Bryan Caplan  

I Can Drunk Just as Well Think!

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The Confirmatory Bias Diet... United 93 vs. Sleepe...

When I was first teaching Industrial Organization (nearly 10 years ago!), there was a big internet campaign to boycott Borders and Barnes & Noble. "It might superficially seem like consumers are getting more and better choices, but just you wait!" said the critics. I'm still waiting.

Now, explains Don Boudreaux in a letter to the editor, people are making the same argument about alcohol with a straight face:

Dear Editor:

Harry Wiles, Executive Director of American Beverage Licenses, supports government restrictions that hamper big-box retailers' efforts to sell alcoholic beverages (Letters, May 20). He asserts that, without these restrictions, the likes of Costco and Wal-Mart will "muscle out smaller retailers at the expense of choice, convenience and service."

The same argument was made 15 years ago by small book retailers when Barnes & Noble and Borders first opened large bookstores nationwide. But who today believes that Americans have less choice, convenience, and service when buying books? Clearly, we have more...

I have trouble even imagining how the small liquor store lobby would respond. I could say that it's time for them to sober up, but I doubt they believe their own arguments. It's the man in the street who is all-too-willing to buy the lobbyists' 80-proof anti-market bias. And the first step to recovery, as usual, is for the man in the street to admit that he has a problem.


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COMMENTS (17 to date)
George P writes:

I don't think it's the same. If the big stores had a choice, they would only sell you one thing and sell you a lot of it. Preferably, that with the highest margin.

It does not work with books, because they are no substitute for one another. If I walked into Borders, I am likely to be looking for something, and they have interest in giving me all the options, because I might have trouble deciding and buy them all.

If I walked into a wine store, I want wine - if they offer three choices I'll buy one of them. If they offer fifty and give me some advise, that's useful, but the profit margin is not quite as good.

This can be seen at any till in a big supermarket - people stock up on the rubbish - frozen burgers, etc, because it's cheap and plentyful. It's even cheaper for the retailer. So they push it in your face and slowly but surely dumb down your taste with sugar fat and salt until all you buy is frozen pizas, crisps and soda water - which, as cheap as they are to you are virtually free for the retailer to obtain.

The price per kilo for crisps is higher than that for smoked salmon. Yet people buy it. Big stores have the power to insidiously alter you taste over time.

So, the mass public will find it easier and cheaper to get drunk, but those who refuse to succumb to the new retail model will find it more and more difficult to buy the wine they want.

PR writes:

Is there a link to the letter to the editor availible?

MjrMjr writes:

As someone who enjoys beers from smaller, less well known craft breweries in the U.S.(read:Victory, Dogfish Head, Old Dominion, Stone, not Bud/Miller/Coors) I'm very interested in how regulations effect both prices and the range of choices I have at retail establishments. If it could be decisively proven that allowing Wal Mart and Costco to sell alcoholic beverages(I think they do this in VA already, though, don't they?) would put smaller stores out of business and reduce the choice and service that they provide I'd probably support this move by the American Beverage Licenses out of very narrow self-interest. If Wal Mart could put stores like Norm's in Vienna, VA, Total Wine, and the beer departments at Whole Foods and Wegmans out of business I would do almost anything in my power to stop them.

More likely, though, is that Wal Mart/Costco would sell Bud/Miller/Coors for a dollar or two cheaper per case than your average supermarket. They'd probably also carry other somewhat common brands like Sam Adamas, Sierra Nevada, Heineken, etc. They probably wouldn't carry beers from the best U.S. craft breweries, and people who enjoy these beers would probably still shop at smaller specialty stores that cater to their tastes. Or if Wal Mart/Costco did carry these less common beers and sell them at a great price... well, even better. Let competition decide who wins.

The reform that I'm most curious to explore is what would happen if the "three tier" system is broken. Currently-I believe this applies everywhere in the United States to beer, wine, and liquor-the brewer/vineyard/distillery has to sell their products to a licensed distributor, and then retail establishments must buy their alcohol only from licensed distributors. I wonder if removing the legal requirement of going through a distributor, and thus allowing consumers and retailers to buy alcohol direct from the manufacturer would be the best way to lower prices and increase choice?

