Wednesday, August 15, 2012

Curing our addiction to bad liquor laws

I often hear a great deal of concern expressed over bars and restaurants that serve alcohol opening up or extending hours, at community meetings. The residents complain about noise, trash, drunks and other businesses being pushed out. Some simply don't like alcohol, or any late night business, at all. The police complain about being overloaded with work already. It always strikes me that this situation has arisen because of a perverse set of laws on the books here in Massachusetts and the city of Boston. These laws are the residue of the stain of Prohibition and also the ugly racial politics of the past couple centuries.

  • Massachusetts, like many states, sets an arbitrary closing time of 2 a.m.
  • Liquor licenses are handed out, ultimately, by a state board.
  • The city of Boston is limited at the state level to a certain number of liquor licenses; this is the remnant of a time when state pols were racially biased against the heavily Irish population of the city.
  • Most licenses are trade-able, meaning that there is a market for them, and the costs can easily reach into the hundreds of thousands of dollars.
  • There's been an effort to hard cap the number of 2 a.m. licenses; they do not create new ones. Which means that many places have to close by 1 a.m. despite state law.
  • Many licenses are restricted in some fashion, e.g. beer and wine only, or with food only.
  • Religious institutions used to be able to prevent licenses from being issued within a 500 ft radius of their property. A famous decision involving Grendel's Den finally found that policy unconstitutional.
The combination of these laws and regulations results in consequences which I have to believe are completely unintended by, or at least, out of the control of officials. Namely, that bars tend to cluster into certain areas and try to pump as much business as possible through their doors, to an extreme. They must do this in order to pay for the high costs and margins of operating under these perverse conditions. When a liquor license costs $200,000-450,000, you better be sure to get a lot of customers. So there's an extra-strong incentive to locate in an area which is already popular. Nobody is going to want to take a chance on revitalizing a neighborhood which has lost its nightly foot traffic, when the stakes are so high.

This kind of agglomeration aggravates residents and emergency service providers who must deal with the negative externalities from alcohol-serving establishments. It also scares residents in other areas who are then led to believe that allowing a single bar to open near them will result in the same problems. In the meantime, the perverse market for liquor licenses creates a lot of profits for arbitrary license-holders, but does nothing for the people who have to bear the brunt of the problems.

The answer is fairly simple, the politics of implementation are difficult.

  • There is no point to a cap on liquor licenses; it was a policy rooted in racism, serves no purpose, and should be eradicated.
  • Licenses should not be trade-able. It doesn't make any sense. A license is a certificate for a specific business that they are law-abiding, not a commodity.
  • Together, this lowers the stakes on opening an alcohol-serving establishment, making it possible for more casual, community-oriented places to survive.
  • In place of the cap, the Commonwealth should institute a system of mandatory, recurring fees for alcohol-serving establishments which are intended to ameliorate the on-going negative externalities associated with alcohol usage.
  • Such fees would pay for emergency and other services in the neighborhood affected, for example, additional LEOs and EMTs to cover the hours necessary. This would be on top of the existing taxes; the idea being that alcohol-serving establishments are a burden on local coffers above and beyond the norm.
Businesses have a tendency to cluster even without the bunching effect of the Massachusetts liquor laws. At least under this system, sufficient revenue to cover those costs would also accrue to neighborhoods which hosted such clusters. There would be less fear of bars opening up in drier areas. Licensing board review would still be necessary in order to ensure bars are doing their part to keep the peace; there would be an additional incentive in the form of lower overall fees having to be collected.

The transition is difficult. There is a lot of political weight behind the status quo. However, the licensing board is already handing out special licenses which cannot be traded, intended for revitalizing certain neighborhoods. I am not certain what it would take to implement the fees, whether that can be done at the local level or must be done state-wide.

In the future, there are some other possibilities. A portion of the fees could be used to provide late-night bus service in lieu of the normal T. This would help cut down on incidences of drunken driving, make it easier for night workers to return after their shifts, and may even pay for itself simply by cutting down on road deaths due to alcohol. A fee structure could also enable later opening hours than 2 a.m. someday, since it would pay for the necessary services. This would help avoid some of the crunch which currently occurs at 2 a.m. when everyone spills out into the street simultaneously.


  1. Serious question: if you want to externality-tax alcohol, why not just tax alcohol directly, instead of indirectly tax the establishments that serve it?

    Likewise, it's unclear to me why there is a mandatory closing time. It can't be just neighborhood noise, or else the closing time would be 11 and not 2.

    1. The mandatory closing time is a state-wide blanket rule which probably evolved out of some complicated post-Prohibition politics. It doesn't really satisfy anyone. There's also a certain set of obstinate folks who believe that trying to tell everyone to go home at 2 a.m. is a "policy solution" even though it doesn't work very well.

      Some of this could probably be accomplished through a state-wide alcohol tax. Measures to curb drunken driving, for example. But I see the rest of it as more of something that should be handled locally. There's the political advantage of seeing benefits accrue directly to the community involved. And relinquishing control to the state-wide government, over what is essentially an urban policy decision, usually makes things more inflexible and unsuitable anyhow. Noise and emergency responder shortages are something which a local community has more grasp on than the state legislature.