Regulation of the Day 111: Buying Wine in New York

It is illegal for grocery stores to sell wine in the state of New York. Only liquor stores are allowed to sell the stuff.

This regulation, a relic of Prohibition, lives on because of one of the central concepts in public choice theory: diffused costs and concentrated benefits.

The benefits are concentrated in one constituency: liquor stores. Regulations give them get millions of dollars in free business. That means they have millions of reasons to lobby to keep the status quo.

Consumers, on the other hand, are hurt by the ban by the exact amount that liquor stores benefit. But that hurt is spread far and wide. No one consumer feels enough pain to hire a high-priced lobbyist to open up the market.

That means New York’s misguided restrictions on competition are likely to continue for some time. It’s hard to imagine an aggrieved shopper suing New York’s wine cartel because she has to make an extra trip to get the wine on her grocery list. Or because she pays a bit more than if she lived in a different state.

(Hat tip: Jonathan Moore)