Tom West writes:

Reduced choice in large bookstores? Well, yes in a particular fashion. Many fiction publishers won't publish fiction that the big box stores won't buy. This means that, for example, fiction books that are "too big" won't be picked up (because they take too much shelf space if the author is not already a big seller). Thus the publishers won't dare publish it in the first place.

It's not a huge effect, but it's definitely a real one.

Pelkabo writes:

George P: If the "big stores" (cue ominous music) were able to maximize profits by selling only two or three kinds of wine, would not the small stores be able to do the same thing? Why then does my neighborhood liquor store stock thousands of different varieties of wine?

Robert Schwartz writes:

You ought to live in a state where the liquor business has been socialist. Ohio liquor stores were government owned until about 10 years ago. They are now franchisees of the state. I long for capitalism.

George P writes:

Pelkabo: Because your neighbourhood store has to offer you something the other small store round the corner doesn't. That's like asking why the small italian restaurant in your neighbourhood doesn't sell only cheeseburgers to maximise profit.

Bob Knaus writes:

I remember the first time my mom saw a grocery store with a "real" produce section. It was a Safeway in Bakersfield, California, in 1975. She was in tears. Came out to the parking lot where we were all waiting in the RV, made us go inside to have a look.

We lived on a farm in Florida, raised produce to sell at our roadside stand. Her father had been an apple grower in Pennsylvania. We all knew what good produce was, and simply couldn't imagine that it would be available at a grocery store. You had to go to the farm to get the real thing, or so we thought.

In Florida in the 1970s, we had the grocery store duopoly of Publix and Winn-Dixie, plus a smattering of mom-and-pops. None of them carried decent produce. Today the mom-and-pops are mostly organic/specialty stores, Winn-Dixie is bankrupt, and Publix is trying its best to look like a Wegmans or Albertsons.

Never has Florida seen a wider or fresher selection of produce. Competition from big out-of-state groceries caused this change.

How would liquor be any different?

JohnDewey writes:

"If the big stores had a choice, they would only sell you one thing and sell you a lot of it."

"This can be seen at any till in a big supermarket"

George P.,
I'm not so sure large supermarkets offer fewer items. The ones I use provide much greater variety than did the smaller mom and pop grocers of years ago. Large supermarkets are able to carry niche items because their customer base is so large. They attract many more customers than do the tiny grocery stores. Even if only 2 percent of consumers seek an particular item, a large suburban supermarket could still sell 100 or more each week.

The trend I see is for even larger supermarkets and greater variety. Here in Texas, giant Central Markets (H.E.B.) and TomThumb/Randall Flagship stores (Safeway) are examples.

"people stock up on the rubbish - frozen burgers, etc, because it's cheap and plentyful. It's even cheaper for the retailer."

I doubt the so-called rubbish provides near the profit margins as do the specialty items. Do you think supermarkets create demand for low margin, low cost items? or do they simply react to consumers' demand?

George P writes:

I do think they create the demand. In I'm probably out of my depth when it comes to US (never even visited), but in Europe and UK all the special 2 for one, half price, etc, offers seem to be on the coloured water and the frozen reconstituted unidentifiable things for deep-frying. As I said, this is what is pushed in your face all the time, and people buy it because it's easy and cheap and gives you instant gratification in the form of salt and fat.

People rarely do what's in their best interest, and it doesn't take much to push them a bit to one side if you have the advertising power.

Here's one example - go to a local market in Greece or Italy, and you'll realise that not all tomatoes are ideal 8cm spheres with no taste and hardly any colour.

That's no good for Walmart, though, is it... It's best if people forgot about real tomatoes..

JohnDewey writes:

George P: "I do think they create the demand."

Are you still referring to the supermarkets? In the U.S., demand for specific food products is driven by food producers' advertising and promotion, not by grocers' advertising. Grocer advertising generally consists of price promotions for products the public already demands.

