Ireland Will Require Cancer Warnings and Calorie Counts on Alcoholic Beverage Labels
Student ID: 170600
Commentary Number 1
Title of article: Ireland will require cancer warnings and calorie counts on alcoholic beverage labels
Source of article (name of publication and URL): https://www.npr.org/2023/05/22/1177521287/ireland-alcohol-warning-labels-cancer-calories
Date article was published: 22/5/2023
Date commentary was written: 20/5/2024
Word count of the commentary: 800
Unit of the syllabus to which the article relates: Microeconomics
Key concept being used: Change
Ireland will require cancer warnings and calorie counts on alcoholic beverage labels
MAY 22, 20231:17 PM ET
By Joe Hernandez
A freshly poured pint of Guinness is pictured in Dublin, on June 7, 2021.
Paul Faith/AFP via Getty Images
Ireland has approved new rules that will require extensive health labeling on alcoholic beverages, including cancer warnings and a calorie count.
Officials say providing such information, which will also have to be available in pubs and other licensed establishments, is critical as experts learn more about the health hazards of drinking.
"This law is designed to give all of us as consumers a better understanding of the alcohol content and health risks associated with consuming alcohol," Minister for Health Stephen Donnelly said in a statement. "With that information, we can make an informed decision about our own alcohol consumption."
Though Ireland says it's the first country in the world to introduce such comprehensive labeling, some other nations do require health warnings on alcoholic drinks.
The U.S., for example, mandates that any beverage over 0.5 percent alcohol by volume carry a warning stating that pregnant women shouldn't drink alcohol, that it can impair your ability to drive and that it may cause health problems.
The new Irish labeling rules, which will take effect in three years, will be more explicit about the possible negative health effects of drinking and contain more information about what's in the drink.
Sellers will have to warn of the specific risks of liver disease and fatal cancers from drinking alcohol. They will also have to notify buyers of the risks to pregnancy, the calorie content of the beverage and the number of grams of alcohol it contains.
"Packaging of other food and drink products already contains health information and, where appropriate, health warnings. This law is bringing alcohol products into line with that," Donnelly added.
The new labels are intended to help inform people who aren't fully aware of the health effects of drinking, officials said. According to the annual government-commissioned Healthy Ireland survey, 79% of respondents didn't know about the risk of breast cancer from drinking more than recommended, 60% didn't know about the risks of bowel cancer and 7% believed it was safe to drink small amounts of alcohol while pregnant.13
Rachel Morrogh, director of advocacy at the Irish Cancer Society, praised the government for taking steps to reduce new cancer cases and said there was support from the public for such a move.
"Today's announcement shows that once again, Ireland is trailblazing in the area of public health legislation," Morrogh said in a statement. "Signing the labelling regulations into law is a clear statement that reducing preventable disease is a priority for Government."
Still, the new labeling requirements have gotten some pushback from trade groups representing alcohol sellers in the European Union, who say it will make trade more difficult within the bloc.
The European Committee of Wine Companies and the group spiritsEUROPE filed formal complaints with the European Commission, saying they supported Ireland's efforts to combat alcohol abuse but that the new regulations would be too burdensome on businesses.
Commentary
Word Count: 800
Ireland, despite having Europe’s highest alcohol tax rate, has one of the world’s highest drinking rate. Given such failure, the article describes Ireland’s “new rule” of mandating health labels on alcoholic beverages to reduce negative health effects from alcohol consumption. The key concept of change will be discussed regarding how this policy change will alter consumer behaviour and alcohol market.
Labels provide information on cancer warning and calorie counts, aiming to educate drinkers about the negative health implications of alcohol to reduce excessive alcohol consumption. Alcohol is a demerit good, incurring negative external costs to the third parties in the economy when consumed. Such negative consumption externalities include drunk people damaging private properties and additional healthcare costs with increased risk of heart disease and cancer.
