of negative externalities that are caused by the drunken tourists…these externalities include injuries to self, and others around them, that could include innocent and sober bystanders, a disruption of peace and quiet in the streets etc.

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# SafonovaNon 10 Dec 2011 at 1:36 am

Hey Monique
In your response to question two, I think that banning alcohol altogether is a little harsh becasue if you ban alcohol altogether, sure you reduce the problems at first, but then alcohl will be sold illegally which will increase the dnager in selling it…as well it might seriously injure tourism in Malia and other resorts, which would have a negative impact on Greece's already failing economy

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# Sebastian vWon 10 Dec 2011 at 1:09 pm

Hey Safonova
I like how you make one big story of your answer in stead of 4 separte paragraphs. Anyhow, I agree with what you say in the end, that if the price increases significantly, the demand will also decrease. Though I think that this price raise has to be very, very high because the demand for alcohol is close to being inelastic.

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# Chris Clatworthyon 10 Dec 2011 at 2:51 pm

Over consumption would be a form of market failure, reason being it is a demerit good; this is where the consumers consumer to many goods and servies that are seen as being bad for them which in this case, is alcohol. A demerit good is seen to have negative externalities, this can be seen in the article it self; how over consumption of alcohol makes the consumer reckless causing them to not only affect themselves, but others around them. For example, if an intoxicated person where to cause damage to themselves enough to go into hospital they would have to pay for the medical fee, but the hospital would also need to pay. Furthermore, if they were to break something in the community the government would have to pay for the repairs.

The best way to preventing drunk tourists would be completely ban the consumption of alcohol. This would, however, have the possibility of causing a black market, this would have obvious affects such as a sharp drop in supply, as the penalties for selling the good cause people to shift into other industries. If the member of the community where causing the damages I would suggest putting high tax on alcohol because that would deter the consumers to realize the lack of utility and in turn shift their willingness to purchase alcohol downwards.

Bartenders and club owners would benefit from an income of revenue because the tourists have a high willingness to purchase a lot of alcohol this is called private cost. However, they do not think how the drunken toursits will have an affect on the social cost mainly because it is not their problem, so to answer the question, yes running a bar in places like Malia, Greece will have an effect on the social cost.

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# Chris Clatworthyon 10 Dec 2011 at 2:55 pm

I like how you stated in is an example of moral market failure. I agree with you 100% on that because people are trusted to drink responsibly, and when they done consequences occurs.

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# Jessica Kennyon 10 Dec 2011 at 8:04 pm

•Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
Yes, it is due to the presence of negative externalities of consumption, coming from the overconsumption of demerit goods.
•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 impose a higher tax on alcohol, which would shift the MPB curve down, closer to the MSB curve. They could also impose regulations, such as restrictions on the time of day allowed for the sale of alcohol, as well as places where it can be drunk.
•How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 owners of bars and clubs benefit more than the taxpayers, because they can sell at the level of marginal private cost, while the taxpayers are affected at the much higher level of marginal social cost, since the sellers earn revenue and do not have to pay for the policing, while society does not earn a revenue and suffers from having to spend on policing and health, which could be otherwise spend on goods such as education or sanitation.

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# Jessica Kennyon 10 Dec 2011 at 8:13 pm

I like your point about setting a quota of sold alcohol, it seems more fair, considering that making it more expensive by taxing may not be so effective in decreasing consumption given that these are resort communities, so the customers who can afford to go there will probably be able to pay for pricey alcohol anyways.

Also I would like to add to your answer on 3 that taxpayers also lose out in the fact that their tax money has to be allocated toward fixing the damage from tourists, rather than on important merit goods like public education.

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# hslateron 11 Dec 2011 at 3:34 pm

1. Yes it is a market failure as it is a negative externality of consumption. It impacts the rest of society in a negative way. However, it can also have positive effects on society by creating business for local companies. I feel that the negative effects need to be sorted out more than we need to keep the positive impacts.
2. They could impose a drinking ban within the resorts however, this would mean that the tourists would just move outside the resort. If they did a complete drinking ban though, this would mean a great loss of revenue for the government and may not be sensible in economic terms. They could also impose a tax on alcohol to pay for any negative impacts that overconsumption has. This may also act as a deterrent.
3. The proprietors of the bars and clubs are benefiting from the tourism as they are the main target group for their goods/services. However, this is at the expense of the taxpayers as they have to pay for the negative effects of the overconsumption of these goods.
4. The profit that the bars/clubs make in the tourist season will not reflect the social cost as they will recieve much more than the private cost of running it.

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# hslateron 11 Dec 2011 at 3:40 pm

Hey Pcassidy

I think it's really good how you've come up with a solution to the problem but you have also explored the problems that this would then present to the nation and society and I think that taxes would be much more effective as this would reduce the consumption but not harm the local businesses too much.

hslater

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# ichoi2on 11 Dec 2011 at 3:44 pm

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

Overconsumption of alcohol is a market failure. It should be classified as negative externalities of consumption. Overconsumption of alcohol is a market failure because habit forming products like alcohol are not usually desirable consumer products, which the government will try to reduce the consumption by banning, imposing tax and so forth.

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

If the tourist nations were serious about cracking down on drunken tourists, they could impose tax upon alcohol so that the MPB curve will shift to the left to meet the MSB curve. That way, the government can expect a drop in alcohol consumption.

