Minimum Pricing For Booze - UK

[robzrob]

http://www.youtube.com/watch?v=nHUiwOSHjd8

[ribuck]

Alcohol is half the price in Spain compared to the UK, yet Spain doesn't have so many paralytically drunk people staggering around the streets on a Saturday night vomiting and collapsing.

So no, raising the price won't "solve" anything.

[PatrickC]

This is a great example of Orwellian newspeak.. The point here is that the govt wants more taxes. Since they are taxing us too much already the only way they can get away with further taxation is by framing it around a 'moral' issue.

One way that might help keep teenagers off the booze is to stop forcing them to attend school. But who am I kidding, where would they learn doublethink. []

[Arius]

I sense a market in underground hooch developing.  Time for all those unemployed, ambitious Brits to fire-up the still.

[robzrob]

 

I sense a market in underground hooch developing.  Time for all those unemployed, ambitious Brits to fire-up the still.

 

 

Ah yes.  And with input from all the Eastern Europeans here, we might produce a very good vodka.  []

[st434u]

The only ones who will benefit from this are the producers of the more expensive brands, as well as the brands with a higher alcohol per volume ratio. Oh, and the bars/dance clubs.

The poor will have to pay more for alcohol, and some will start stealing to pay for their habit like we see with illegal drugs. Likewise they will be more incentivized to go for liquors/spirits rather than beer or wine. Not that I think that liquors/spirits are necessarily worse, but I'm just saying it will likely have the opposite of the claimed intended effect.

Simultaneously, while the convenience/grocery/liquor stores will have to increase their prices, the bars and dance clubs likely will not, since it seems that this minimum price will only apply at the retail level, and these businesses have to charge much more for the drinks in order to cover the accomodations they offer.

So the poor (which is the economic class to which most people who provoke these problems fall into) will be somewhat less likely to buy alcohol at a store and drink at home or in the street, where they can be relatively easily avoided, and they will be somewhat more likely to drink at bars and clubs, where they will be more likely to cause problems for the middle and upper classes that are applauding this new law.

[Rob_Ilir]

@ 1:01 "The medical community (nhs)...have lobbied for an even higher price rise, for 3000 people saved"I have a feeling that that reporter is just pure evil, and understood full well the implications of his mis/report. 

[st434u]

At a more basic economic level, the minimum price will necessarily lead to surplus production. This isn't as good as it sounds, as it means that resources will be invested in this area of production, where they are not meeting any demand, instead of being invested in other areas, where they would meet a demand. The market will eventually adjust to this by reducing production and increasing quality, but the core problem will always remain, and the economy as a whole will be that much less productive as a result of this.

[Arius]

At a more basic economic level, the minimum price will necessarily lead to surplus production.

It's not like the government is gonna buy all the booze which can be produced below the minimum price.  It's not a price floor or anything.

Anyone trying to sell booze at a lower price will either be fined or imprisoned.  There won't be an ounce of surplus production.

Who this impacts depends on how it's implemented.  If the extra price is paid by consumers to the government, it's a tax.  If the extra price is paid by consumers to producers, it's a subsidy.  If the extra price is paid by producers to the government, it's regulatory capture.  And, should merchants do the paying, it's still regulatory capture.

Seriously though, a person can setup a still in their home for less than $100.  You could, literally, manufacture gallons of liquor each week in a studio apartment with a kitchenette.  It's silly how cheap and simple (and illegal) it is to make hard liquor.   If there's actually as much market demand for getting black-out drunk as the story suggests, people will just start makin' the stuff themselves (or buying stronger proof stuff).  My guess is, there's no more demand for getting blackout drunk in the UK than there is in the US, and this whole story is just an excuse for regulatory capture by the "big booze" moguls.

[PatrickC]

Hey Arius, great synopsis I thought you made. I wouldn't normally disagree with you either, although having been a bit close to this topic, I'd say it's generally political manipulation of a percieved (and media consumed) 'moral' issue and a possibility of more funds. As it happens almost all drink producers are against this idea. However, given the way booze is taxed in the UK, any hike in prices will be coin for the public purse (as it were). As will be the higher 'moral' ground these tools in govt will receive by the media. The political ends are more important and extra coin is a bonus to be made over time of course. []

[Arius]

So you think this is an entirely political issue?  It's possible.

