Utah's Monopoly on Liquor

Is Utah's monopoly on selling hard liquor good for the state or for the consumers? Mark Shurtleff is requesting that the United States Congress allow Utah to keep its unique system. Utah's system creates a governmental monopoly on the hard liquor sold here. With that system in place, the state liquor board can set any price it would like to set for the liquor. Utah does not want to give up the system in place because that would significantly decrease the revenues to the state. And in such a time as this where the state budget is so tight, Utah is not going to have any motivation to loose that revenue.
- Ralphie


Rex said...

While the liquor laws do appear to create a governmental monopoly, it does not allow the state to charge whatever they want for liquor. While they do restrict the sale of liquor within the state, they have to compete with forces outside the state. They may be able to charge slightly more, but when the costs outweigh the benefits, people will simply buy it elsewhere, out of state. I'm just pointing out that it's not a full blown monopoly.

Dave said...

I don't think this is really a monopoly issue, or a tax issue.

Yes, the government has a retail monopoly, but on locations not on quantities. There doesn't seem to be much evidence that they are limiting quantity.

Now, they do seem to be choosing a price above the competitive level, and they could match that to the profit-maximizing quantity. It's not what we teach in the textbooks, but it does work in practice.

Rex is right though that they can't set that price as high as they want if their goal is maximizing profits, but they could set it anywhere they want if they have other goals.

Now, alcohol tax revenues are an important source of income for most states. Having moved around the country a bit, I'd be really surprised to find out that Utah is charging the most. So this makes me thing that Shurtleff's position is really a moral one rather than an economic one.