Excess drinking is associated with lost productivity, accidents, disability, early death, crime,
neglect of family responsibilities, and personality deterioration. These and related concerns have
justified special restrictions on alcoholic-beverage commerce and consumption. The nature and extent
of government involvement in this arena vary widely over time and place, and are often controversial.
Economists have contributed to the evaluation of alcohol policy through empirical work on the effects of
alcohol-control measures on consumption and its consequences. Economics has also provided an
accounting framework for defining and comparing costs and benefits of interventions, including excise
taxes.
Outside of the policy arena, economists have analyzed alcohol consumption in the context of
stretching the standard model of consumer choice to include intertemporal effects and social influence.
Nonetheless, perhaps the most important contribution by economists has been the repeated
demonstration that there is nothing unusual about alcohol in at least one essential respect: consumers
drink less ethanol (and have fewer alcohol-related problems) when alcohol-beverage prices are
increased.
Important econometric challenges remain, including the search for a satisfactory resolution to the
conflicting results on the effect of price changes on consumption by consumers who tend to drink
heavily. There are also unresolved puzzles about the relationship between drinking and productivity;
even after controlling for a variety of other characteristics, drinkers tend to have higher earnings than
abstainers, and women's earnings (but not men's) tend to increase with alcohol consumption.