Review About Private and External Cost

Why do the two methods so diverge? Economists are n ot so amoral as to consider it irrelevant that someone has tragically died. But me asures of private costs borne by drink drivers are only economically meaningful if o ffset by the consumption benefits enjoyed by all drinkers who took similar risk and d id not have an accident. Consider, by analogy, skiing, which would be utterl y socially wasteful if we counted all of the accident costs suffered by skiers while taking no consideration of that all skiers derive at least some enjoyment from their ri sky activity. And here, from an economic perspective, the public health literature goes seriously awry. 6 BERL simply assumes that harmful drinkers enjoy no benefits from their consumption; 7 they consequently deem all private costs as social ly relevant because there are no offsetting private benefits. CL take a rhetorically different but substantially equivalent approach by assuming any p otential market failure in alcohol consumption sufficient reason for dismissing all pr ivate consumption benefits. 8 Market failures such as imperfect information can r esult in excess consumption, and the excess of costs over benefits for the erroneous ly consumed alcohol can then count as social, but simply assuming away all private ben efits because of the potential for market failure is completely at odds with standard economic method. We could similarly assume that imperfect information in the used car market means nobody derives any benefit from buying a vehicle. This substantial difference results in the biggest divergence between the public health and the economic approach to tabulating the costs o f alcohol use. Where public health figures include all of the costs drinkers impose up on themselves, the economic method would either leave those costs to the side o r incorporate them only if offsetting private benefits were simultaneously est imated and included. Drink-driving costs falling upon those external to the vehicle should be counted as policy-relevant from both an economic and a public health perspective. From an economic perspective, costs falling upon the driver should be deemed private and irrelevant for policy unless weight is given to ben efits enjoyed by the set of drivers taking similar risk but who suffer no adverse outco me. Whether those inside the vehicle with the drinker b ear public or private costs is less clear. A strict interpretation of the economic appr oach would hold that passengers’ agreement to ride with an intoxicated driver makes them party to the driver’s decision; resultant costs or benefits they bear can then hardly be deemed external. 9 If we wished to take a less strict line, we would agai n wish to count the benefits enjoyed by the passengers of drink drivers who do not suffe r accidents against the costs falling on those who do. It is easy to scoff at the potential existence of s uch benefits, but it puts a heavy thumb on the scale if we simply assume them away. In any case, the mortality costs of drink driving accidents falling on those inside the drink er’s vehicle other than the driver are a small proportion of overall tabulated mortality c osts.

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