THE ABROGATION OF MARKETS IN BRITISH COLUMBIA

Jack is spending some time in British Columbia. He writes that the provincially operated auto insurance is, far pricier than the private Ontario system, in part because of subsidies to bad drivers who wouldn't be insurable there. This is to be expected. If the risk pool includes people who impose high costs on the system, and if they cannot be charged premia to match those costs (probablistically), then everyone else will have to bear a share of those costs. It is inefficient because the system tends to encourage too many risky drivers to be on the roads; it also, because of the higher insurance premia, tends to discourage some very low risk drivers from driving.Jack continues,Privatized alcohol businesses compete with the Provincial outlets. Prices about 25% higher than Ontario though, flying in the face of the usual predictions. This seems unlikely to me. I know from nothing about the BC retail liquor business, but here are my suspicions:It is extremely unlikely that gubmnt and private retail liquor outlets compete head-to-head. One way the gubmnt stores can survive is if they are subsidized, directly or indirectly. More likely in this instance is that the prices are regulated and kept above the Ontario levels to guarantee the survival of the gubmnt stores. Otherwise the private outlets would compete the snot out of them.

http://econoclectic.powerblogs.com/posts/1191547058.shtml

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By EclectEcon