An Economist's Response to the Alcohol Problem

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Economists Response to Alcohol Problem Alcoholism to the economist would be more than the effect it has on the immediate consumer. An economist would look at the problem from the perspective of its effects on the immediate family members and society as a whole. Economists will consider what are the extra costs (externalities) are likely to be incurred by the alcohol consumption to the immediate family and society? Externality refers to the costs associated to consumption or production of a commodity that would otherwise not be ADDIN EN.CITE Mullahy199028282817Mullahy, J.,Sindelar, J.An ounce of prevention: Productive remedies for alcoholismJournal of Policy Analysis and ManagementJournal of Policy Analysis and Management249-253921990. An economist will look at the cost of care incurred by the immediate family members, the likely cost of job loss, the cost of Medicare to the alcoholic, the likely road accidents associated with drunken driving and the cost to the government of providing social amenities to care for the alcoholics (example: rehabilitation centers and other medical care). A measure to correct the problem of alcoholism is to levy a tax assuming that the alcohol consumer are rational and will respond to the disincentive. This tax was named after its proponent Arthur Pigou Pigovian tax. The Pigovian tax is levied on market activities that produce extra negative cost unaccounted for in the production. The tax is assumed will increase the cost of consuming

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