The economics of nobody goes there anymore, it's too crowded

Crowded Bar Economics

Crowded Bar Economics

Moneybox
A blog about business and economics.
Aug. 8 2012 11:03 AM

The Economics of Nobody Goes There Anymore, It's Too Crowded

The old joke about the place nobody goes anymore because it's too crowded is a joke for a reason, but it also captures some truth. You can see that from the Brightest Young Things list of the least-douchey bars in D.C., in which some entries come with the proviso that you should only go there on a weeknight when it's not so packed. The existence of that kind of phenomenon is a reminder that many cities could unlock a lot of additional prosperity by adopting a freer hand with the disbursal of bar and tavern licenses.

That's because new drinking establishments wouldn't just redistribute the existing stock of drinkers. As the drinkers redistributed out to more bars, the bars would become less crowded and people who are currently deterred by weekend crowds start coming out more. As you can see from the fact that bars don't close on weeknights, it can very much be profitable to employ a bartender to serve a relatively small crowd of people. In theory it's possible for the limiting factor to be the availability of real estate, but even though I'm generally obsessed with that subject it's hard to see that being the case here. Instead the issue is that bars need special licenses and the licenses are hard to get.

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Now they're not hard to get for no reason. People see them as a neighborhood nuisance. Which may be the case. On the other hand, it's not as if mayors and city councils have an abundance of cost-free options for creating jobs and raising tax revenue. And few cities seem to be trying to design their liquor licensing institutions in a way that seriously tries to balance the costs and benefits. If each bar has local costs and citywide benefits, and then you design a system that overweights local concerns in each individual decision then you end up with a city with many fewer bars than people actually want.