Assorted thoughts

- Beer prices are going up; market forces pushing prices upwards shouldn't upset you as much as taxes doing the same thing. (Here's looking at you, Alaska.)

- Here is an interesting article on craigslist and it's founder, Craig Newmark. The article focuses too much on the zero-price aspect to explain their success instead of the network effects, but I was surprised to learn that he's given away large portions of the ownership of the company (though it's privately held and thus unverifiable).

- Here's a survey on democracy in Ethiopia; many of the answers seemed double-peaked to me, and the accusations of ethnic bias shouldn't be taken lightly-- though perhaps the former helps disprove the latter. Like the World Values Survey, is anyone else surprised that those giving the survey can find a healthy number of people willing to spend hours filling these out?

Oregon beer tax

Travis Wiseman and I were chatting after class today about beer, and he mentioned his blog post on Oregon's 1900% tax increase on microbreweries. The numbers are staggering and stand on their own:

- The proposal would raise the tax from its current level of $2.60 to $52.21 per barrel.

- It would move Oregon from a position of being one of the most favorable states for beer taxes to the worst, trumping Alaska by one-third.

- The impact on a pint of beer in the state would be an increase between $1.25 and $1.50.

Does anyone have any update on this? The underlying WSJ article is from tax day, April 15. The bill is question is House Bill 2461; here's the text of the bill. Note the provision for the outlay of the revenues:

(2) Moneys in the Alcohol Impact Remediation Fund are continuously appropriated to the Department of Human Services to be distributed in each calendar quarter as follows:
(a) 15 percent for the purpose of funding section 8 (1) and (2), chapter 14, Oregon Laws 2008.
(b) The remaining balance in the fund shall be used as follows:
(A) 6 percent for statewide alcohol and drug use prevention initiatives;
(B) 14 percent for other alcohol and drug use prevention purposes;
(C) 72 percent for treatment of alcohol and drug addiction; and
(D) 8 percent for alcohol and drug recovery support services.

For what it's worth, Section 8 (1) and (2) deals with drug programs in jails (though is deftly written to allow syphering to jail funding in general).

The Oregon Legislature website shows the bill as introduced without any further action. This is a promising sign; the website gives the following as an outline for their in-session dates:

When is the Oregon Legislative Assembly in session?

Oregon has biennial sessions, with the Assembly convening on the second Monday of the every odd year. Oregon has no set ending date for regular sessions. An average regular session runs six months.

Here's the Facebook group against the tax, and here's an online petition. Here's a story on the angry locals, and here's an opinon claiming that there's no evidence that a 1900% tax increase "would cause job losses..."

As a side note, check out Travis' blog Champion Economics.

Assorted links, March 30

TPS Middle East traveler Thomas Johnson sends along this beer map of America. Note the back-of-the-envelope calculations put West Virginia as the worst beer state. Maybe Yuengling deciding to sell beer here will help ease the pain.

And here is a ranking for the best places for business and careers. I'm going to aggregate these rankings here in the near future and make sense of it all...

Short-sighted alcohol tax effects

CNN reports on a new study [pdf] in the American Journal of Public Health that notes that higher alcohol prices via taxes leads to the saving of lives. That spin of the results makes all of the difference-- the researchers correctly note that the increase in alcohol taxes leads to "immediate and sustained reductions alcohol-related disease mortality." [emphasis added] The real issue here is that taxation causes substitution away from the taxed good (beer, wine and spirits) and for the answer that everyone cares about-- what's the overall effect on mortality-- to become apparent, we'd need to look at the spillover effects of this tax into related activities. Are all of the high-value drinkers substituting into lower quality alcohol? Maybe they're drinking less and eating more potato chips on the couch watching football. The direct effect is clear, but the truth comes in looking at the secondary outcomes. The authors don't extend their research beyond alcohol, nor beyond drect alcohol related deaths by disease (i.e. drunk driving), so they aren't trying to overstep their bounds. CNN gave it a bit too much range, however.

For what it's worth, Figure 2 doesn't provide a compelling story. Personally, if I don't see it in the simplest of terms, I'm not going to buy any level of statistical fudgery. And at first glance, under the right circumstances, an increased propensity for alcohol-related death over the second span could generate the downward dichotomy at 1983 that the authors attribute to the tax shock. Also, the variance of the error terms doesn't seem to be constant across the span either. And are they drawing the last line in the thrid section with 8 data points over 2 years?

Again, I believe the paper doesn't try to say too much, but the policy implications of papers like this can't be underestimated if they get into the wrong, MADD-inspired hands.

Onorato Tax

So being close to Pittsburgh, and having Pittsburgh local channels beamed in on Dish Network, I end up hearing a decent amount of Pittsburgh news. Over the last year or so, there has been quite a hubbub over a new drink tax. People don't like paying more taxes, obviously, but evidently people really don't like paying extra for their drinks. And at 10%, that's a steep levy.

What reminded me of this situation was my bill from a recent trip to a Pittsburgh restaurant-- clear as can be, below my total bill, were the taxes were split into "sales tax" and "drink tax." Only the drink tax didn't say "drink tax"-- instead, it was labeled as the "Onorato Tax," after Allegheny County Cheif Executive Dan Onorato. That killed me.

How things have progressed: In late July, the Allegheny City Council determined that this measure should be decided on the November ballot-- in the format of "should we repeal the drink tax for an increase in property taxes?" In early September, the board of elections of Allegheny County determined that the issue was not fit to be determined through an election. A week after that ruling, the Friends Against Counterproductive Taxation appealed the decision. Just last Thursday, the state Supreme Court decided that it will hear the two appeals. Dana-- I know in California they vote on tax issues all of the time, so what's the grounds for saying this shouldn't be put to a vote if the city council deems it so?

Beer regulations of a different breed...

So it's not the beer itself...

...but the name of the beer that causes drunken brawls?

Though you have to love this bit:

Mr Carmichael said the name would be inappropriate if it were a low-priced drink aimed at youngsters.

But he said it was an award-winning beer which is bought by "discerning drinkers who appreciate its quality and who drink it responsibly".

Yes-- 11-year-olds can't appreciate the historical subtlety of Skull Splitter Ale, but seasoned veterans can.

Infinite Time Horizon and Guinness Beer

Sometimes the writers of the contract should read the fine print. Summarized by Wikipedia:

Arthur Guinness started brewing ales initially in Leixlip, then at the St. James's Gate Brewery, Dublin, Ireland from 1759. He signed a 9,000 year lease at £45 per annum for the unused brewery.

Why 9,000 years? Why not 9 million? Weird. I bet £45 was a rip off for several years, but I don't know of an inflation calculator that goes that far back. Beer being one of the most important products in history, the industry has many different econ lessons for us.