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

The proprietors of bars and clubs in resort community benefit at the expense of tax payers because that money will be used to pay for the clubs and bars expenditures, such as damages caused by the tourists. I think the private cost of running a bar in a place like Malia, Greece reflects the social cost, because the cost of damages and the wreckages of the city

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# ichoion 11 Dec 2011 at 4:27 pm

Hey chris!
I found your answer to the last inquiry very interesting! I wrote basically the same ideas for questions one and two, but I see that you have included some ideas to your response which i never thought of before! I suggested that the government could impose tax, but i didn't discuss about banning alcohol. Also for your third response, I had a slightly different stance because I said they will benefit, but reading your response I do think that rather than the drunken tourists benefitting the bars and clubs, but rather, the tax burden will be put upon the locals whereas the damages and social costs will be caused by those foreign tourists.

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# jzheng2on 12 Dec 2011 at 12:25 pm

1. Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
Overconsumption of alcohol is harmful in many ways. For that reason, it causes negative external costs to many 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?
First thing is that they can raise the taxes of beverages in the resort communities, to increase the price of alcohol, which can decrease demand.
Second thing is to tax firms that are producing these beverages for the resort communities, in order to decrease their production, thus decrease the supply of alcohol.
Both of these actions will decrease the consumption of alcohol, if not by a significant quantity.

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 bars and clubs in resort communities are benefiting a huge sum from the consumers to pay the taxes, thus the private does not even show the slightest reflection of the social cost.

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# jzheng2on 12 Dec 2011 at 3:11 pm

I believe that alcohol drinking should not be considered beneficial, as the effect of lack of alcohol occurred by drinking alcohol in the first place. This 'lack' effect is caused by the habit of drinking alcohol, and then lack of drinking it.

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# ahamdockon 12 Dec 2011 at 5:24 pm

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

Yes it is market failure; I can come to this conclusion because the supply for alcohol is matching the demand, without an increase in price by firms. This means that alcohol can be consumed a lot without any change in price, subsequently resulting in the overconsumption of alcohol that has been noted. Furthermore, this can also be considered market failure because the overconsumption of alcohol creates negative effects, or negative externalities, beyond the market, these include; drunk driving (possibly resulting in accidents, in which case the people will have to pay for through taxes), death, property destruction, etc.

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

They could impose a tax on alcohol, effectively making it more expensive to consume as much alcohol as people did prior to the tax. However governments must first consider the impact of the tax; high tax will result in the creation of secondary sources to acquire alcohol, or black markets, while too low will have no effect.

3. How are proprietors of bars and clubs in resort communities benefiting at the expense of 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.

They are benefiting if they offer the sale of alcoholic beverages at lower prices, in order to remain competitive. This would result in more people getting drunk, and as discussed in the article, drunkenness largely results in personal injury, property damage, etc., where the taxpayers will have to bear the blunt of the indiscretion. No it does not, because the social cost, has effects, such as those listed above, while the private cost is relatively minimal.

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# ahamdockon 12 Dec 2011 at 5:28 pm

@Jtruex2
I like your post, and especially how you sysnthesized the taxation of alcohol with the fact that alcohol itself is an inelastic good, and therefore would not be effective. Well done!

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# Samanthaon 12 Dec 2011 at 6:33 pm

•Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
The overconsumption of goods is not a market failure because the profits from the booze probably still outweighs the costs of the drunkenness on the community.
•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?
Some actions that could be taken if people were serious about cracking down on drunk tourists is the requirement of these tourists to pay a heavy tax, limit on the amount of booze that could be bought, or placing taxes on the booze itself after a certain amount.
•How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 of these bars and clubs in resort communities are benefitting at the expense of taxpayers from other parts of the nation because they sell vast amounts of alcohol and when these people that consume the alcohol get arrested, often it is the taxpayers that need to pay the officials that do the arresting The private cost of running a bar does reflect the social cost because most likely these places are still paying a tax in order to serve alcohol in their bars and this tax is probably higher than the cost of taking care of the number of people that behave irresponsibly as a result of this consumption.

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# skim3on 12 Dec 2011 at 6:39 pm

I think you raise some pretty interesting points and solutions to the problem, but I don't know if you can consider overconsumption of alcohol a complete market failure since we are not told in the article that the profits made by the people outweigh the costs. However, you make an interesting argument.

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# skim3on 12 Dec 2011 at 6:41 pm

I really like what you said about the negative consequences only being placed upon the consumer and not the producer. Also, the mention of private costs shows that there is some benefit. Do the consequences really outweigh the benefit?

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# rpuri2on 13 Dec 2011 at 10:38 am

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

The overconsumption of alcohol is considered as a market failure. This is evident as in the diagram shown in the article, the marginal private benefit of consuming the good is greater than the marginal private benefit thus creating negative externalities for society. It could be classified as a result of the overproduction/consumption of demerit goods in society; goods that are deemed to be ‘bad’ by the government who thus try to reduce the marginal private benefit.

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

To reduce the demand for the good and the marginal private benefit (thus reducing the negative externality and ‘fixing’ the market failure) governments could impose a tax directed to the consumption of the goods. Although the good is relatively inelastic as it is an addictive good, the increase in price for the good will result in some decrease in demand; even if it may not be that great of a change in proportion of quantity demanded. Following the British Consulate’s example is also possible, creating negative advertisement campaigns; this will increase awareness for the dangers of the good. Banning the good completely from society is not possible and will have adverse effects as the creation of black markets could occur and people might turn to drugs and other ‘worse’ goods.

