ABSTRACT
This chapter outlines the contribution of economics to the evaluation of alcohol-related problems and policies. A necessary condition for government intervention, on economic grounds, is that government policies are efficient in the sense that they do not make a bad situation worse. Consuming goods and services provides satisfaction or utility to the consumer. The rational consumer will arrange consumption to maximise satisfaction, given his income. Contrary to what non-economists often believe, economic efficiency is in no way restricted to narrow materialistic issues like cost minimising, profit maximising, and so on. Reality is admittedly rather different from the ideal price system outlined above. Most economists believe that the price system, with all its imperfections, is more efficient in maximising social welfare than government policies. Market demands and supplies will reflect only the benefits and costs of the participants in the market; the benefits and costs that fall on others will not be taken into account.
