The 21 Year Old Minimum Legal Drinking Age Phillip Huff - 12/18/09

The 21 Year Old Minimum Legal Drinking Age:

An Economic-based Analysis of Problems with the MLDA and Potential Solutions

The 21-Minumum Legal Drinking Age: One of the most highly praised laws that had saved

approximately 22000 from 1975 to 2002.[7] However, they don't tell you about the countless souls they

have damned to live with alcoholism by forcing them into a dangerous and addictive drinking society.

The MLDA breeds wanton alcohol abuse and disrespect for the law. However, the alcohol abuse

effects more than just the abuser and his or her family; it hurts the economy and costs our country

billions of potential dollars every year. The MLDA is causing fewer youths to drink, but the youths

that do drink, are drinking even more which leads to higher alcohol abuse rates. The most promising

and cost effective choice is taxation; it doesn't force youth to comply to a law, it coerces them with the

most alluring weapon: money. It also has effects which don't attempt to just solve a problem in a single

age group, it effects all age groups equally. The revenues can also be put back into the alcoholism

prevention and treatment system to further reduce alcoholism and the negative effects it has on the

economy. Originally, the MLDA was created to reduce traffic fatalities. It has succeeded in this sense,

but has started costing lives by creating a dangerous underground drinking society. The MLDA is

making underage drinking a dangerous game and needs to be replaced by something like taxation,

which helps reduce alcohol abuse, which hurts our economy significantly, across all age groups which

reduces alcohol related fatalities, and the taxation can be used two-fold by putting the revenues into

alcoholism prevention and treatment programs which helps our economy even more.

Firstly, the MLDA has run its course of effectiveness because the public is starting to see the

law as a side-steppable nuosamce, and that means that the social costs, like deaths, of experimenting

with

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different alternatives for the MLDA are low.

"Several recent studies examine the effects of various drunk-driving laws. Ross reviews a number of these studies
and concludes that laws that increase the perceived certainty of punishment have a short-term effectiveness. He
concludes, however, that the laws have little effect in the long run due to a decline in the public's perception that
the laws will be enforced.”[2]
This shows that the MLDA, being a dated policy, has reached the conceivable end of it's usefulness.

The law either needs to get updated or replaced because it has earned the title of being “just a law” that

doesn't do anything among youths today. Ask any student what they think about the 21-MLDA, they

will all tell you the same thing, it is just a nuisance. This is why it needs to be replaced, the law is

causing more harm than good because it is believed that the 21-MLDA promotes binge drinking, which

is a common form of alcohol abuse, which we need to prevent for the sake of economic growth.

Secondly, it is important to reduce alcoholism rates because alcoholism hurts a nations GDP,

and it is believed that the U.S.'s MLDA law causes alcoholism through breeding an underground

drinking society. Therefore, it is important that we change this law to reduce alcoholism rates.

"Harwood (2000) estimated the aggregate cost of alcohol abuse to be $184.6 billion for 1998,

amounting to more than 2% of GDP for that year."[l] This states the economic costs, without regard to

social costs, of alcohol abuse are high and they need to be taken into account. If alcoholism amounted

to less than 1% of GDP, reducing alcoholism rates would be a much smaller issue and not as vital to

address. If the drinking age is lowered and what many organizations like Amethyst Initiative and

Choose Responsibility argue about alcohol abuse is true (they state that a lower drinking age will

reduce alcohol abuse rates and they cite many sources like the Institute of Medicine), then both the

economic and social benefits of a lower drinking age great. However, many pro-21 MLDA sources

like Mothers Against Drunk Driving argue that underage drinking is on the decline and that this is

proof of the effectiveness of the law. Pro-18 MLDA sources like Choose Responsibility do not deny

this to be true, but they argue that now, more than ever, underage youth are abusing alcohol more than

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they were before and that this abuse is harmful to their health, the community, and the economy.

Below is a quote from CR rebutting the argument about decreasing underage decreasing. “Under the

21 year-old drinking age, fewer underage individuals are drinking, but those who do choose to drink

are drinking more, are drinking in ways that are harmful to their health, and engaging in behaviors that

have a negative impact on the community.” The following quote from a conclusion in an econometric

journal reaffirms the importance suggested above that there are great economy benefits from a lower

drinking age (assuming it lowers alcohol abuse rates as also suggested).

