One note: I am sceptical that hangovers should be counted as negative externalities:
Outside of the huge economic costs imposed by death, worse health, and violence related to alcohol, hangovers alone lead to $220 billion in lost productivity each year in the U.S., or $650 for every person in the country per year. Adding this number to the costs of drunk driving alone means that alcohol externalities are costing society over $1000 per year per person. Each person you know is effectively paying $1000 per year for alcohol to be a normal part of our culture, over and above the actual cost of drinks.
Assuming functioning labour markets, much of the effect of hangovers on productivity seems like it should be internalised by the worker. If you show up to hungover, you will be less likely to be promoted, more likely to be fired, receive smaller bonuses etc.
(I agree you are right in cases where labour markets do not function as well and reward is less well tied to productivity, like with trade unions or government employees)
It would be fair to apply a downward adjustment before converting into an externality. At the same time, a worker’s salary is only a portion of their productivity, the correlation between productivity and wages may not be particularly strong, and some of the costs nominally borne by the worker end up being borne by society (via lost tax revenue, increased demand on need-based social service programs, etc.)
(As an aside, the article is paywalled, but I’d need more convincing on the $220B figure. I quickly saw a study in the Netherlands that suggested a cost there of 2.56 billion euros [or roughly 60 billion if you scaled to the size of the US economy]. Not suggesting that is the right figure either, but this strikes me as a case in which the methodological assumptions could make a big difference.).
via lost tax revenue, increased demand on need-based social service programs, etc.
I am skeptical of this style of argument, because it seems like it allows a sort of illiberal rhetorical transmutation. A government can take some private aspect of life that it does not have the right to regulate, subsidize part of it, and then claim that those who behave in undesired ways are ‘demanding’ social assistance, negatively affecting the taxpayer, and hence can be regulated.
Thanks for sharing!
One note: I am sceptical that hangovers should be counted as negative externalities:
Assuming functioning labour markets, much of the effect of hangovers on productivity seems like it should be internalised by the worker. If you show up to hungover, you will be less likely to be promoted, more likely to be fired, receive smaller bonuses etc.
(I agree you are right in cases where labour markets do not function as well and reward is less well tied to productivity, like with trade unions or government employees)
It would be fair to apply a downward adjustment before converting into an externality. At the same time, a worker’s salary is only a portion of their productivity, the correlation between productivity and wages may not be particularly strong, and some of the costs nominally borne by the worker end up being borne by society (via lost tax revenue, increased demand on need-based social service programs, etc.)
(As an aside, the article is paywalled, but I’d need more convincing on the $220B figure. I quickly saw a study in the Netherlands that suggested a cost there of 2.56 billion euros [or roughly 60 billion if you scaled to the size of the US economy]. Not suggesting that is the right figure either, but this strikes me as a case in which the methodological assumptions could make a big difference.).
I am skeptical of this style of argument, because it seems like it allows a sort of illiberal rhetorical transmutation. A government can take some private aspect of life that it does not have the right to regulate, subsidize part of it, and then claim that those who behave in undesired ways are ‘demanding’ social assistance, negatively affecting the taxpayer, and hence can be regulated.