The externality of alcohol consumption is represented by the vertical distance between marginal private benefit (MPB) and marginal social benefit (MSB) curves — as drinkers fail to recognise the external costs and only consider their utility when drinking, MPB is greater than MSB. This results in the market equilibrium at (Pp, Qp) where marginal private costs (MPC) and MPB intersect, whereas the socially optimal equilibrium is at (Popt, Qopt). The difference between Qp and Qopt represents the overconsumption of alcohol, suggesting an overallocation of resources to alcohol production, and the shaded area represents deadweight loss where the market fails to reach allocative efficiency.
Health labellings including “specific risks of liver disease and fatal cancers” help to educate the negative health consequences. Such product labelling will be effective to induce changes in consumer behaviours. According to behavioural economics, these labels have a psychological effect on consumers of addressing bounded rationality, where decisions are made without all necessary information to make a rational decision within a given time period. The educational impact of these labels changes consumer’s valuation of alcohols by associating it with serious health risks like cancer and liver damages, making the alcohol less appealing.
Fig. 2. Addressing market failures through labelling
The association with alcohol with health risks would thus heighten drinkers’ awareness of the negative implications and external costs of alcohol consumption, reducing the distance between MPB and MSB by decreasing the MPB1 to MPB2. This effectively addresses the market failure as the new equilibrium quantity would be at Qp2 which is closer to Qopt and the deadweight loss is also reduced, represented via the shaded area.
The policy of simply sticking health labels on products is cost-efficient as it does not require significant monitoring and enforcing costs that would be required in an out-right alcohol ban, which could form underground market. Furthermore, it is not a market-based policy requiring a careful evaluation of the optimal tax levels to reduce consumption by considering the price elasticity of demand (PED). For governments, while some monitoring costs remain and government revenue is limited compared to taxation, these expenses will be compensated by reduced healthcare spending.
However, heavy drinkers already addicted to alcohol may experience limited impact. Habitual drinkers may already be well-informed about the health risks associated with alcohol but persists in their consumption habits. A market-based policy such as tax to financially disincentivise drinking, especially in younger age groups, who are relatively more exposed to information about negative consequences of drinking and have relatively high PED due to lower income, might be more effective in reducing drinking. Nevertheless, labels could induce habitual changes by fostering a drinking culture that acknowledges the negatives of alcohol consumption. This may unconsciously nudge heavy drinkers to reduce alcohol consumption via herd behaviour, where individuals collectively make choices as a group that they might not make individually.
Labelling, however, would be “burdensome” for both domestic and foreign producers, leading to decreased revenue and profit due to reduced consumption and added costs to meet Irish regulations. This could also result in higher unemployment in the alcohol industry as firms aim to minimise costs. Producers might counteract by increasing marketing initiatives such as aggressive celebrity advertisement, potentially offsetting the impact of health labelling. Moreover, with trading becoming more challenging with added regulations, imports of alcohol may decline, benefiting local alcohol producers as demand for local alcohols increases. Still, as the policy “will take effect in three years,” and the fact that the marginal cost of labelling is negligible once printed, producers would not experience a significant fall in profitability as anticipated.
In conclusion, while the psychological impact cannot be quantitatively measured and some business losses may occur in the short-run, creating a healthier drinking culture and inducing change among habitual drinkers is beneficial in the long-run. The labelling would also incentivise alcohol producers to innovate alcohol products with lower alcohol content but with other appeals through marketing. Given that “79% of respondents didn’t recognise associated risks,” labelling, coupled with negative advertising campaigns and rehabilitation programmes, would help reduce alcohol consumption and its negative effects on various stakeholders in society.
References (Article)
Hernandez, J. (2023) Ireland will require cancer warnings and calorie counts on alcoholic beverage labels, NPR. Available at: https://www.npr.org/2023/05/22/1177521287/ireland-alcohol-warning-labels-cancer-calories (Accessed: 13 May 2024).