Wednesday, March 17, 2010

How does the economics of this work?

Minimum pricing might increase alcohol sales in supermarkets, according to the Office of Fair Trading (OFT).

Reported here it appears to state that the OFT reckons that normal economic theory is so much dust.

Essentially they are saying that increased prices might lead to higher sales due to increased profits, and thus more marketing. However given that the increases in prioces would be for taxation, there wouldn't be increased profits.

"This is in contrast to a minimum price which may increase revenues for the industry whereas a tax could avoid any adverse incentives to increase sales of alcohol.

But they do like the classic dehumanising approach to drinkers by which they would be forced to pay to increase attacks upon them and their lifestyle

Tax revenues also get passed to the Government, and in principle could be spent on tackling alcohol misuse in other ways.

Another way of putting it is that these 'other' ways would no doubt include government anti drink advertising.

So the OFT, I think, though it is not entirely clear here, wants to increase prices, but only through taxation. But how could they increase prices anyway, why would they ever want to force the booze industry to do so? Wouldn't that be almost in direct contravention of their stated aim which is to stop price cartels forming and thus get better deals for the public?

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