Do Liquor Stores Enhance or Worsen Economic Development?

There is a hotly debated issue in Albany, GA where there are concerns about whether or not to provide a liquor license to Alexander Rowe, who wants to open a liquor store that is close to Albany State University (ASU)  and Union Baptist Church.  Even though it appears that the liquor store meets regulatory requirements on distance between a school and church, it is still negligible and one can say that it violates the spirit of the law, if not the letter of the law.  J.D. Sumner writes an editorial in November 5th, 2010 edition of the Albany Herald that asserts that reasoning and free markets should prevail and Mr. Rowe should be able to open the liquor store.  On the other hand, ASU supporters are worried about its effect on students, who might be more tempted to bring alcohol to campus.  When looking at economic development, it is important to recognize the true cost of allowing a liquor store to operate in such close proximity to a school and church.

Most advocates of permitting Mr. Rowe's proposed business point to its financial benefits.  As of right now, the area in question is currently vacant, so a liquor store would bring in much needed sales tax revenues that can be used to support city services.  While there would be a limited number of jobs, there would be increased traffic and this could lead to more business activity in East Albany, which is economically depressed.

However, there is the issue of negative externalities occurring in an area where a liquor store is located.  A negative externality is a cost incurred on outside parties not directly involved in the transaction.  Often, free market advocates ignore or minimize the effects of externalities, but their existence can create inefficient outcomes.  Examples of negative externalities would be an increase in crime in the area and student performance being compromised if their alcohol use increases due to the existence of the liquor store.  Mr. Sumner tries to counter this point by referencing a local study that found no significant correlation between crime and the location of businesses that serve alcohol.  While he was careful to note that the study included all establishments that serve alcohol, I would think the study should be narrowed to include only liquor stores. 

There should be a distinction between establishments that serve alcohol as their primary source of revenue and those where alcohol sales are secondary.  One can assume that the primary source of revenue for a liquor store is alcohol, while L'Jua is a restaurant whose primary role is serving food to customers.  This is important because I would argue that a patron goes to L'Jua with the explicit purpose of enjoying its fine food.  On the other hand, a liquor store customer is almost always interested in buying alcohol and carrying that liquor outside to either their home, school, or other place.  There is also the potential for attracting unsavory elements as vagrants and other undesirables to this area.  While Mr. Sumner's point is strengthened by highlighting the existence of a nearby nightclub, Big Daddy's Lounge, you still have the same scenario as L'Jua where alcohol can only be consumed inside its door and not beyond.

When considering economic development, one needs to examine its overall impact.  Oftentimes, our desperation leads us to encourage any type of economic activity, as long as it creates jobs and revenues.  However, one must understand that certain actions can hamper future economic development.  Just because East Albany is relatively depressed today, that does not have to be the case 5, 10, or 20 years later.  Remember we will be seeing a new Walmart constructed nearby and the Marine Corps Logistics Base is also expanding.  This has the potential to attract more population to Dougherty County and prospective homeowners are likely to turn a dismissive eye to areas that have too many liquor stores.  After examining the merits and downsides to Rowe's proposed liquor store, I see its denial as eventually a net benefit to both East Albany and the ASU community.