3) How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 are benefiting at the expense of taxpayers from other parts of the tourist nations as they benefit from the consumption of the good. As suppliers their primary goal is to maximize on their profit and make the greatest possible revenue. This is at the expense of the taxpayers who have to pay for the damage and any inconveniences caused by the drunks in society. The government must allocate some funding in fixing any of these problems caused by the drunks, thus reducing their funding they spend on public goods (roads etc.). The private cost of running a bar in Malia and Greece is much less than the social cost of the drunk tourists, this shows the negative externality created.

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# Anair2on 13 Dec 2011 at 3:32 pm

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

Well, I must say in this case, overconsumption of alcohol is definitely a market failure. The negative externalities with the consumption of alcohol with the British Tourists are very great as they mostly binge drink, causing havoc throughout the other European Nations. As seen on the diagram in the article the MPB is far greater than the MSB, therefore creating negative externalities. As the negative externalities are due to the consumption, this would be considered as a product negative externalities of consumption. Alcohol itself would definitely be a demerit good, as it is seemingly being over produced and consumed past the socially optimum and is considered not good for the nations by the governments,

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

This market failure, as a negative externality of consumption could be addressed in several ways. Firstly an imposition of a tax could occur directed to the consumers, which would therefore increase the price and decrease the quantity demanded of the good. Alcohol is definitely a relatively inelastic good but nonetheless follow the market mechanism so the quantity demanded would still decrease. Even if the tax would not reduce the quantity demanded drastically, it would mean that government would have more funds to tackle it in other ways such as a campaign against alcohol. Creating Advertisements on all means of media, therefore the MPB of drinking would be closer to the MSB, as it would mean that the tourists would be more aware of the product’s effects. Looking at it in another way the article states that these tourists look for ‘cheap booze’ so with a price floor it would mean that the binge drinkers would be targeted and the rest of the consumers (native consumers) of alcohol would not be affected by a great deal. Lastly it is an option for the government to ban the alcohol as a whole but that would greatly affect the economy.

3.How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 truly benefit greatly at the expense of taxpayers from other parts of tourist nations. The reason is that suppliers, similarly to producers want to get the most profit possible that they can get. This means that these tourists from countries like Britain benefit them greatly as they consume a great deal of alcohol. It is at the expense of tax payers because these tax payers as, it is their funding put in place for the mending of the problems they bring and this affects the development of the country. As their funds would be much better if allocated to bettering infrastructure and etc… rather than paying for damages caused by tourists. The private cost of running a bar in a place like Malia or Greece, does not at all reflect the social cost because, the private cost of running a bar itself is not that high in comparison. Whereas the social cost caused by these tourists are much greater as they cause havoc and inconveniences to society.

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# Anair2on 13 Dec 2011 at 3:49 pm

@ ahamdock

I agree completely with all your responses to the questions, and my responses to the questions were quite similar to what you have done. I really liked how for the first question how you actually gave examples as to what the inconveniences and problems, tourists cause that affect society as a whole. For the second question do you believe that only an imposition of a tax would crack down on tourists, What do you think of banning alcohol, campaigns against alcohol and etc..? Because I believe those could also potentially be possible economic actions. As per the last question I have no comments, as I cannot seem to think of a way in which the private costs of the bars would reflect the social costs.

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# Zhi Qion 13 Dec 2011 at 4:02 pm

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

Over consumption is a market failure, and it is because of negative externalities. ‘Bad’ things that people does after they drink.

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 impose a tax on alcohol, so that it will shift the MPB towards the MSB.

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.

They make a lot of profit by selling alcohol, but it is at the expense of people who consume it. As after they consume it, they may get themselves into trouble. or harm other people.

The private cost of running a bar is far lower than the social cost, as the social cost includes the negative externalities but the private owners don’t have to account for that.

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# Zhi Qion 13 Dec 2011 at 4:19 pm

Jessica Kenny, I think it is good of you to bring up that another expense of the society is the money they have to spend on medical issues. I left out looking at this area when thinking about this issue. I only thought about how they may harm themselves and others when they are not in a clear state of mind. I think that my points can be added to yours, to make your answer more complete.=]
Vicky

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# EmilyK-pamo.eduon 13 Dec 2011 at 4:55 pm

1. Overconsumption of alcohol is market failure because there are not enough of the good to support the demand to consume it. This is when the marginal social benefit is less than the marginal private benefit of consumption. Without intervention the good or service will be under-priced and there would be negative externalities. All this would cause a welfare loss.
2. If the tourist nations wanted to lessen the number of drunken tourists then they should increase the price of alcohol in the country and put a tax on it. This would decrease the demand to by the alcohol because it would cost more on average.

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# EmilyK-pamo.eduon 13 Dec 2011 at 4:56 pm

3. Bars and clubs benefit from the tourists because they make more business during the tourist seasons. If the taxes were increased some tourists would still buy from the bars to enjoy their experience in the country. From this they would make more profit when the tourists come. In Malia, Greece there would be more profit to the private cost for owners of a bar because Greece is a popular tourist place and so the bar owner would benefit. The social cost reflects the private cost because by going to the bar it adds to the experience for the tourists to build a better experience. So the bar would benefit both social and private.

