Monday, 30 June 2014

The price of beer, water and Pimm's

The Sunday Times ran a shocking exposé about the price and strength of Pimm's at Wimbledon over the weekend...

It seems that Pimm's, which should be served so that it is 6.5% alcohol, is being watered down with lemonade (lemonaded down?) meaning that it is, in practice, merely 4% or even 2.5%. Since the stuff is sold at £7.80, the Sunday Times thinks the Great British Public is being ripped off. It may have a point. It quotes a Wimbledon-goer saying "I'm shocked at how expensive the Pimm's is at Wimbledon."

A few pages later, the Sunday Times reported a shocking exposé of how mineral water drinkers are being ripped off, except that it didn't frame it in those terms. Instead, it expressed outrage at how people are able to buy relatively cheap beer and cider from supermarkets.

The 'beer is cheaper than water' meme always reminds me of Eddie Izzard's comment about blood being thicker than water ("it means we should be nice to our relatives, but custard is thicker than blood so should we have more respect for custard?"). It doesn't really mean anything. Since beer is made out of water, you might conclude that someone is making a lot of money selling water to the gullible. And so they are, but most people drink water out of the tap. If clean drinking water was harder to obtain than alcohol (as it was centuries ago), the comparison might be germane, but it isn't so it isn't.

At 6.5% ABV, one pint of Pimm's is enough for someone to reach their 'daily alcohol limit' although I notice that the Sunday Times doesn't caution readers against buying a second one. As a further aside, 6.5% ABV is exactly the figure at which beer and cider become 'super strength' drinks in the eyes of various local councils and are taken off the market. By contrast, all the beers named and shamed in the Sunday Times for being sold at 'pocket money prices' have an ABV of 4% which, in the other story, is "like a soft drink". Super strength for booze for me, but not for thee? 

The Sunday Times thinks that the supermarkets and the Wimbledon Lawn Tennis Association are both behaving reprehensibly, but for completely different reasons. The former is selling booze too cheaply, the latter is selling it too expensively. Presumably somebody at the Sunday Times knows exactly how much alcohol should cost. I guess this mystery figure falls somewhere between the 'shockingly cheap' 72p for a pint of Foster's and the 'shockingly expensive' £7.80 for a pint of Pimm's. But where? And how can they possibly judge?

You might say that the boffins and eggheads at Sheffield University (as The Sun doubtless calls them) know exactly how much alcohol should cost and it is 50p per unit, but 50p is only one of a number of options in their model and it is no more 'evidence-based' than a 60p, 70p or 90p unit. On the contrary, from a 'public health perspective' (and what other perspective is there, right?), the higher prices are more evidence-based.

I would argue that the optimum price for alcohol—and every other product in the world—is 'as cheap as possible'. The whole point of economic progress is to make things more affordable through higher wages and lower prices. In paradise, everything would be free, but if things can't be free, they should at least be cheap. The only qualification I would make is that any negative externalities should be captured in the cost of the product with a Pigovian tax. In the case of alcohol, it seems clear that alcohol duty amply covers the financial costs of alcohol misuse and leaves the government with a multi-billion pound profit.

Alcohol tax should therefore be reduced and supermarkets should be congratulated for selling alcohol as cheaply as they can can. The dilution of Pimm's may be a matter for the boys at weights and measures—I don't know—but you are allowed to bring your own alcohol into Wimbledon so my recommendation is to stock up on supermarket beer before you go. As usual, the off-trade can save the day.


JD said...

Anyone who says beer/cider/whatever is cheaper than water shows themselves to be
a) a f***wit, as it's not true
b) a health fascist, as we all know why they're saying it.
Tesco sells 6 litres of still water for £2. Will one of these prohibitionists please tell me where I can get 6 litres of any alcoholic drink for £2. I'll be ever so grateful.

Ondřej Palkovský said...

I would personally be very cautious with the externalities alcohol/tobacco makes. If you happen to kill somebody, it is not an outright externality as you will pay/be punished.

As for 'health care costs', I am very reluctant calling this an 'externality', and even if you call it one, there is no clear reason why one would that imply anything.

The problem is that the government said: let's your health care costs be paid by all others. Will this result in a moral hazard behaviour? Yes, it will. However, there are actually many ways to treat this problem:
1) put up with it
2) restrict people's choices to eliminate the moral hazard

Considering that the government essentially forced the 'free healthcare' system on us, I do not see any moral reason to prefer 2) over 1).

Curmudgeon said...

As has often been said before, to compare the price of bog-standard lager to premium brand water is effectively an outright lie. Tesco will sell you Value Water, either still or fizzy, that is far cheaper than any beer.

It's about as sensible as saying in shocked tones that pushbikes are dearer than cars.