The Right Coast

July 26, 2005
Economic Incentives for Teenagers
By Mike Rappaport

The article from the New York Times suggests the power of economic incentives:

"WHEN you look back on all the attempts to curb teenage drinking, smoking and drug use over the last couple of decades, you start to ask yourself a question that countless parents have asked: Does anybody really know how to change a teenager's behavior? Sometimes the government and advocacy groups have used straight talk, like Nancy Reagan's "Just Say No" campaign. Other times they have tried to play it cool. They drop an egg into a sizzling frying pan and announce, "This is your brain on drugs."

Much of this back and forth is unnecessary. There is in fact a surefire way to get teenagers to consume less beer, tobacco and drugs, according to one study after another: raise the cost, in terms of either dollars or potential punishment.

In just about every state that increased beer taxes in recent years, teenage drinking soon dropped. The same happened in the early 1990's when Arizona, Maryland, New Jersey and a handful of other states passed zero-tolerance laws, which suspend the licenses of under-21 drivers who have any trace of alcohol in their blood. In states that waited until the late 90's to adopt zero tolerance, like Colorado, Indiana and South Carolina, the decline generally did not happen until after the law was in place.

Teenagers, it turns out, are highly rational creatures in some ways. Budweisers and Marlboros are discretionary items, and their customers treat them as such. Gasoline consumption, by contrast, changes only marginally when the price of a gallon does."