I've noticed there's a pattern to these things (at least in America).  First, there's excessive media coverage of something trivial.  Second, the body politics vows to take swift and decisive action to resolve the non-problem.  Third, industry leaders are involved in the planning process.  Finally, a series of nonsensical laws, which only benefit the politicians and "leaders" of industry, are passed and enforced.

My guess is that the UK government will "work with" large manufacturers and distributors to arrive at a "mutually acceptable" solution.

That, or it's possible the UK doesn't have as pro-business (read as: corporate-owned) a government as the US does.  Maybe it is just moralizing to build a platform for popular support.  We'll see how this develops.

[PatrickC]

Yes for sure, you could be right.. It's just that the industry has generally been dismissing this as a really bad idea.. But who knows, behind closed doors this could just be a public face on it perhaps.

[robzrob]

Yeah.  Ok. there are some for whom Saturday night means getting blind drunk and falling over and puking and all that, but it's exxagerated by the press.  And if you don't want to experience all that, you don't have to go to the places where it happens.  And if they want to stop it, there are almost certainly laws already in existence to deal with it.  Drunk and disorderly?  Disturbing the peace?  etc.

[Connor]

The LCBO -- Ontario's fascist liquor cartel -- is going on strike at the end of this month, citing lack of hours and low wages.  I guess the solution to not enough work in our bizzaro world is to stop working altogether?

[st434u]

It's not a price floor or anything.

Anyone trying to sell booze at a lower price will either be fined or imprisoned.

That is exactly what a price floor is.

There won't be an ounce of surplus production.

Yes, there will be. Normally in a market, when the price increases it is either because production has fallen, production costs have risen, or demand has increased. In this case, none of the above will have taken place. However the price increase will result in a diminished demand. The leftover production that cannot be sold at this now higher price will become a surplus that cannot be cleared by normal market mechanisms (the normal and quickest reaction  to a general surplus is for prices to fall, but that will be illegal here, so production must adjust downwards... but until it does, there will be a surplus).

Who this impacts depends on how it's implemented.  If the extra price is paid by consumers to the government, it's a tax.  If the extra price is paid by consumers to producers, it's a subsidy. 

It looks like it's the second thing you said, but it would not be a subsidy per se. It can be considered a subsidy for the producers that will not be forced to lower their price, because their price was already above the minimum; but for those who are forced to raise their price, it's not a subsidy because they would prefer to be able to sell cheaper (which means they would make more money selling cheaper).

 

[st434u]

I don't normally link to wikipedia, but this article is good (as of this posting anyway)

http://en.wikipedia.org/wiki/Price_floor

[st434u]

I should probably also mention that different stores have different prices, and some of the factors that make one store be able charge a higher price and still get customers is the general service offered within the store, the "shopping experience", as well as the location of the store (better locations are more expensive, but make it easier for customers to get to or pass by the store and buy things).

So this law should disproportionately affect those stores that don't offer much quality in terms of shopping experience and benefits (such as point systems, prizes, free stuff with your purchases and whatnot), but that have lower prices.

Besides this, the law will entice stores, liquor stores in particular (or other stores that derive a significant amount of their revenue from sales of alcoholic beverages) to invest more capital in making the shopping experience more enjoyable for the consumer, as lowering their prices on the alcoholic beverages will no longer be an option to attract customers. This will again generate a misallocation of resources, with capital being invested in an area of the market where it shouldn't be, and where the additional returns generated by it are not sustainable.

[Arius]

That is exactly what a price floor is.

The economic model of a price floor is only valid when it is impossible to buy or sell below the prescribed minimum and that minimum is above the market equilibrium price.  If any transactions can occur below that price, the price floor model does not accurately describe the situation.

What prevents me from selling liquor below the legally-mandated minimum price?

If you look at the real price floors (corn, milk, wheat, etc), you'll notice the common element is the method of enforcement.  In the case of agricultural products, the government enforces the price floor by supplying an infinite amount of demand below some price threshold.  For example, the reason there are no pounds of corn available for purchase at $.02 in the US, is because the government will buy 100% of the corn available at, or below, that price.  By buying the surplus, the government can create a functional price floor.  Without buying the surplus, the government cannot create a functional price floor.

[LovePrevails]

it's just posturing to make the gov look like they're doing something

 

it's all symptoms symptoms symptoms

 

if they really cared about stopping problem drinking they would put out a high-profile television broadcast on the effects of child-abuse and talk about some of the ways to reverse the effects.