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The Economic Costs of Alcohol Abuse: An Assessment of Current Methods and Estimates

Dale M. Heien, David J. Pittman

This article provides an exposition and critical review of the methods and assumptions used by the National Institute on Alcohol Abuse and Alcoholism to estimate the economic costs of alcohol abuse. Particular attention is paid to the methods used to estimate productivity loss which comprises over half of total abuse costs. This study concludes that these estimates are inaccurate and that they continually overstate actual costs. The main reasons for this overstatement are the attribution of causality to alcohol abuse where none has been shown to exist and improper methodology with regard to productivity impairment measures. In addition to being inaccurate at any point in time, the estimates are not a valid measure of the costs over time due to changing definitions of what constitutes alcohol abuse and lack of correction for inflation. Also, the method used implies cost comparisons with a society with no alcohol abuse. As a result of these considerations the estimates lack policy relevance.