Bihar’s policy foundations were erroneous, and in an effort to cover up its rudimentary faults, advocates of this policy have been resorting to other methods, such as making constant amendments, manipulating statistics to present a favourable picture, spinning stories in newspapers. So, what should the government have done instead? And what can economists and policymakers do now?
Controversy has pursued the liquor ban imposed by Bihar Chief Minister Nitish Kumar two years ago. It has been attacked by people and critics alike, undergone various amendments, and most importantly, failed to provide results. Though proponents of this law have tried to defend it by focusing on its various virtues, the manner in which this law has been enacted shows inadequate application of mind. The result: Bihar has reached another junction where an amendment has become inevitable.
Introduced on 1 April 2016, the Bihar alcohol prohibition law sought to reduce crimes related to alcohol and respond to protests being held by various communities. Sale and consumption of alcohol was banned throughout the State, and any person found in possession of alcohol was penalised. On paper, this sounded ideal. In effect, however, this law has not been able to achieve much — neither fiscally nor socially.
“The State
In a curiously counter-intuitive behaviour, instead of being a deterrent to crime, the liquor ban actually increased crime. According to Bihar police crime data, cognisable crime rose by 13% in six months, to 16,153 cases in October 2016 from 14,279 in April 2016.
Having realised these unintended consequences, the Bihar government recently amended the law, and has now watered down its stringent rules. Now, a first-time offence has been declared bailable, and jail time for such offenders has been reduced to three months. For second-time and subsequent offenders, this duration is two to five years.
Bihar’s policy foundations were erroneous, and in an effort to cover up its rudimentary faults, advocates of this policy have been resorting to other methods, such as making constant amendments, manipulating statistics to present a favourable picture, spinning stories in newspapers. So, what should the government have done instead? And what can economists and policymakers do now?
Economist Steven Landsburg in his book, The Armchair Economist, may offer some answers. Take seatbelts. When they were introduced, he writes, the intention was to reduce road accidents. But in fact this led to more accidents. Landsburg explains that sometimes things might be counterintuitive, and this can be explained using basic economic principles. Since people respond to incentives, the introduction of seatbelts gave drivers a false sense of security and got them to drive recklessly, and as a result, even though there was a slight decrease in driver deaths, there was a dramatic increase in pedestrian deaths, hence resulting in an overall death toll increase.
Another such example is that of the Soda Tax in New York City. The New York government introduced a soda tax to cut soda purchases, and ultimately, obesity. What they didn’t realise was that increasing prices for people who wish to satisfy their sugar requirement would push them to shift to substitutes. And, not so surprisingly, results of a research paper undertaken by Jason M. Fletcher et al. show that even though soda sales fell, the purchase of sugar and other sugar products increased — and obesity remained the same.
The Bihar liquor ban also runs along similar lines. Because the government didn’t conduct sufficient research and didn’t consider factors such as availability of substitutes and black-market sellers while enacting the law, it is now trying to eliminate this unintended consequence by amending it. In fact, had the Bihar government thought the policy through, it would have looked at Scotland’s example and not introduced this faulty act in the first place.
The Forbes Mackenzie Act of 1853 tried to cut alcohol consumption by closing Scotland’s pubs at 11 pm on weekdays and all day on Sundays. Hundreds of licensed drinking establishments closed as a result, only to be replaced by shebeens — illegal drinking dens selling cheap, adulterated, and often dangerous alcohol, which caused the government to repeal the act.
This case study provides Bihar a window through which to ensure that the policies it designs need to be well thought-out and meticulously planned. If policies as ambitious as the Bihar liquor ban are to be implemented, the government needs to widen its area of inputs, involve the people, study the incentive-structures that determine public choices and through a process of debate and discourse design policy that’s robust.
The author is a research intern at Observer Research Foundation, Delhi.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
PREV