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# EmilyK-pamo.eduon 13 Dec 2011 at 5:13 pm

I agree that this would cause market failure because the tourists can consume the alcohol with no extra cost. This creates negative effects and negative externalities.
In my post I also said that the government should impose a tax on the alcohol. As I was writing I could not quite figure out what the term for illegal markets was. By reading your post it reminded me of the black market and how sellers will try to still sell alcohol at a lower illegal price below the minimum price to gain profit.
I did not think about the sales that the alcohol could have so more can be bought when a large sale happens. This could cause a problem because people would just buy a large amount of alcohol then and use it over time and then there still would be the problem.

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# Sanghyunon 13 Dec 2011 at 6:05 pm

1.Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
I think that over consumption of alcohol is a market failure. Defining what market failure is, market failure is failing allocate in a proper manner so that we might oversupply and consume demerit goods such as alcohol; therefore this can be considered as a market failure This can be considered as a negative externality from consumption
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 that we should impose a tax for such products, because it will help reduce the high welfare lost that we have due to the negative externalities. Since, the marginal cost will increase, the actual area of where the welfare lost will decrease. Tax may be an useful solution to solving such problems.
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.

I think that the regulations in such countries do not reflect the social cost. Because if more tax is implemented, it is not the private owners that are affected by the negative externalities of the social cost. Even though there might be drunken tourist who might cause mischief, they would usually cause mischief after they leave the building damaging public property, which requires the people to pay taxes to fix; however ,since the bar itself wasn’t affected much, there isn’t much change in private cost.

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# Sanghyunon 13 Dec 2011 at 6:08 pm

Hi Samantha, it is an interesting to consider that the costs of the drunkenness on the community when looking at market failure, but I think in general, there was an oversupply and consumption of alcohol, so it might have been in a market failure. Just an small thought about it

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# rlewison 13 Dec 2011 at 7:04 pm

1.Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
No, I would not say that the overconsumption of alcohol is a market failure. The profit margin on alcohol is high, and it is also highly taxed. Baring that in mind, the cost as a result of the drunken behaviour of tourists would probably not exceed the tax payed by all alcohol consumers.
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 economic actions that could be taken are to increase the tax on alcohol, and limit the number of units a single person is allowed to purchase at once. If the tax is increased and the it is made to be inconvenient to buy a large amount of alcohol, it would deter people from getting really drunk.
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 of bars and clubs are benefitting at the taxpayers’ expense because they are making huge amounts of profit when they sell vast amounts of alcohol. When the consumers of the alcohol become drunk and begin to wreck public property, the money to repair that property comes from the taxpayers.
The private cost of running a bar or club in a popular tourist destination probably doesn’t reflect the social cost because the places would have to be licensed to sell alcohol, which costs them money, however this is probably less than the cost of the damage done by the drunken tourists.

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# rlewison 13 Dec 2011 at 7:10 pm

I disagree with your first point Jack, because the overconsumption of alcohol boosts the market for it. But I do agree with your second point. Again, not too sure about your third point, because although the tourists don't pay taxes in the country as such, they will be paying tax on the alcohol that they are buying in the country
Rachel x

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# agramachoon 13 Dec 2011 at 7:27 pm

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

Yes, the over consumption of alcohol is a type of market failure. This is because it can create negative externalities when consumed too much. A drunk driver may get in a car accident, for example, which damage costs would have to be paid by the society through indirect taxes (not the damage of the car, but the damage of a broken light pole). This negative externality is a negative externality of consumption, since costs are generated and received in consumption.

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

The government could impose taxes on alcohol, which would decrease the amount of consumption; however, the imposition of high taxes in order to prevent drunken problems could create other problems, such as an emergence of an illegal market (black market).

3.How are proprietors of bars and clubs in resort communities benefiting at the expense of taxpayers from other parts of the tourist nations?

Proprietors of bars would benefit if they sell their products at a lower price in order to compete with other bars, however, such low prices lead to more people getting drunk and according to the article, such behavior results in personal injury, property damage, etc.

4. Does the private cost of running a bar in a place like Malia, Greece reflect the social cost? Explain.

The private cost of running a bar in Malia does reflect the social cost because the social costs caused by the over consumption of alcohol sold by these bars could lead to property damage, for example, and this damage would have to be paid by the society in the form of indirect taxes.

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# agramachoon 13 Dec 2011 at 7:36 pm

1. Wouldn't the over consumption of alcohol create negative externalities though? As stated in the article, drunkenness can lead to property damage, which costs would have to be covered by society as a whole through indirect taxes.

2. I agree with you; imposition of taxes on alcohol or limit the number of units a single person is allowed to purchase at once may reduce the consumption of alcohol; however, the government has to consider that too high taxes may lead to the emergence of an illegal market.

3. If a drunk person causes damage to a property, the society would have to pay it in the form of indirect taxes. The bar runner being part of the society, would have to pay indirect taxes as well.

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# rpuri2on 13 Dec 2011 at 8:34 pm

Hi Chris, I agree completely in your assetion that the overconsumption of alcohol would be a form of market failure as it is a demerit good and that it has many negative externalities to society and external costs to society that are described in the article itself. I like your example of a drunken man and hospital. Your analysis of the what could be done to fix this failure too is good. I agree that banning the good completely will create a black market as people will be able to profit from the lack of supply in the community. Also a tax on the alcohol is a possibility as you do outline, but what do you think about the effect of a tax on the actual demand for the good due to the inelastic nature of alcohol (being an addictive good)? Good analysis overall.

