In Norway there is a state owned wine monopoly, Vinmonopolet, which has a monopoly on all beverages containing more than 4,75 % alcohol. As we know, monopolies tend to give higher prices and the alcoholic beverage prices in Norway shows that Vinmonopolet is no exception to this. Eurostat studies actually show that Norway is the most expensive country in Europe for alcoholic beverages with prices 259 % higher than the average price in Europe. Although Norway is more expensive than the average for most goods, the price of alcoholic beverages stands out. As a lot of consumers rage about the high prices and the inconvenient opening hours of Vinmonopolet, we should ask ourselves if Vinmonopolet is all bad, or if it is actually economically beneficial for our society.
To get a deeper understanding of this question, we first state the obvious: with alcohol come problems. When people get intoxicated, they hurt themselves and others and cause damage more easily. In the cases of alcoholism, people are also less likely to contribute to the community. The question to ask is therefore: who will pay for these negative effects of alcohol? Who will pay the hospital bill for the reckless intoxicated guy falling down the stairs? Who will make sure the alcoholic old man has a house and enough money to support himself?
In a lot of countries, the individual him/herself will pay the hospital bill, and there will be no social government to support you with a house and monthly income when you are not able to work. Thus, the consumer him/herself pays (at least close to) the actual costs of alcohol consumption. However, this is not the case in Norway. Since every Norwegian is entitled to free health care and governmental support if we cannot work, the cost of one man’s abuse of alcohol will be a cost of the society. The tax payer’s will have to cover the medical bill of the guy falling down the stairs, and the house for the old alcoholic man. Hence, the consumer of the alcoholic beverage does not pay the true cost of consumption, but pushes some of these costs onto the society.
In the case of Norway, this means that if we had an open market for alcoholic beverages, the consumer would pay enough money to cover the seller’s economic profit, but he/she would not cover the cost that society incurs when alcohol is consumed. The economic logic behind the monopoly is therefore to reduce the consumption and negative effects of alcoholic beverages through high prices and restricted availability, and to make the consumer pay as much of the actual cost as possible. From an economic perspective, the wine monopoly can therefore be a good thing for you and me as tax payers in a social country. If it is the most efficient way to reduce the negative effects of alcohol will be another discussion.