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Economy

The Next Time I Watch Braveheart, I’m Gonna Root for England

By David Stokes on Sep 2, 2010

Even at his worst, I doubt Longshanks would ever have done something as horrible as impose minimum alchohol prices throughout Scotland! Not only is this the nanny state at its stupidest, but it is bad economics, as well. How does the government have any idea what the minimum price for alcohol in Scotland should be? Markets, not governments, set correct prices. The Scottish health secretary said:

“Getting the price right is vital for minimum pricing to work — too low and it will simply be ineffective. After careful consideration, we believe that 45p per unit is the right price.”

The chances that the government set the “right” price are zero. There is no such thing as a “right” price set by government. The “right” price for alcohol, and everything else, is set by the interaction of constantly changing supply and demand curves. The “right” price is different for different people at different times, whether buyers or sellers. In fact, we just produced a video about the dynamics of market pricing — and I can assure that the video in no way involved any alcohol.

The Scottish policy is ostensibly being implemented for health reasons. I won’t get into the antitrust, anti-dumping implications of the regulation of minimum prices. I believe that is a separate issue, albeit related.

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About the author

David Stokes

Director of Municipal Policy

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