"The estimated abuse effect, however, differs from that of M&S [1988 Alcohol Supplement of the National Health
Interview Survey, Mullahy and Sindelar] in two important quantitative respects—it is substantially larger than that
of M&S, and it is statistically significant where the estimate of M&S is not. This indicates that there may be
significant labour market benefits from effective alcohol abuse prevention and treatment, and that such potential
gains should be taken into account in cost-benefit analyses of proposed policies and interventions.”[1]
The MLDA does not effectively prevent alcohol abuse, in actuality, it promotes alcohol abuse because

the only way youths can acquire alcohol is primarily through partying which involves binge drinking,

which is a form of alcohol abuse. Therefore a replacement for the drinking age that is not a

circumventable psuedo-preventor must be put in place to prevent this gross loss of economic potential

through lost GDP, poor work efficiency, and economic damages due to social damage dealt by alcohol

abuse.

Also, evidence suggests that taxation is an extremely effective means of replacing the MLDA

because it effects all age groups and doesn't breed a society that disrespects the law and idolizes

overuse of alcohol. “A policy that fixed the federal beer tax in real terms since 1951 would have

reduced the number of lives lost in fatal crashes by 15 percent, while a policy that taxed the alcohol in

beer at the same rate as the alcohol in liquor would have lowered the number of lives lost by 21

percent.”[3] The MLDA's purpose is to reduce alcohol related driving fatalities, and therefore a

replacement would have to be able to reduce said fatalities as well. Taxation, the most reasonable

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replacement, saves a large number of lives, and this number only includes eighteen to twenty-one year

old youths.1 Since taxation also effects people who are not underage, the effects overall would be much

greater. To reaffirm this point, this same paper calculated quantitatively that “the enactment of a

uniform drinking age of twenty-one in all states would have reduced the number of eighteen- through

twenty-year-olds killed in motor vehicle crashes by 8% in the period 1975-81.”[3] Based on this data,

taxes are clearly a much more effective method of preventing alcohol related fatalities. In an

environment where alcohol is taxed, assuming there is no 21-MLDA, youths say “do I want to just

drink a few beers, or completely go crazy because it's relatively pricy with the taxes.” While in the

environment where there is only a 21-MLDA, youths say “if I can get it, I'm drinking as much as I

can.” This shows that taxes, instead of a drinking age, forces youths to focus on the actual costs of

alcohol, rather than the “hidden” costs of alcohol like “how am I going to get it.”

However, some people argue that a combination of both MLDA and taxes would have an even

greater effect. These people do not take into account the supported belief that alcohol is only elastic for

youth when there is no MLDA present, so therefore taxation cannot be coupled with the MLDA, which

supports the claim that the MLDA should be replaced by taxation. The quote following provides

evidence that supports the claim made above.

“More interestingly, Laixuthai and Chaloupka (1993) also found that the price sensitivity of youth drinking fell
after the MLDA of 2l years was enacted in all States. For example, the investigators estimated that an increase in
the Federal beer tax offsetting the effect of inflation since 1951 would have reduced the probability of having any
binge-drinking episodes by 18.4 percent in 1982 but only by 6.5 percent in 1989.”[4]
This suggests that the price elasticity of alcohol decreases dramatically for youths when a 21 MLDA is

introduced (see figure 2 in the appendix for a graphical example of how the MLDA would impact

supply and demand and taxation).2 This counters the argument stated above that tax can be used to
1 This assumes that taxation will lower demand based on the concept of economic equilibrium in a well-functioning market
system. Figure 1 graphically represents the effect that the concept of economic equilibrium has on demand when a tax is
introduced.
2 The graph presented in figure 2 is by no means an accurate representation of how the MLDA effects the supply and demand
curves and inherently taxation. It is only meant to serve as a visual aid for the reader to understand the concept of how a

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augment the benefits of a 21 MLDA, because a tax loses a good portion of its benefits on reducing

youth drinking and alcohol abuse. A tax with a 21 MLDA becomes less effective, and therefore the net

benefits would decrease while it is still negatively impacting drinkers age twenty-one and above the

same amount. A following quote describes a theory on why the MLDA decreases the elasticity of

alcohol.