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# Stefan Josephon 13 Dec 2011 at 9:17 pm

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

I do believe the overconsumption of alcohol is a market failure because the good isn't being allocated efficiently as the consumption is at a high rate which causes these crimes to happen. These crimes represent the marginal social cost of society and the benefit of the consumer is that they are satisfying their addiction. We can clearly state this market failure is one where the private firms are benefiting more because they are not taking the negative externalities into account.

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?

Firstly, very influential campaigns should be created to raise awareness about the consumption of alcohol and its effect on society. Secondly, the most obvious way to resolve this problem would be to impose a sales tax on alcohol to lessen the demand for it. Though its inelasticity might question the significance of such a tax. Lastly, the British government should be forced to create regulations on the production and consumption of alcohol to prevent such incidences to happen and resolve the market failure.

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.

Definitely. Proprietors of bars and clubs would benefit at the expense of taxpayers because as they are profiting from the sales of alcohol to tourists, the taxpayers have to fund to repair the damage created by the drunken tourists. The social cost is very high for Malia because with the high number of drunks, it would diminish the tourism as visitors would not want to experience the damage done by drunken tourists.

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# Olivia Dorrityon 13 Dec 2011 at 9:42 pm

1) I would say that overconsumption of alcohol is a market failure in this instance, as there are many negative consequences, not only on the communities but on the individuals. While there is a high profit margin for alcohol, in my opinion the negatives outweigh the profits, as the consequences can be long-term.

2) On the surface, the best move would be to completely ban alcohol. However, this is unlikely to be effective in practise as it would encourage a black market, as was seen in America during the prohibition era. The most effective way to cut down alcohol consumtion would be to raise the tax on alcohol to dissuade consumers from buying the alcohol in the first place. It would also bring in extra income for the government in areas where alcohol is still bought.

3) Bar and club owners benefit from the consumption of alcohol, as they are usually able to sell a lot and therefore gain income. However, if there is an abuse of the alcohol, the businesses are likely to suffer the damage of the ensuing drunken rampages.

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# aaxler2on 13 Dec 2011 at 10:04 pm

•Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
oAlcohol consumption could be considered a market failure, because the social cost is far greater than the price cost. It would be classified as a negative externality of consumption
•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?
oThey could place a special alcohol tax on a non-residents. They could as the article suggested they were doing place negative advertisement like “drink responsibly signs.” The could also make the communities dry by forbidding alcohol entirely
•How are proprietors of bars and clubs in resort communities benefiting at the expense of 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.
oThe bars and clubs are benefiting from the profits they make from the sale of liquor. The private cost doesn’t really reflect the social cost. The profits the bars make aren’t hurt by the social costs ( damaged public property, emergency room stress, general public rowdiness).

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# aaxler2on 13 Dec 2011 at 10:08 pm

I agree with your comments, that the over-consumption of alcohol is a market failure, however, I'm not sure a restriction on the time of day would better much. I'm assuming you would restrict the sale of alcohol at night let's say past 8, but if people are on vacation they don't have to work so they could be partying all day.

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# smarttikalevi2on 13 Dec 2011 at 10:35 pm

1) The over consumption of alcohol is not really a clear type of market failure, however, it has a negative externality of consumption on the people around them. In this instance the negative externalities of over consumption of alcohol has several negative effects especially to the community, but also to some individuals (as i mentioned, the people around them) – we call the ones suffering in this case the third party.

2) The first obvious thing that comes into my mind is tax. The economic action for the governments of countries with a lot of tourists could be placing much higher tax on the alcohol products. In this way, more revenue can be collected which the government can then use for the cleaning up the messes wasted tourists cause AND also, less tourists would get drunk, which obviously is the main goal.
If thinking deeper for different solution, banning alcohol is one choice, but to be honest, the alcohol producers wouldn't like that at all.

3) The tourists from other countries would not pay taxes to the country they are visiting, but if the tax was placed specifically on alcohol products, the tourists would have to pay the price, which includes the tax. This way the government get huge amounts of money. Some of the taxes, which the tax payers of the country pay would however end up in the situation, where it is used to clean up the messy places the drunk tourists have created.
However, this high tax would give an opportunity to the black market sellers to sell alcohol for lower price. If the tourists were to buy alcohol from the black market, the government would have pretty much increased the tax for nothing. The government would end up with much less total revenue, and still messy places everywhere, if the black markets were created. However tourists are not likely to buy alcohol from illegal sellers, that was just a thought.

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# smarttikalevi2on 13 Dec 2011 at 11:02 pm

@ Stefan Joseph
Well explained overall: you have good analysis and clearly expressed opinions.
For the first question you have explained well the relationship between your answer and the question, but you seem quite certain that over consumption of alcohol in general is a market failure. I personally do not believe this is the case, as some individuals do not harm/wreck anything/anyone. Isn't it only when the effects of the over consumption are negative?
For the second question you have two major ideas, and I totally agree you on the second point you make about tax. But for the first point, you say that "influential campaigns should be created to raise awareness" of the over consumption of alcohol. I am pretty sure that most of the people who over consume alcohol know what the consequences will be like, so I find this kind of useless. However, if the campaign really is INFLUENTIAL, then it might work (but to be honest it is really hard to get something like that work).
In the third question I totally agree with you on everything you say – >The private cost of running a bar in a place like Malia indeed reflect Greece's the social costs.

