Nepal, like many other nations, has recently planned to adapt regulations which intend to reduce the alcohol consumption of the whole country through supply side interventions. As per the proposed directive, the hotels, bar and restaurants are likely to be restricted from selling alcoholic beverages prior to 5:00 P.M and after 10:00 P.M, while the liquor stores are allowed to perform transactions related to bottled alcohol between 4:00 P.M to 9:00 P.M.
Restrictions on alcohol sale hours is one of the most commonly used tools by many countries to reduce alcohol consumption. These laws are made with noble intentions, in case of Nepal – reducing consumption and stopping the illegal brew of alcohol. However, the regulators have failed to take into consideration that these laws incentivize the sellers and the consumer to practice more dangerous behavior in the market, generating unintended consequences.
The directive is likely to have three immediate repercussions:
Firstly, a consumer can buy stock of these beverages in advance and consume more alcohol – undoing the impact of the restriction.
Secondly, it is likely to promote evasive entrepreneurship – where the sellers will develop innovative ways to outwit laws and regulations. It is evident from alcohol ban stories of various nations such as India and US, that government policies which restrict availability of alcohol will increase alcohol transactions through black market. Both, the price of alcohol and its consumption is likely to increase and not decrease from these practices. While such strict policies persist, entrepreneurs and consumers will find a common ground for performing mutually beneficial transactions which if viewed from legal and regulatory perspective are too costly as the secret operations of the black market will be immune to any regulations and directives.
Thirdly, home-production or illegal brewing of alcohol will increase. Research on black market alcohol in countries like Estonia, Latvia and Poland shows that the factors driving home and illegal production of alcohol become more prominent when governments restrict the availability of legal beverage alcohol.
Thus, it is important for the regulators to understand that, when the rules of a society becomes firmer, making it difficult for individuals to engage in voluntarily exchange with one another, individuals begin to invest time and resources in figuring out how to circumvent these laws.