Excessive alcoholic consumption has been a long-term issue since the 19th centur
ID: 1142873 • Letter: E
Question
Excessive alcoholic consumption has been a long-term issue since the 19th century. In the US history, Prohibition (of alcohol) was a major law to prohibit the manufacture and sale of alcohol during 1919-1933. Before the law was created and enforced, prohibition was a major reform movement from the 1840s because drinking was on the rise after the American Revolution. To combat this, a number of societies were organized as part of a new Temperance movement which attempted to dissuade people from becoming intoxicated. Prohibition was finally instituted with ratification of the Eighteenth Amendment to the United States Constitution on January 16, 1919, which prohibited the "...manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States..." Congress passed the "Volstead Act" on October 28, 1919, to enforce the law. However, the Repeal of Prohibition in the United States was accomplished with the passage of the Twenty-first Amendment to the United States Constitution on December 5, 1933, which was the end of Prohibition. By its terms, states were still allowed to set their own laws for the control of alcohol.
Please answer the following questions based on your own economics intuition and the economics knowledge that you learned from class.
a. Explain why excess alcoholic consumption was not only a personal issue but also a public health issue even in the late 19th and early 20th centuries.
b. Explain why people may make seemingly irrational decisions to consume excessive alcoholic drinks.
c. Provide the economics rationale why Prohibition as a government intervention was necessary to correct people’s seemingly irrational behavior (in this case, consuming excessive alcoholic drinks.)
d. Without reading further materials about the history, use your economics intuitions to analyze why this policy (i.e. Prohibition) failed at the end.
e. Propose another policy intervention to reduce excess alcoholic consumption as you were a government policy maker in that era. Be sure to provide your economics rationale.
f. Evaluate this proposed policy in e) and determine if it would be successful or not. Why or why not?
Explanation / Answer
a. Excessive alcoholic consumption was not only a personal issue but also a public health issue because of the negative externality it imposes on the society. It not only harms the person consuming alcohol but the entire family associated with him. It affects the earning potential of the person and also has a naegative impact on the minds of children in the family. A single alcoholic person in the society can destroy the entire family.
b. People make irrational decision to consume excessive alcohol only out of enjoyment as it has no positive impact on the society.
c. To correct negative externalities, sometimes consent between two parties is enough to comppensate the other. However, in case of alcoholoc drinks, no such consent was possible and government intervention becomes necessary to combat excessive alcoholic consumption.
d. Prohibition failed in the end because it led to black marketing of alcohol as people who were addicted to it were ready to pay high prices. Lack of proper implementation of the law is also one of the reasons that the government policy failed.
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