George P: "I'm probably out of my depth when it comes to US (never even visited)"

I've never been to England, but I did live in Milan in 1991. The variety of grocery products at even the largest Milan supermarket was just a fraction of what we enjoyed everywhere in the U.S. at the time. The choices at the numerous small grocers, in this very large European city, was less than is available in the smallest of U.S. towns.

George P: "People rarely do what's in their best interest, and it doesn't take much to push them a bit to one side if you have the advertising power."

I disagree, but I don't want to argue nutrition and health with you. I will point out that food producers in the U.S. continue to offer healthy products, and a significant percentage of the population buys them. Of course, a large segment still buys the junk you refer to. But that's not because food producers and grocers haven't offered healthy choices.

From some comments in this thread I get the impression that US supermarkets don't sell alcohol?! Wow, I thought that was a radical norwegian idea. Most districts allow beer in supermarkets, mine is one of the last in the country that doesn't. Only about 5 out of more than 400 restrict sales, I think.

There has been referendums on the issue, and they voted to keep the communal beer monopoly with a good margin. Question to big L types out there: Do you think this is legitimate? In a community of only about 8000 people, would you say we have a right to restrict the sale of alcohol?

Disclosure: I think yes (and I support the restrictions). I think that in such a small community, we affect each other so much by our actions that we have a right to make stronger demands of each other. Our rights to restrict each other's freedoms is propotional to how close we live, in other words how much our decisions affect each other. I can make demands from my family that I could never make from my neighbours, and from my neighbours that I could never make from people in Oslo, and so on. In all cases, it goes both ways, of course - I would hardly be a good husband, neighbour or citizen if it didn't!

What do you think? Am I being reasonable?

JohnDewey writes:

Harald,

My in-laws live in a small East Texas county that prohibits alcohol sales. This restriction forces many to travel miles across county and state lines to purcahse and consume alcohol. Net result: more drunk drivers, higher gasoline usage, and loss of sales tax revenue. I think the prohibition also retards economic development. All those disadvantages are apparently just fine with the voters in the county. But I don't understand what they're they're accomplishing.

FXKLM writes:

Bob Knaus: Publix is one the greatest grocery stores in the country. Albertson's is barely tolerable. To say that Publix aspires to emulate Albertson's is completely outrageous. Equating Albertson's with Wegman's is equally absurd. Have you confused Albertson's with some other store or have you simply never been in one?

Please retract your anti-Publix comments.

Bob Knaus writes:

Gosh, FXKLM, I don't know what it takes to make a grocery store "great." I was thinking the produce section, but hey... maybe how they treat their employees or perhaps shareholder return are better yardsticks?

I've only heard about Wegman's from enthusiastic customers in the Northeast. I've been in many an Albertson's, and their produce sections are much better than the ones at Publix used to be. Perhaps as importantly as the actual freshness of the produce was the "trendy" air. As if they were trying to make the veggie shopping experience lighter and happier.

I only get to a Publix a few times a year now. They are better than they used to be. I've heard good things about their new larger stores. The older ones that I go to are clean, but too small and crowded to have a really nice produce section. You can tell they are trying to improve though. For instance, loose produce rather than just pre-pack.

JohnDewey, it's very interesting that counties are allowed to do that in the US. I was of the impression that they had very little say.

I can't speak for the texans, but here in Sula, Norway, we don't ban alcohol sales, we just try to limit exposure and perverse incentives. You have to go to the district-run store to buy beer, so you have to plan ahead a little, and not just get drunk on impulse - you may be suprised at how effective that restriction is.

The problem is that the economic interest in alcohol abuse is removed from the stores to the district government. True, they have restrictions on what the profits may be used for, but I'd prefer it if it was run on a non-profit basis. Since we are so close to our district government - I know many of the members personally, and I just moved in - it's not much of a problem in practice, though.

George P writes:

This explains what I mean - you know it when you've lost it - http://www.timesonline.co.uk/article/0,,1061-2087780,00.html

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