Answer to Question #148690 in Macroeconomics for Prakash

Question

Topic 1
During the recent assembly election in Bihar, many of the women voters who supported CM Nitish Kumar's Prohibition Policy were against him. Is prohibition the most effective policy to deal with alcoholism in society? Evaluate the impact of such policy on the different parties - consumer, government and society, primarily using economic reasoning.

Answer 1

The policy of prohibition is not the most effective way to deal with alcoholism in the society and can be a miserable failure in all accounts. Evidence from the National Prohibition of Alcohol policy (1920-1933) affirms a sound economic theory that predicts that prohibition of every relevant and mutually beneficial exchanges is doomed to failure. The consumption of alcohol might seem to fall at the beginning of the Prohibition, and subsequently increase. Thus, prohibition policies can remove significant sources of tax revenues and hugely increase government spending. It can also lead many drinkers to look for other alternative products such as marijuana, patent medicines, and other dangerous substances, which they could have been unlikely to encounter in the absence of the Prohibition policies.