The examples above show that laws can impact economies after their passage. However, as noted, it is often helpful for lawmakers to identify the economic impacts of the laws they pass before they do so. And this is the second part of the proposition we started with. Of course the economics of a situation should not be the only driving force behind lawmaking, but it is undoubtedly true that economic impacts should be at least one of the guiding factors in careful and considerate lawmaking.
Aside from the fact that economics is an inexact science, its answers are not always the right fit for every situation. Even more critically, sometimes the nets cast by laws driven primarily by economics end up picking up more than just the intended quarry. It appears that some of the laws privatizing liquor stores are one unfortunate example of this, at least according to a new study. The report in question, entitled Impact on alcohol-related mortality of a rapid rise in the density of private liquor outlets in British Columbia: A local area multi-level analysis, was recently published in the international journal Addiction. The findings were based on the research on the privatisation of the BC liquor market conducted by the University of Victoria’s Centre for Addictions Research (CARBC) and the Prevention Research Center in Berkeley, California. From the press release:
The study examined 20 types of alcohol-related death including liver disease, strokes, cancers, injuries and suicide in 89 local health areas of British Columbia during a rapid rise in the number of private liquor stores between 2003 and 2008. The number of non-government liquor stores increased by 40.3 per cent to 977 while government store numbers decreased by 10.4 per cent to 199. The study found that areas with more stores in private rather than government hands had significantly higher rates of alcohol-related deaths involving local residents. In fact, there was a 27.5 per cent increase in alcohol-related deaths for every extra private liquor store per 1,000 British Columbians.
Though the research focuses on Canada, the release notes that 'a number of US jurisdictions are currently considering privatising government control systems for the retail distribution of alcohol, including Pennsylvania, Washington, Virginia, Ohio and North Carolina.' And this is where the law/economics angle arises from. Many of the proponents of taking distribution out of the hands of the government in these states cite economic reasons, such as increased taxes and fees to the government coffers, for doing so. It is a very pure example of how economics can be used to impact the lawmaking process.
However, if the conclusions of the study are correct, there could be very interesting implications beyond the pure economics (which are often debated heatedly by those for and against privatization) for lawmakers considering privatization across the US. What of the very obvious implications for the public welfare? A government should have some consideration of such things. Even if one did wish to keep things in the realm of economists, arguments could be made which would suggest a negative economic impact. For example, looking forward beyond sales numbers, states may want to consider what portion of future health bills they will need to be concerned about if their populations are adversely impacted by increased consumption in the wake of deregulation.
On the other hand, alcohol is legal, and its use is a personal choice. Government monopolies on such products are not typical. In a nation which has become increasingly deregulated this side of the story certainly shouldn't be ignored. And, as the press release notes, 'Private liquor stores are certainly more convenient than the government outlets, since they are open longer hours and there are many more of them...' Finally, it is worthwhile to think about the motivations of the researchers of any study, particularly when statistics from a small sample set (five years in this case) are utilized to draw fairly dramatic conclusions.
Maybe studies like this don't provide all of the answers. But then, neither does economics. However perhaps both, if viewed as data points in the decision-making process, can shine a brighter light on the costs and benefits of any law. In the case of privatisation, the truth is that there are no easy answers. Perhaps there aren't even any correct ones. This is why it is such a difficult question for lawmakers, and one which is debated with such passion. However, at the very least, the privatization debate provides a great example of how economics, even if it shouldn't be ignored completely, should also not be the end of the discussion when it comes to good lawmaking.
UPDATE: A good friend in the industry informed us that opponents of Virginia privatisation have already embraced this study there while proponents have already blasted the authors for being anti-free market. While it wouldn't surprise us if the true answers actually fall somewhere between 'privatisation causes all the problems of society' and 'privatisation is the pure embodiment of the American spirit' the fact remains that neither pure economic analysis nor impassioned pleas should be the only tools legislators work with.
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