“For a youth, the full price of consuming alcohol can be thought of as the monetary price of alcohol plus the
indirect costs of illegal drinking. These indirect costs include such legal obstacles as the MLDA, the time spent
obtaining alcohol, and the money and time spent obtaining false identification. When the average MLDA and,
consequently, the associated indirect costs of alcohol, are relatively low (as in the 1982 sample), a given increase in
alcohol taxes will have a relatively large impact on the full price of alcohol and thus on consumption. Conversely,
when the average MLDA and the associated indirect costs of alcohol are high (as in the 1989 sample), a similar
increase in alcohol taxes will have a relatively small impact on the full price of alcohol and on consumption.
Accordingly, high school seniors in 1989, who faced higher indirect costs of obtaining alcohol than their 1982
counterparts, responded less to changes in the monetary costs. ”[4]
Since the benefits of taxation, reducing alcoholism rates and drunk driving fatalities, effect all age

groups, the net benefits outweigh any probable negatives when there is no MLDA. Also, another

unrelated article also suggests that alcohol is a price-elastic good is quoted below with their conclusion.

“We found that based on a 10% price increase, the mean price elasticity of demand (% change in quantity
demanded / % change in price) was −0.79 for MLB drinkers, −1.14 for regular beer drinkers, −1.11 for hard liquor
drinkers, and −1.69 for the combined group of all other drinkers. Logistic regression analysis revealed that the
personal characteristics significantly related to being a MLB drinker were older age, not working, being homeless,
and a daily drinker. Daily (or nearly daily) drinkers were more likely to be married, earning lower incomes, and
hard liquor drinkers.”[6]
This quote reaffirms the argument that alcohol is price-elastic and therefore is effected by taxation. The

elasticity of alcohol is a debated topic, but with two unrelated articles agreeing that alcohol is elastic, it

is safe to assume that these articles are accurate enough for the purposes of this analysis. Another

argument against taxation states that a tax would put a burden on working men and women of legal age

who do not have drinking problems and this in turn may hurt alcohol companies. However, in this

case, the social benefits, saved lives and reduced alcoholism, outweigh the costs, inconveniencing

people willing to purchase a arguably carcinogenic product. Another argument against taxation is that

the effect of this tax weakens as the income of a person increases because the cost of alcohol would be
change in elasticity effects taxation's effect on demand.

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a relatively small percent of his or her income. However, the people to whom this law is targeted to are

not wealthy people, but people with relatively low incomes which could be due to being a student or to

having a low paying job due to alcohol abuse taking over their life.

Finally, there is also the suggestion that the revenues brought in from the taxation could

be used to make the benefits of taxation two-fold; the revenues from taxes would be used

to fund alcohol treatment and this two-fold approach would effectively lower alcoholism

rates and restore GDP lost from alcoholism.

“In a 1997 national survey funded by the Robert Wood Johnson Foundation, 82 percent of
adults favored an increase of five cents per drink in the tax on beer, wine and liquor to pay for
programs to prevent minors from drinking and expand alcohol treatment programs. According
to a 2002 American Association of Retired Persons (AARP) survey, eight in ten North
Carolinians support an additional tax on beer, wine and other alcoholic beverages in their state
to generate money for health and long-term care services.”[5]
This shows that the people are willing to pay a tax on alcohol, and also, the tax becomes more palatable

to the general public if they know that the revenues are going to pay for alcohol treatment and

prevention programs. This proves that a tax could be successful implemented without too much public

ire, and at the same time could be use for a two-pronged attack on alcohol abuse. This attack on

alcohol abuse will also help increase our GDP because too much of our GDP is lost to alcohol abuse.

The MLDA has served its purpose and has saved lives, however, it is time that we replace it

with a more viable, long-term solution like taxation. Taxation directly combats alcohol abuse, which

costs us more than 2% of our GDP yearly, in two ways: taxation reduces demand for alcohol and tax

revenues can be spent to pay for alcohol abuse treatment and prevention programs. There is evidence

that states that laws like the 21-MLDA lose effectively over the long term because the public doesn't

think the law will be enforced. There is nothing that says that our MLDA will be any different from

these other laws. Taxation, on the other hand, will not lose effectiveness over the long term (assuming

it is adjusted for inflation) because public perception doesn't effect taxation. Taxation will reduce

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demand for alcohol, which reduces underage drinking, alcohol abuse, and alcohol related driving

fatalities. It does everything the 21 MLDA does and more. It even does what the MLDA does better

than it. It is believed that the MLDA actually breeds an underground drinking society where alcohol

abuse is extremely prevalent, so replacing the MLDA would reduce this widespread alcohol abuse.

