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18.6.12

Privatize the liquor stores

My political positions run pretty far to the left. I favor fairly extensive government intervention in the market -- things like strong environmental regulations, extensive public transit, single-payer health care, and public higher education. Nevertheless, I am something of a classical liberal at heart, in that I believe in a principle of limited government that says that the presumption should be in favor of activities being handled by the private sector. Government should step in only when 1) an activity is a vital social need, and 2) there is a significant market failure in providing it. My disagreement with libertarians is in that sense more an empirical question of how often those questions apply than a question of pro- vs anti-government principle.

This is made clear by my position on the privatization of alcohol sales in Pennsylvania. The state legislature is currently considering bills to reduce the state's near-monopoly on intoxicating beverages. I think that doing so is a great idea.

Alcohol sales fail the first of my two prongs of the government intervention test. While getting medical treatment or being educated are vital social needs that all citizens should have access to, getting drunk simply is not. Drinking is a hobby. On that ground alone, I would dismiss the need for state-run alcohol sales.

But Pennsylvania's alcohol sales fail the second prong as well. There is no massive market failure in the case of alcohol. There is no problem of externalities, perverse incentives, or grossly unequal access in the way that there is for purely private provision of the other things I want government to provide. Many other states (such as my old home of Arizona) have far more liberal alcohol sales systems than Pennsylvania, and people there get drunk just fine.

Opponents of privatization have complained that privatization would reduce selection and raise prices. These, I think, are actually arguments for privatization. If state-run stores have lower prices and better selection than private ones would, this means that the state is subsidizing drinking. This would be a concern only if cheap access to the full range of liquors were a vital social good (as is the case, say, for cheap access to the full range of medical treatments). People are not entitled to have any recreational product they like at any price they like.

Another concern is the potential loss of unionized liquor store jobs. Here I would simply point out that there is no reason why a private liquor store workforce couldn't unionize (and they should!). There are many ways for the state to encourage the creation of good jobs, but running a business as a make-work program seems like a decidedly inefficient way to go about it. (Note that the case for saving my own job as a unionized public university employee is importantly different. Education is an important social good, unlike alcohol. And the private sector is unlikely to provide decent quality education to all students who need it at a price they can afford, unlike alcohol.)

I see no more reason for the state of Pennsylvania to hold a monopoly on alcohol sales than I do for it to take over guitar manufacturing or movie theaters. Privatize it, and let the government handle the real social needs.

3 Comments:

Anonymous InfiniteBuffalo said...

What about the argument that state-run liquor stores provide cash for the Commonwealth Treasury at a time when the Commonwealth Treasury is sorely lacking in cash, as explicated by your representative and mine, State Senator Jim Ferlo?

"@SenatorJimFerlo
PA House debating privatizing liquor stores again. Cutting $ for schools & human service programs AND taking away a major source of state $?"

10:17 AM  
Anonymous cpow said...

@buffalo- I don't understand how this works because the state still gets the huge alcohol tax, and doesn't have the cost of running the stores, ads, etc. Do you have a link to something more in depth? I just don't understand the system.

Also, I think the state should just raise income tax and scrap all the stupid weird taxes, of course I also want them to get rid of the 87 layers of government that tax us, and a pony.

10:30 AM  
Anonymous InfiniteBuffalo said...

[I fail at Blogger; I only just noticed I'd been replied to...]

With privatized stores, the state gets revenue from taxes on alcohol sales, and presumably licence fees. With socialized stores, the state gets revenue from taxes on alcohol sales, plus their profit on the sales themselves---to my understanding, the state's markup over wholesale is substantial and more than covers the cost of running the system.

[I'm not actually in favour of state-owned liquor stores, though I'd be interested in a comparison with how, say, Ontario does it. But Sen Ferlo's comment happened to come up while I was reading the post, so I was curious what y'all thought about it.]

8:07 AM  

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