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# kfletcher2on 13 Dec 2011 at 11:07 pm

1. Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
Yes, the overconsumption of alcohol is a market failure because resources are not being allocated efficiently. It is negative externality of consumption because the consumption of alcohol provides a spillover of negative effects to society. It is also a demerit good as alcohol is considered bad for both the consumer and society.

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 firstly raise a tax on the purchase alcohol, lowering the demand of alcohol, and also they can run a advertising campaign to stop the overconsumption of alcohol and to drink responsibly as mentioned in the article.

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.
Yes proprietors of bars benefit at the expense of the taxpayers, because tourists buy large amounts of alcohol from them, and the proprietors benefit from them (this is the private gain), however taxpayers have to pay for the police to enforce the law and they also have to pay for the damage caused by the drunks (this is the social cost). No the private cost does no reflect the social cost because the bars and clubs make money while the social cost is money lost.

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# Auroraon 13 Dec 2011 at 11:14 pm

1.I think that over-consumption of alcohol is a market failure, because it is a demerit good that by consuming it causes negative effects on the society and the consumption of alcohol has negative externalities affecting it so it confirms that is a market failure. In my opinion it can be classified as negative externality of consumption as it is created by the consumers and it affects all the society.
2.Government could impose taxes in order to compensate the shift on the demand curve due to the externality. However it would be very difficult to establish the value or the price of the negative externality. In addition it can cause the origin of a black market because the high prices. The government could also try to put expensive fines if someone drunk does something prejudicial to the nation in order to motivate tourists not to do these actions.

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# Auroraon 13 Dec 2011 at 11:14 pm

3.They benefit because while the residents are paying taxes, the proprietors’ of bars and clubs establish the price very low in order to compete in the market so more people get drunk but the damages made by them will be paid with the taxes collected from all the people of the nation.The private cost of running a bar in places like Malia and Greece is much less lower than the social cost and this shows us the negative externality created.

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# kfletcher2on 13 Dec 2011 at 11:14 pm

I like your answer, but do you think the ban of alcohol would lead to a black market,or are you suggesting that alcohol is prohibited in some area and not others like smoking?

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# Auroraon 13 Dec 2011 at 11:25 pm

I think you made some interesting points but I think the over-consumption of alcohol only benefits the producers although they will have later to pay the damages made by the drunk tourists by the taxes. Finally I think that if they ban to purchase the alcohol or if the government imposed a tax maybe a black market will appear so in my opinion I think it is really difficult to solve this problem although there are ways that may motivate not to get drunk or over consume alcohol such as advertisements or campaigns.

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# MMartinsonson 13 Dec 2011 at 11:50 pm

- I think that alcohol over- consumption is a market failure. It is classified as an over-supply of demerit goods. The issue in over-supply leads to over-consumption.
-If the tourist nations were serious about cracking down on drunken tourists then the government should impose even bigger tax on alcohol at those resorts. This would reduce some problems, but will not eliminate all.
-One is obvious that the proprietors of bars and clubs get most of their revenue from selling alcohol, and as maybe some of you have mentioned that usually in bars and clubs it is more expensive than in a shop. However, it seems that it is still too cheap in order to reduce the trouble caused by those tourists.
-Social costs reflect for sure, because not all the money goes to proprietors some of the money goes to government, tax. However, if it is a tax-free zone then the social costs would not reflect in those particular resorts.

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# MMartinsonson 13 Dec 2011 at 11:56 pm

I do not necessarily agree with your statement were you state that it is classified as negative externalities of consumption, well partially it is but I think that in this case it is over-supply of demerit goods. First of all it is merit good, and second of all it clearly says over-consumption and as it say in a textbook that over- supply leads to over-consumption.
Talking about injuries, government does not pay for their health care it is either their insurance or themselves if they are not insured.

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# ssewellon 13 Dec 2011 at 11:58 pm

I agree with your conclusion about the potential methods of cracking down on drunk tourists; although advertising would be ideal, it would not be very effective, and people main aims on holiday are to enjoy themselves, without having to be responsible as usual. I think an indirect tax is the wisest course of action, but you are absolutely right about the effect of elasticity. In fact, demand might be even more inelastic on holiday, as people will not be willing to compromise their fun, even if it costs extra.
In terms of the private costs, I think that these are part of the social cost. However I would say that the pressure put on emergency services, such as police and ambulances, would be a more significant cost, whichaffects the whole community.

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# Rory Thorntonon 14 Dec 2011 at 3:27 am

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

The overconsumption of alcohol is considered a market failure. It’s considered a market failure because the resources, in this case the alcohol, is not being allocated efficiently. The overconsumption of alcohol could be classified as a negative externality because it forces a variety of negative affects onto the society/public.

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?

In the resort communities, there could be a tax charged when purchasing alcohol. This tax would increase the price of the alcoholic beverages, resulting in a decrease in the demand. With a lower demand, less people would buy enough alcohol to the extent in which they are drunk and cause trouble. Another major effort which could be taken is to advertise the negative effects of alcohol, convincing people to drink safely instead of “going all out!”

