PROFITING FROM DRINKING
Not only does it open secretive minds, alcohol statistically earns drinkers more money than their counterparts
BY DOUG FRENCH

Doug French, associate editor of Liberty Watch: The Magazine is an executive vice president of a Nevada bank. He is the 2005 recipient of the Murray N. Rothbard Award from the Center for Libertarian Studies. Other stories by Doug French

Two of America's sharpest wits, Groucho Marx and George Jean Nathan, famously said, "I drink to make people interesting." It's as good a reason to have a few cocktails as any I've found. But in today's politically correct society, drinking has been demonized along with smoking.

Conversely, any depiction of the Old West features the saloon as the center of any town's activity. Boomtowns in the west often had hundreds of competing watering holes. And there was no such thing as waiting until five o'clock or after to imbibe.

"Wines and liquors were created by God, not to take the place of castor oil and aspirin, but to make the human race happy," H.L. Mencken wrote. "The chief effect of alcohol, socially considered, is not that it converts a man's liver into linoleum and condemns 22 percent of his children to dementia praecox, but that it loosens his tongue and makes a babbler of him - in brief, that it breaks down all his habitual pruderies and causes him to speak his secret mind."

Research just completed by two economists now validates Mencken's observation of the social benefits of drinking. In a paper just published for the Reason Foundation entitled "No Booze? You May Lose: Why Drinkers Earn More Money Than NonDrinkers," authors Bethany Peters and Edward Stringham found that drinkers earn 10 to 14 percent more than teetotalers.

The authors point out that there is a growing movement by government agencies to limit alcohol consumption, most especially that of young adults. The American Medical Association's "A Matter of Degree" program "advocates improving enforcement of drinking age laws, limiting the number of alcohol outlets near college campuses, restricting drink specials and alcohol advertisements, and increasing alcohol taxes."

The high-minded folks at Harvard "deem drinking to be deviant and harmful to individuals and to society," according to the authors. But still millions of people the world over are enjoying a libation as you read these words. Perhaps you the reader are having a pop right now. Cheers.

So while the government and their Ivy League friends are urging everyone to dry out, the fact of the matter is people who drink make more money for the simple reason that drinking builds social capital. And those with social capital often make more money than those who don't. Nondrinkers tend to not want to hang around when the booze is flowing, inhibitions are dropped and conversations take off. Thus, when deals and contacts are made in the bar, nondrinkers are out of the loop.

Social capital, according to economists Edward Glaeser, David Laibson and Bruce Sacerdote, is "a person's social characteristics, including social skills, charisma, and the size of his Rolodex, which enable him to reap market and nonmarket returns from interactions with others."

Certainly, some people are naturally gifted in the ways of socializing and charm, but shier types need a little jump-start that a drink can provide quite nicely. Stringham and Peters decided to test whether drinking enhances social capital, gathering data from the General Social Survey. The empirical results found that the average male drinker who works full-time earns 19 percent more than the average male abstainer, while the average female drinker with a full-time job earns 23 percent more than her non-drinking counterpart. The study further found that males who drink in bars earn an additional wage premium of 7 percent. Females who drink in bars do not earn the additional wage premium.

The results of the study counter the views expressed by the dry forces folks at Harvard who argue that those with more social capital drink less. The authors also cite the works of a number of other researchers who have found that social drinking facilitates social networking and the production of social capital. "In terms of search theory: the more one drinks, the more people one knows, and the more people one knows, the lower the marginal costs of search," Peters and Stringham write.

The authors point out that the consequences of restricting drinking in public as occurred during Prohibition are that people will drink in private, thus reducing the social capital that is produced while drinking in public. Peters and Stringham believe that restricting public alcohol consumption diminishes not only the fun of drinkers, but their earnings as well, and concluded: "Rather than attempting to discourage drinking in society, perhaps we should encourage it."

Let's all drink to that. LW