Draft Three, Section 4.1

4. The Alcohol Model, Plus Consumer Licensing

4.1 From Opting Out to Opting In

Perhaps the one plank of vice policy that receives almost universal support is that children should not be given unbridled access to potentially addictive substances such as alcohol, nicotine, opiates, cannabis, and so on. Precisely what limits should be placed on children, and at what age they graduate into adulthood, remain debatable issues. Irrespective of how these tricky matters are decided, however, what happens when the age of majority is reached? Drugs do not stop presenting difficulties as soon as the drug consumer is an adult.

The questionable rationality of addictive behavior, along with the self-control issues faced by many non-addicts in vice-related decisions, suggests that public policy might want to counter excessive vice consumption – even in those forms of vice that do not involve significant externalities.[i] One way to do this is via default rules.

The default setting – the action that takes place in the absence of any positive step to override the default – can be very powerful in influencing decision-making.[ii] In particular, many people will accept the default, despite having no strong commitment to the decision that the default implements, and even if overriding the default involves minimal effort. The choice of a default setting has been shown to hold significant implications for decisions in a wide variety of settings, from retirement plans to registering to be an organ donor.

For legal, non-prescription drugs such as nicotine and alcohol, the standard default rule is access to unlimited quantities. (The access is not entirely unhindered, however, in that restrictions of sales to licensed premises and special taxes present departures from the conditions under which regular, non-vicious goods can be acquired.) In the United States, for instance, you are not allowed to purchase alcohol if you are under 21 years of age. On your 21^st birthday and dates thereafter, you are allowed to purchase as much alcohol as you or anyone else could possibly want (though on-site drinking establishments are not supposed to serve intoxicated customers). You don’t have to opt-in to being a legal alcohol purchaser – you only have to be sufficiently old.

An alternative regime can be envisioned, one that offers protection for people who are concerned that they might drink to excess. When you reach 21 years of age, you do not automatically qualify to purchase alcohol. Rather, you qualify for the opportunity to opt-in, for the opportunity to acquire a license that will allow you to buy alcoholic beverages.[iii] Alcohol sellers (who themselves are licensed) must check each purchaser’s “alcohol” license, just as they now verify the age minimum.

The introduction of drinking licenses provides new tools for alcohol control. People who misbehave under the influence can have their alcohol purchasing (and perhaps alcohol drinking) privileges rescinded. Consumers who fear the possibility of excessive drinking could bolster their self-control by choosing not to acquire a license, or by becoming licensed but specifying a legally-enforceable limit on the amount of alcohol they can purchase in a day, week, month, or year. Licenses could be tied to price regulations or taxes in such a way that prices charged to buyers could mount as the extent of purchasing goes up – the second bottle of spirits during a week could cost more than the first, for instance. The strictness of the overall alcohol regulatory regime can be adjusted by tweaking the ease of acquiring a license or the circumstances in which a license could be revoked.

It is possible, therefore, to use buyer licensing to convert alcohol purchasing from an opt-out default to an opt-in default. One of the difficulties of the current opt-out system, for those who face alcohol self-control issues, is that maintaining abstinence or temperate consumption requires near continuous re-iteration of the decision to opt out (at least in the absence of an exclusion system as detailed in section 3). A buyer’s licensing system might make it much easier to pre-commit to avoiding or restricting drinking – buyer licensing subsumes a self-exclusion system, as failure to obtain a license results in ineligibility to purchase alcohol. Assuming that the process and cost of acquiring an alcohol buyer’s license are not very onerous, this pre-commitment option can be provided with little imposition upon those who place no value on limiting their alcohol purchases.[iv]

[i] See Chapter 3 of Leitzel (2008).

[ii] Thaler and Sunstein (2009, pp. 83-87).

[iii] Kleiman (2007) and Leitzel (2008, pp. 163-165).

[iv] Policies that assist people who might be less than rational in their drug related choices, while not imposing in a significant way upon other users, meet the criteria of vice policy robustness, libertarian paternalism, asymmetric paternalism, or related concepts. See Leitzel (2008), O’Donoghue and Rabin (2003), Thaler and Sunstein (2003, 2008), Sunstein and Thaler (2003), Camerer et al. (2003), and Loewenstein, O’Donoghue, and Rabin (2003).