Here we go again. Another of the occasional measures of liberalisation that pepper the government's normally authoritarian social policy is suddenly at the centre of public debate. In this case, it is the end of the licensing laws that were intended to prevent First World War munitions factory workers from being too pissed in the morning.

These laws persist to this day, making it damned hard to get a pint for a reasonable price after 11pm, even if the chance that you will accidentally blow something up at work the next day is minimal.

Result: complete chaos. Not the new licensing laws, but the public reaction. The right is apoplectic about anti-social behaviour, a breakdown of tradition values and the damaging effect it will have on ordinary working people. The left is quieter, but mutters darkly about pandering to the corporations – not to mention the damaging effect on ordinary working people.

If all this gives you a strange sense of déjà vu, you might be thinking about last October, when the government announced another of these occasional measures of liberalisation.

In last year's case, they announced the liberalisation of the gambling laws by allowing the creation of super-casinos, while creating a new regulatory body and taking slot machines out of unregulated premises such as cab offices. Result: complete chaos. The right was apoplectic about anti-social behaviour, a breakdown of traditional values, and . . . I think you can see where I am going with this.

Hysteria aside, this kind of reaction is understandable. Drinking and gambling can both ruin people's lives, and it is true that, as pleasant as the oft-cited post-theatre glass of wine or winning twenty quid at cards can be, it is the corporate world that stands to gain most from these changes.

Only when you compare these reactions with those on the other strand of the government's pre-election social policy extravaganza do things get irritating. Last November, a White Paper was published that proposed a ban on smoking in cafes, restaurants and pubs that serve food.

Those exact same conservative commentators that expressed outrage at the idea of casinos that do not require membership, or pubs that open until 3am, were up in arms about the "nanny-state" and the Englishman's right to have a fag. Oddly, the right to not be detained without trial, not to mention those other trifling rights included in the European Convention, such as life and free speech, seem of less interest to most of them.

It is the lack of consistency that gets me. If we, great unwashed, can be trusted to decide whether to smoke – and whether to expose ourselves to other people doing it – why do we need to be kept away from roulette wheels and drinking after midnight, like some cross between Marge Simpson and Gizmo the Mogwai? Evils though alcohol and gambling undoubtedly are, I am aware of no study that has shown them to be more addictive or carcinogenic than cigarettes.

This inconsistency seems to have a similar root to the idea, recurrent in the blacktops, that transgressions committed by drivers are nothing more than Mickey Mouse crimes or money-spinners for Gordon Brown.

Such an approach also supports the mixed up notion that, while the bad habits of others are heinous, those of people like themselves are merely the exercise of personal freedom. The problem is that freedom, when it is arbitrarily decided you can have it, is not freedom at all. If one unhealthy and anti-social form of behaviour is allowed in company, it defies logic to ban another.

In 'On Liberty', written in the late 19th century when freedom was somewhat out of fashion, John Stuart Mill came up with the harm principle. This is the idea that "the only purpose for which power can be rightfully exercised over any member of a civilised community against his will is to prevent harm to others". Mill's ideas also echo those of a group who would be horrified to find their rhetoric used to defend such a socially liberal bill: the US Republican Party.

In its pre-Bush incarnation, the Republicans wanted to limit the number of laws passed, and money spent, by the federal government – on the grounds that government was the enemy of freedom.

It is an idea that never really caught on in Britain – perhaps unsurprisingly, since it was our government that first put this particular wind up them in the first place. Even Thatcher, who came to power announcing her intention to roll back the state, spent the next eleven years accruing as much power as she could get her hands on.

But it is these ideas of small government and personal freedoms that seem to lie behind the new 2003 Licensing Act. Despite the fact that it has become infamous for allowing 24 hour drinking, few have shown any interest in selling alcohol at 8am. The 2003 bill is more about the removal of an unnecessary law, rather than the creation of a new one. Small government conservatives should like this type of deregulation.

Instead of imposing a one-size-fits-all licensing law defined in Whitehall and Westminster on the whole of England and Wales, the Act gives local authorities the discretion to decide their own licensing laws, and allows local people to be involved in the consultation process. For the first time, there is an admission that licensing laws appropriate for a rural Monmouthshire village may not be appropriate to London's West End.

From a government that is known for its control freak tendencies, such a recognition of regional difference is a welcome move from the centre to ground level. It is also one that it could have made sense to copy in the gambling bill. Not every local authority is going to want a Vegas style casino, but some – well, Blackpool, anyway – might find one a useful boost.

Either way, the local population will be better placed to decide than London-based civil servants. With the anti-smoking bill, it makes more sense to let individual establishments decide whether they want to allow smoking, and prod them in the direction of a ban by charging licensing fees.

Such fees would fulfil the requirements of the modern update of Mill's Harm Principle: the 'Polluter Pays' Principle. Few would deny that excessive drinking, gambling or shoving your smoke down other people's lungs is anti-social – just as few are under the impression we can ban them altogether. The best compromise seems to allow these things, and then make damn sure the people doing them contribute to the costs they create.

So smokers pay extra tax to go to the NHS, drinkers pay extra tax on booze to fund extra policing and those that insist on driving in central London, despite it being marginally faster to travel by yak, pay the congestion charge.

Pubs that serve until a fight breaks out at 4am pay police fines and drinks companies that sell brightly coloured alcopops pay extra tax for the privilege of marketing something that is quite obviously aimed at kids. And the government will tax casino owners until their eyeballs bleed. If they want so badly to bring their business to Britain, they will put up with it. Result: more freedom, more revenue.

In this way, towns and cities can make their own decisions and people are free to do what they want, but there are incentives to act responsibly. What is more, the dreaded corporations pay a price for the chance to profit out of activities that may be creating misery. The markets should become self-regulating, and the nanny state so beloved of the Daily Mail never has to get involved by imposing a centrally decided norm. More to the point, there would be a consistent approach to potentially anti-social activities, and I would finally be able to get a late pint for under £3.00.

Nobody can be sure what whether deregulated drinking will turn England's high streets into Italy circa 11pm in June, or Bosnia circa 1994 in a nightmare. But, while I doubt we will ever get the Mediterranean drinking culture that the government wants, we may well get a Scottish one, with bars closing at different times and fewer people determined to be falling over drunk by midnight. Binge drinking could wind down.

But it will, no doubt, take time to adjust. At first, some people are bound to greet the novelty of the new laws by taking full advantage of the chance to roll down the street at dawn covered in body fluids. Over time, it should become clear to drinkers that neither their body, nor their wallet, can take a sharp increase in their alcohol intake. And it may become clear to licensees that the extra income that comes from staying open all hours is not worth the hassle – or the fines.