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?

Proprietors of the bars in resort communities benefit because they are the one’s selling the beverages to the public. Taxpayers (the public) are forced to pay taxes in which a proportion of their pay goes towards law enforcement and clean-up/repair of the damages caused by the drunk people. The private cost doesn’t reflect the social cost because the actual bars and clubs are gaining profits when the society is having to pay for some of the negative externalities.

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# mlopezrubio2on 14 Dec 2011 at 8:23 pm

•Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
Overconsumption of alcohol is a market failure, because it causes the society to suffer a welfare loss and to pay external costs. It would be a negative externality of consumption, because it’s caused by consumers and it affects the demand. The overconsumption means that the product should be consumed less in order for the society to reach its optimum.
•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?
If they wanted to stop this from happening they could do it in various ways: by imposing taxes, making negative advertising and regulating the market, being their objective to move the quantity demanded to the left.
Taxes: the tax should be the same amount of money as the costs the negative externality is causing on society. The aim of the tax would be to shift the supply curve leftwards so that the price increases and the quantity demanded decreases.
Negative advertising: as the article says this has already been done by some governments in order to persuade people to drink less and move the demand curve leftwards.
Regulations: government can impose various types of regulations, from a ban to a simply restriction. In this case I don’t think the government should ban the alcohol because that would damage the restaurants and bars and the whole market as, as said in the text, tourist may decide not to go to a place where they can’t have fun anymore. But the government could restrict the consumption of alcohol or set price controls so that alcohol is not excessively cheap and consumers don’t demand it so much.
•How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 these places are benefiting at the expense of taxpayers because they are obtaining a lot of profit from the sale of alcohol and they are not paying for all the damages the consumption of alcohol makes to the rest of society. So the private cost wouldn’t coincide with the social cost of running a bar in these places. The private cost will be higher than it should be because proprietors of bars aren’t taking into account any externalities, but there are negative ones. And so the social cost will be lower than the private one and the society will lose welfare.

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# mlopezrubio2on 14 Dec 2011 at 8:31 pm

Reply to Rory Thorton
I agree with you, but I think there are mroe things the government could do to prevent tourist from damaging the country. In my oppion another really common and good way of eliminating the external costs would be to impose some kind of regulation or restriction, such as not letting one person drink more than a certain quantity or after a certain hour, or make the bars be more resposible about the effects the product their selling will have on society instead of just look at the profit they will make. However I think your response is pretty coherent and I have really similar thoughts about the subject.

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# ctoantran2on 15 Dec 2011 at 12:15 am

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

Over-consumption of alcohol is indeed a market failure due to the negative externalities associated with alcohol abuse. Alcohol abuse will increase risk for liver cancer and failure and can decrease workers' efficiency/safety standards, resulting in greater burden on society. Alcohol could be classified as a demerit good, meaning that its market failure is the over-supply of a demerit good.

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 take a few courses of action:
1. They could increase the price of alcohol, producing revenue from taxes and reducing consumption.
2. They could restrict alcohol consumption with legislation, banning or reducing alcohol consumption.
3. They could use negative advertising to reduce demand and consumption.

How are proprietors of bars and clubs in resort communities benefiting at the expense of 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 benefit at the expense of taxpayers from other parts of the tourist nations because, despite the damage caused by tourists, the state and not the bar has to clean up, meaning that the marginal social cost is greater than that of the marginal private cost.

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# ctoantran2on 15 Dec 2011 at 12:21 am

Market failure does not cause companies to fail; that's not its definition. Instead, it means that a market fails to allocate resources efficiently. Alcohol over-consumption is a market failure because the MPB are greater than the MSB due to negative externalities, such as drunk and disorderly behavior.
I agree on your proposed courses of action for governmental intervention, but which one would be the most effective in your opinion? Would raising the drinking age do anything meaningful, or would the enforcement required outweigh the cost?
I find your view on businesses paying higher taxes to offset the social cost of disorderly behavior, but would that actually do enough? Would there not still be disorderly behavior and negative social consequences such as rape and injury?

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# Mmecathumon 19 Dec 2011 at 10:11 am

1.Overconsumption of alcohol is definitely a market failure that has a huge external cost to a third party. This is because alcohol is a demerit good and has a negative externality consumption nature. When alcohol is over consumed, the social cost is almost intangible. It can have such a vast range in market figure whereby the consequences span from merely falling asleep to causing an accidental death of say, a multinational company CEO! This is because no amount of taxes by the government can compensate for the potential losses incurred.
2.Taking into consideration that tourism would be the primary focus of these nations, any negative action curbing or restricting tourist activities including but not limited to the consumption of alcohol would adversely affect the projected economic growth in that nation. Having said that, tourist nations are faced with the prospect of facing a catch 22 situation. On one hand, the tourist market helps boost economy. On the other hand, the “possible” ill effects of over consumption of alcohol can negatively affect the tourist industry as well. Hence, steps taken have to be weighed cautiously and it is assumed that education would eventually prevail over harsh punishment. As such, campaigns and negative banners located in strategic locations would benefit the tourist nation in the long run. Additionally, the best solution for these nations is to have the presence of police as a deterrent for the alcohol consumers. The presence of the police would throw caution to the unruly tourist.
3.The proprietors of bars and clubs are contributing to the foolish actions of drunk tourists. This is unfair, as they do not take any responsibility for the after effect of the product they provide. This leaves no one but the government to intervene and ensure the situation is once again under control using up their revenue instead. This revenue are from the expense of taxpayers that mostly have nothing to do with the problem at all and are simply bearing the cost of the acts of irrational tourists. Therefore, the negligence of the external costs causes the private cost to be higher than the socially efficient output value.
*Continuation of 3rd question – 2nd part
No it does not. As evident from the reasons above, the private cost would not reflect the social cost. In fact, the private cost would be higher as the cost of externalities isn’t taken into consideration by those bars and pubs.

