The persistence of consumption habits
Lorenz Kueng, Evgeny Yakovlev 10 September 2014
Understanding consumer behaviour is crucial for many economic questions. This column looks at the persistence of consumer habits towards alcohol among Russian males. Beer sales expanded rapidly after the collapse of the Soviet Union both in levels and relative to vodka sales, driven mainly by the beer consumption of cohorts born in the 1980s and 1990s. The authors estimate that this trend will reduce the male mortality rate in Russia by one quarter in the next 20 years.
Understanding consumption behaviour of individuals and households is crucial for many economic questions, particularly for those with policy implications. For instance, given that consumption is the largest component of aggregate demand in most economies, it is important for policymakers to understand how consumers respond to changes in their economic environment – so called ‘shocks’ – including those caused by new policies.
Health economics Microeconomic regulation
consumption habits, Alcohol consumption, substitution, Russia
Minimum prices for alcohol should work
Joan Costa-i-Font 30 June 2014
Addicts may not respond to price incentives as we would expect. This problem, combined with the fear of disproportionally taxing the poor, makes it difficult to address the consumption externalities caused by addictive substances. This column reviews recent literature showing the efficacy of minimum pricing on alcohol, and the curious result that alcohol consumption now seems to be increasing in household income.
Policymaking on addictive substances is a tricky business, since the choices of addicts should not be expected to follow the neoclassical view of consumer choice. The additional problems are many:
- People have limited will power,
- Time preferences tend to excessively favour the short run, and
- Certain social norms can create an unhealthy social environment (e.g., “drinking is cool”, “alcohol is the fast way to relax”).
Under these circumstances, traditional incentives might not work the way we think.
Alcohol consumption, minimum price, public health, consumption externalities