REPEAL OF PROHIBITION: A BENEFIT-COST ANALYSIS

Donald Vitaliano

Contemporary Economic Policy, 2015, vol. 33, issue 1, 44-55

Abstract: type="main" xml:id="coep12065-abs-0001"> In spite of an estimated increase in annual alcohol-related motor vehicle costs of $2.767 billion (1947 dollars), the net social benefit of repeal of alcohol Prohibition amounts to $432 million per annum in 1934–1937, about 0.33% of gross domestic product. Total benefits of $3.25 billion consist primarily of increased consumer and producer surplus, tax revenues, and reduced criminal violence costs. A Monte Carlo simulation shows the probability of negative net benefits is 16%. The estimated price elasticity of demand for spirits, beer, and wine are –.60, −.56, and –.51 respectively, which is consistent with the modern literature. (JEL D61, I18, K420, I120)

Date: 2015
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