The tax would have to replace the law because the 21 MLDA reduces the price elasticity of alcohol for

youths by a significant amount. However, it is not a flawless method of prevention because it punishes

moderate and light drinkers with a tax, and punishes the poor more than the rich. However, the

moderate and light drinkers would be less prone to complain about the law because the revenues could

be used to prevent and treat alcohol abuse. The law is also intentionally targeted more towards to the

poorer because they, in theory, don't have higher-income jobs due to their alcohol abuse. It is critical

that we address alcohol abuse because it costs $184.6 billion for 1998, which amounted to more than

2% of our GDP that year. The MLDA is not just a social problem, the effects are also an economic

problem, which is why we must replace the MLDA with a more effective form of prevention: taxation.

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Works Cited:
1. Alcohol Abuse and Employment: A Second Look
Joseph V. Terza
Journal of Applied Econometrics, Vol. 17, No. 4 (Jul. - Aug., 2002), pp. 393-404
Published by: John Wiley & Sons
Stable URL: http://www.jstor.org/stable/4129259
This journal article shows that alcohol abuse reduces employment and causes us to lost a substantial
chunk of our GDP every year. It is an article from the Journal of Applied Econometrics and is written
as an opinion paper based on research collected from various sources. The author is a professor at
Pennsylvania State University and serves on the Department of Economics within that school. This
article shows that, if alcoholism rates are decreased by a lower drinking age, that a reduction in the
drinking age would have an overall beneficial effect to the economy. There is little evident bias in the
article, except to the fact that alcohol abuse is detrimental to the economy, which it may or may not be.
I find this to be a very comprehensive, yet technical, document and I believe that it contains a plethora
of useful, relevant information.
2.Alcohol-Control Policies and Motor-Vehicle Fatalities
Frank J. Chaloupka, Henry Saffer, Michael Grossman
The Journal of Legal Studies, Vol. 22, No. 1 (Jan., 1993), pp. 161-186
Published by: The University of Chicago Press
Stable URL: http://www.jstor.org/stable/3085637
This article states that alcohol-control policies are only effective in the short term and are quite
ineffective in the long term due to the fact that use decision-making does not follow a rational model,
which the control policies do, and also that the minimum legal drinking age is less effective than other
methods like taxation of reducing fatalities. This article is an opinion paper authored by Frank J.
Chaloupka, Henry Saffer, and Michael Grossman. Chaloupka is an Assistant Professor of Economics
at the University of Illinois at Chicago, and is a Faculty Research Fellow at the National Bureau of
Economic Research. Saffer is a Professor of Economics at Kean College of New Jersey and is also a
Research Associate at the National Bureau of Economic Research. Grossman is a Distinguished
Professor of Economics at the City University of New York Graduate school and is a Research
Associate at the National Bureau of Economic Research. The article shows that the social costs that
youth will pay from a switch to a lower-drinking age will be low, and therefore any yielded economic
benefits have very few negatives. The paper seems to not hold too much of a bias towards either
lowering the drinking age or raising it. I believe that this article is rife with information that could be
used both beneficial and negatively towards my argument and that this article could be used to created
ideas for alternatives to the MLDA.
3.Beer Taxes, the Legal Drinking Age, and Youth Motor Vehicle Fatalities
Henry Saffer, Michael Grossman
The Journal of Legal Studies, Vol. 16, No. 2 (Jun., 1987), pp. 351-374
Published by: The University of Chicago Press
Stable URL: http://www.jstor.org/stable/724352
This articles states that taxation may serve as a better form of reducing youth motor vehicle fatalities
than a MLDA would be, and would have the added benefit of possibly reducing motor-vehicle fatalities
across all age groups. This paper is authored by Henry Saffer and Michael Grossman. Saffer is a
Associate Professor of Economics at Kean College of New Jersey and is also a Research Associate at
the National Bureau of Economic Research. Grossman is a Professor of Economics at the City
University of New York Graduate school and is a Research Associate at the National Bureau of
Economic Research. The article shows that taxation is a more effective way of reducing fatalities than

