Liquor Privatisation and Cost/Convenience Trade Offs

Blog, Crown Corporations, David Seymour

Several weeks ago the Saskatoon Star Phoenix ran a piece from a U of S professor named Colin Boyd.

Boyd claims that Alberta liquor is NOT cheaper than Saskatchewan liquor. We point out that this 2009 Frontier study found that it is.

Whoever is right about that, there is a more important point that Boyd misses in his article. The price at the checkout is not the full cost of the item. The full cost is the cost of getting the item to your house. Part of this cost is paid at the checkout, and part of it is paid by the customer in the course of getting to the store and then home again. These costs are not only time and travel costs, but also stress and inconvenience. In his article, Boyd implies that having multiple stores in what seems to be a small area is an unnecessary duplication that increases the cost of liquor. Therefore, he concludes, Saskatchewan has the superior system.

Boyd does not account for the additional convenience and reduced travel costs that Albertans face when purchasing alcohol. Take the example of the Saskatchewan Office of the Frontier Centre. It is over 1 km to the nearest liquor store. As we are model Smart Growth citizens and do not drive, this makes it almost completely impractical to buy alcohol. With such a 2km+ round trip, I’d be sober by the time I got my second load.

More generally, there is a trade off between cost and convenience. According to Boyd’s argument, Sask. should just have a big warehouse somewhere on the Trans Canada (so the delivery trucks wouldn’t have to go off course) and everyone could do an annual stock up from there. The other extreme would be for every household to employ a “liquor purchaser” who would ensure everything they could want was always available in their pantry.

Alberta has allowed a balance to be struck on an open market and people have collectively chosen more convenience at the expense of higher prices than they would otherwise pay. I suspect that this competitive marketplace better reveals customer preferences than Saskatchewan’s bureaucracy.