Free Enterprise, On the Rocks

    Governor Malloy is fighting for free enterprise, Republicans are supporting price controls, and in an odd twist of events I find myself siding with Dannel. Welcome to the Twilight Zone.

    A February article in the Hartford Courant reported that Governor Malloy will push for further reforms to the state’s puritanical alcohol sales laws.

    The proposal, which would eliminate minimum alcohol prices for wine and liquor, follows the Governor’s successful plan to allow alcohol sales on Sundays in the state.

    With regards to his newest proposal, Malloy remarked, “We would not allow the car industry to set a minimum price on cars. We wouldn’t allow other industries to conspire to set prices. Somehow and some way, we decided it was OK to charge people in Connecticut more for liquor than they are charged in the surrounding states and to defend that system. And for the life of me, I don’t understand it…I like the free market system.”

    Bravo Mr. Governor. Aside from the fact that he is pushing for price controls in other sectors of the economy (take, for example, his support for a rising of the national minimum wage), his argument is dead on. The free market offers much more efficient and desirable allocations of goods, even ‘sinful’ ones such as liquor.

    Ironically, several prominent Republicans have come out against this proposal. Far from heartless, profit-maximizing corporate fat-cats, Representatives Brenda Kupchick and Dan Carter oppose the bill as a “mom and pop” job killer.

    However, while this proposal may in fact lead to a decrease in small, locally owned liquor stores, the overall impact on the economy in Connecticut is simple: more sales, more savings, and fewer citizens crossing borders to buy goods. The “opportunity cost” of minimum pricing is the amount of money wasted on inefficiently priced goods. With the market free to allocate prices efficiently, this money will once again return to the consumer and be spent in other, more desirable ways.

    Now, while the Governor’s proposal may seem like a total about face for a man who has hardly advocated for markets free from government interference in the past, there may be a more reasonable explanation behind the move. The change would undoubtedly bring greater tax revenue to the state, with some analysts projecting an increase of 12 to 15 percent for sales of spirits and wine. For a man with a well-documented spending problem, that revenue must be pretty appealing.

    A smarter move, however, would be for the state to eliminate minimum pricing and use the increased tax revenue to lower taxes in other sectors of the economy. This policy would truly represent a sensible economic initiative and help move our economy in the right direction.

    Unfortunately, I tend to be skeptical about how smart or sensible the state government is, but you never know. Anything can happen, in the Twilight Zone.