Privatizing ABC Stores

Thursday, May 27th, 2010

Don Boudreaux and Julia Williams look at the effects of privatizing ABC stores by comparing the 18 states that “control” alcohol distribution by directly running retail or wholesale establishments with the 32 states (and the District of Columbia) that simply license private retailers and wholesalers.

The control states and the license states are indistinguishable in terms of alcohol-related deaths, binge drinking, drunk-driving fatalities, etc.:

These findings aren’t surprising given that per-capita alcohol consumption in control states is statistically no different than it is in license states.

In other words, the data suggests that if a state shifts from being a control state to a license state (or vice-versa), that switch will not affect the amount of alcohol consumed, on average, per person in that state.

The reason is that to reduce the social problems associated with alcohol requires, as a practical matter, changing the amount of alcohol consumed by abusive drinkers. But changing the consumption of these drinkers cannot be done only with population-level policies and high taxes.

Unsurprisingly, research indicates that abusive drinkers are not as responsive to higher prices or government policies as are more moderate consumers. Direct government operation of alcohol retailing or wholesaling cannot possibly target abusive drinkers in ways that would cause them to reform.

The primary difference is that control states bring in less money for the state.

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