-Mirren

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# Mmecathumon 19 Dec 2011 at 10:17 am

Hi Rory,

I agree with your answers. They are simple and straight to the point and easily understandable. However, don't you think that by taxing the alcohol, it would decrease the amount of tourist in that area? Yes, taxing alcohol is a great step as this really ensures it is consumed under control. However, as the question relates it to the tourist industry, wouldn't decreasing demand be a negative aspect of the outcome of the situation?

Mirren

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# Rueveydeon 20 Dec 2011 at 5:52 am

1. Is overconsumption of alcohol a market failure? If so, what type could it be classified as?
- Overconsumption of alcohol is a negative externality of consumption; so yes, it is a market failure.

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 the taxes on holitays at the resort communities
- they could increase the taxes on alcohol
- they could make alcohol illegal

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.
- If the taxesl on alcohol were increased, teh taxpayers on other parts of these nations would also have to pay for increased prices
- Vandalsm caused by drunk tourists needs to be paid by the taxes (normally all citizens of the nation pay this)
The private cost doesn't reflect the social cost because the social cost includes the negative externalities, so the social cost is bigger than the private cost.

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# Sakshion 28 Dec 2011 at 6:35 am

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

Overconsumption of alcohol is a type of market failure as alcohol is not being efficiently allocated. Its overconsumption is leading to a welfare loss. It is a negative externality of consumption as its negative effects are initiated at consumption.

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 government could set a minimum price per unit of alcohol in those areas in order to discourage consumers. They could even add tax so that the extra money could go to the government in order to fund public projects. The government could set a limit to the amount of alcohol a person is allowed to purchase in those areas. The government could maybe appoint bouncers to ensure no rowdy behavior takes place. The government cold use advertising to promote anti-drinking.

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 of bars and clubs in resort communities are benefitting as they are ones receiving profit from all the alcohol sales without having to pay for damages as this is done by taxpayers. The private cost of running a bar is a lot lesser than the social cost and thus a negative externality is created. The private cost is merely the financial cost plus some other things like cost of repairing vandalism; while the social cost is a lot more : vandalism, rowdy behavior, crimes and poor judgment as a result of alcohol etc.

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# skalra2on 28 Dec 2011 at 6:43 am

@ Samantha
I thought your idea about placing a limit to the amount of alcohol that could be bought was a good one. But it made me wonder whether black markets could arrive as a result of this? This could go on to have negative effects of a bigger proportion.

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# Konstantin Frankon 03 Jan 2012 at 10:25 pm

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

Overconsumption is definitely a market failure, as it is a missallocation of resources. As the word overconsumption says, and the social costs of consuming alcohol are definitely higher than the private costs, it is a negative externality of consumption. It is not only the social benefit (actually there is no social benefit when someone gets drunk) the social cost is way higher when things begin to get wrong like operations or reparations of damaged properties, than the private cost of buying a bottle of Vodka.

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 ?

What the tourist nations probably want to achieve is a shift of the demand curve to the left, as at the same price, less alcohol will be demanded, which would reduce the overconsumption of alcoholic beverages. By negative advertising, like with the pictures seen above, some people might stop drinking that much. Another way would be taxes on alcohol, bought from foreign people in the resorts, so the local people would not have to pay the extra tax and therefore not be punished for the tourist’s behavior. A very strict and harsh attempt would be banning of alcohol for tourists, which will probably never happen as too many people earn money from it.

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 benefit from other taxpayers expenses, as it is mainly their fault that tourist get drunk (of course it is the tourist’s fault getting that drunk, but the proprietors provide it to them). The community has to spend money on cleaning the streets from the trash produced by drunk people, to keep the hospitals running and the police needs to be paid if there are any conflicts. A souvenir dealer has therefore to pay for something he did not cause at all and he makes not profit with at all. The private cost does definitely not reflect the social cost, as the proprietor of a bar gains more by selling that much alcohol. The drunk people impose costs to society and society (not only the proprietor and the drunk people) have to pay for it.

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# Konstantin Frankon 03 Jan 2012 at 10:29 pm

Hi Mirren and Rory,

I think Rory's suggestions to limit the consumption of Alcohol are very good. However, Mirren's idea, that taxing would decrease the number of tourists in that area is valid, too. I think it needs to be evaluated what is better for society and also the environment. More drunk tourists and higher revenue, but also higher costs for the "cleaning", or less tourists, less alcohol, less revenue, but also tremendously less costs for "cleaning". I think by taxing or banning alcohol a completely different type of tourist could be attracted by advertising it as "sustainable tourism" etc.

Konstantin

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# Daughtryon 23 Apr 2012 at 4:42 am

Không có ý ki?n gì ngoai vi?c m?i xem c?a tôi

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