"As I’ve written before, economists generally believe that the “external costs” of an economic activity (i.e. its impacts on others besides its producers and consumers) should be factored into its price. If producers and consumers don’t consider the harm (or benefit) that their actions cause others, they will create more (or less) of a good than is optimal from the point of view of society.
The steep external costs of alcohol consumption suggest that government should use price signals to moderate drinking. But do prices make a difference, or is drinking the sort of behavior people will do no matter how outlandish the cost (which you might have observed the last time you were at a sports stadium or concert venue)?
...What level would alcohol taxes have to reach to match the costs drinkers impose on society?"
Read the whole story at the Freakonomics blog
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