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the 21-MLDA is and that it would save lives in other age groups because the tax would not be targeting
at a single age group. The paper may hold a slight bias towards lowering the drinking age, but it seems
overall to maintain neutrality. I believe that this article has a lot of good information on alternatives
that are beneficial to the economy and replacements for the archaic 21-MLDA.
4.Chaloupka, Frank J., Michael Grossman, and Henry Saffer. "The effects of price on alcohol consumption and
alcohol-related problems." Alcohol Research & Health 26 (2002). BNET. CBS Interactive Inc. Web. 26 Nov. 2009.
<http://findarticles.com/p/articles/mi_m0CXH/is_1_26/ai_90681217/?tag=content;col1>.
The articles states that taxation would serve to lower alcohol-related mortality rates and various other
dangers among teens and young adults. It also states that a tax works most effectively when there is no
MLDA present, as a MLDA greatly reduces the elasticity of alcohol among teens and young adults.
This article is authored by Frank J. Chaloupka, Henry Saffer, and Michael Grossman. Chaloupka is an
Assistant Professor of Economics at the University of Illinois at Chicago, and is a Faculty Research
Fellow at the National Bureau of Economic Research. Saffer is a Professor of Economics at Kean
College of New Jersey and is also a Research Associate at the National Bureau of Economic Research.
Grossman is a Distinguished Professor of Economics at the City University of New York Graduate
school and is a Research Associate at the National Bureau of Economic Research. This article shows
the irrefutable benefit of dropping the MLDA in favor of taxation (in regards to teens and young
adults). However, the paper may hold a bias towards abolishing the MLDA. I find that this article has
evidence to support the claim that taxation is more effective and therefore better than the MLDA and
could serve to replace it.
5."Ensuring Solutions to Alcohol Problems: Resources: Treating Alcohol Problems and State Alcohol Tax Revenues."
Ensuring Solutions to Alcohol Problems: Home. Web. 06 Dec. 2009.
<http://www.ensuringsolutions.org/resources/resources_show.htm?doc_id=339039>.
This article says that taxation could help reduce alcoholism and teen drinking, and the excess money
could be used to pay for alcoholism treatment and make up for some of the lost GDP due to
alcoholism. The author is unknown, so I can provide little about the credentials of the author of the
article. The article shows little bias towards anything relevant to my paper, and I believe this article
will reaffirm several other points made.
6.French, Michael T., Didra BrownTaylor, and Ricky N. Bluthenthal. "Price elasticity of demand for malt liquor
beer: Findings from a US pilot study." Social Science & Medicine 62.9. Science Direct. Elsevier B.V., 16 Nov. 2005.
Web. 2 Dec. 2009. <http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VBF-4HK5SY0-
1&_user=10&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=1119929707&_rerun
Origin=scholar.google&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=20b07e4cbcd42c663c3ef
b501bf03ebd>.
The article states (in the abstract, which is all I am able to view) estimates for the elasticity of malt
liquor beer, which can be used as an analogue to other alcoholic beverages. Michael Thomas French
teaches (assumed) at the University of Miami. Didra BrownTaylor teaches (assumed) at Charles R.
Drew University. Ricky Bluthenthal works at RAND, Los Angeles. This article shows that overall,
alcoholic beverages are elastic, except in cases where the alcoholic beverage in question is the
beverage of choice of the specific consumer. However, overall it says that alcohol is elastic and
therefore can be controlled from tax/price policies. This article helps strengthen the argument that
taxes are more effective than the MLDA posed by Chaloupka, Grossman, and Saffer in an earlier cited
article.
7.United States of America. National Highway Transportation Safety Agency. Calculating Lives Saved Due to
Minimum Drinking Age Laws. By John Kindelberger. NHTSA, Mar. 2005. Web. 10 Dec. 2009. <http://www-
nrd.nhtsa.dot.gov/Pubs/809860.PDF>

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