REPEAL OF PROHIBITION: A BENEFIT-COST ANALYSIS

In spite of an estimated increase in annual alcohol-related motor vehicle costs of $2.767 billion (1947 dollars), the net social benefit of repeal of alcohol Prohibition amounts to $432 million per annum in 1934-1937, about 0.33% of gross domestic product. Total benefits of $3.25 billion consist primarily of increased consumer and producer surplus, tax revenues, and reduced criminal violence costs. A Monte Carlo simulation shows the probability of negative net benefits is 16%. The estimated price elasticity of demand for spirits, beer, and wine are -.60, -.56, and -.51 respectively, which is consistent with the modern literature. (JEL D61, I18, K420, I120)