The Rand Corporation estimates that external costs imposed by alcohol consumption (e.g., deaths caused by drunk drivers) to be 48 cents per ounce consumed.If taxes on alcohol are 23 cents per ounce consumed, then

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The external costs imposed by alcohol consumption are higher than the taxes imposed on it. This implies that the social cost of consuming alcohol is greater than the private cost paid by individuals. Therefore, the level of alcohol consumption is greater than the socially optimal level, and there is a market failure. To correct this market failure, policymakers should consider policies such as increasing taxes on alcohol or implementing regulations to reduce the external costs imposed by alcohol consumption.

The Rand Corporation Estimates That External Costs Imposed by Alcohol