Hipster Amateur Economists Know What’s Good for You
November 30th, 2010

Megan McArdle and Matthew Yglesias have (intentionally?) hilarious posts arguing that urban neighborhoods which have odious  restrictions on liquor licenses are really hurting themselves because it would be better for everyone if there were lots of super cool bars to go to at night. Here’s Yglesias summing up the argument:

Basically the East Village really “wants” to be full of nightlife establishments just like Qiaotou, China wants button factories. Restricting the creation of new button factories in Qiatou will help incumbent button makers (and alleviate neighborhood concerns about factory smoot) but it’s hard to call a bar scene into existence that way. Similarly, making it hard to open a new bar in the East Village isn’t going to create a button factory. It’s going to create an underutilized space. That means somewhat more unemployment in the city, somewhat less tax revenue in the city, and thus at the margin higher tax rates and fewer social services for everyone.

It’s hard to take any of this seriously–it’s as if neither of them has ever heard of “opportunity cost.” But just for giggles, let’s poke a few holes.

* How many salaried positions do bars create? For starters, a bar requires relatively few employees, and for another, they tend not to be salaried positions. How much income tax revenue do bars really generate?

* If the loss of tax revenue incurred by not having bars leads in fewer marginal social services, how many more social services do bars consume relative to other uses of the space? More police work, more sanitation, more billable hours on the public side of the criminal justice system. Surely bars consume more state resources than residential or retail units.

* How do bars impact property values? If the presence of bars lowers surrounding property values, which seems at least possible, this creates a property tax shortfall.

And so on and so on. The heart of this, of course, is that hipster amateur economists really just want to manufacture an economic rationale for a good which they personally prefer. There’s no consideration that other people in the neighborhood might prefer competing goods–like quiet, stable property values, family-friendly space, etc– and that those goods also have value.

But hey, that’s cool, because grown-up, professional economists do this all the time.

  1. Jason O. November 30, 2010 at 2:27 pm

    I have to give McArdle credit: This piece is by far the best (i.e., insightful) short piece on the GM bankruptcy that I’ve read.