Pre-drinking and the night-time economy

I'm a little unusual among economists, in that I really like to get out and do fieldwork (ok, maybe not that unusual any more, given the Nobel Prize winners of last year do it as well). Some of my most interesting fieldwork experiences have come overseas, or interviewing drunk people in the night-time economy. In fact, I posted about some of my work on the latter back in 2018.

I was lucky enough to secure some research funding from the Health Promotion Agency to repeat similar work last year (in fact, given the number of my students I encountered, probably some of the readers of this blog remember seeing me out in town late at night, breathalyser in hand). That research, which is joint work with Matthew Roskruge (Massey University), Nic Droste and Peter Miller (both Deakin University), is now published on the Health Promotion Agency website.

This time around, we had three research questions in mind:

1. Where and when do pre-drinkers (people drinking before a night out or event) obtain their alcohol?;
2. What is the difference in the level of intoxication of pre-drinkers vs. non- pre-drinkers, and how does this difference vary over the course of a night?; and
3. Is the level of intoxication of pre-drinkers related to where and when they obtain their alcohol?

We also looked at the motivations for pre-drinking, and at the prevalence of side-loading behaviour (side-loading is the consumption of alcohol during a night out or event, occurring at a location other than a licensed venue). In this post, I'm just going to focus mostly on the first and third research questions, which I think have the most policy relevance (if you're more interested in the other research questions, then read the report).

The reason for looking at those research questions is easy to explain. There are lots of intoxicated people out and about in the night-time economy, and there's a lot of alcohol-related harm that arises from this. If you want to reduce alcohol-related harm, then one way is to try to reduce the amount of drinking. However, it isn't clear where policy should be directed. The bar owners will tell you that the problem is pre-drinking - people get drunk before they come into town for the night, and then cause problems. In that case, you may want to target policy at the off-licence outlets, since they are the main cause of the problems. However, the off-licences argue that making them close earlier wouldn't be effective, because people plan ahead and buy their drinks for pre-drinking ahead of time.

So, which side is correct? It turns out both. Pre-drinking is a big contributor to the level of intoxication in the night-time economy (we showed that in our earlier research, and again in this work). So, the bar owners are right.

However, when we looked at where and when pre-drinkers were buying their alcohol for pre-drinking, we found that the majority of pre-drinkers purchase their alcohol for pre-drinking on the day that they consume it. However, more than half of them were purchasing sometime before 6 p.m., so to have an appreciable impact on pre-drinking by modifying off-licence trading hours, you'd have to make the off-licences stop selling alcohol awfully early in the evening. It would be hard to make the case for that as a policy solution.

One of the biggest motivations for pre-drinking is price, which we found here, and which has also been found many times in international research. Alcohol is much less expensive when purchased from an off-licence and consumed at home, or on the way into town, than it is when purchased at a club or bar. If curbing pre-drinking is an important means of reducing alcohol-related harm, then it seems more feasible to try to reduce the price differential between bars and off-licences, than to mess with off-licence trading hours.

One of the great ironies of the Sale and Supply of Alcohol Act, which came into force in December 2013, was that it prohibited alcohol outlets from selling low-priced drinks. On the surface, this makes sense. People drink more when alcohol is less expensive (that's the simple downward-sloping demand curve at work). However, in practical terms, prohibiting low-priced drinks killed the 'happy hour' at bars and clubs, which was often early in the evening. Being able to buy cheap drinks in happy hour encouraged at least some people to come into town early. [*] Without happy hours, the incentives change in favour of drinking at home and coming into town later in the evening. I'd argue that this change has probably contributed to a continuing increase pre-drinking behaviour.

So, if reducing alcohol related harm through curbing pre-drinking is a policy goal, looking at how alcohol is priced is important. I'm not necessarily arguing for a return of the happy hour, in order to reduce the price differential between bars and off-licences. However, the obvious alternatives are either: (1) increasing excise taxes at off-licences but not bars, which seems unnecessarily complicated (especially since there are bars that also have an off-licence); or (2) minimum unit pricing, which would affect off-licences but be unlikely to affect bars. More on that in a future post.

*****

[*] Not everyone, obviously. And let's be clear - pre-drinking is not a new behaviour, as it was common when I was an undergraduate student.

Read more:

• The temporal gradient of intoxication in the night-time economy