Cato’s Scott Lincicome methodically demolishes the mayoral candidate’s arguments for city-run grocery stores.
By the time Scott Lincicome has finished with them, there’s less left of some key arguments for New York mayoral candidate Zohran Mamdani’s city-run food stores than there was edible food on the shelves of a Soviet “supermarket.”
Lincicome outlines Mamdani’s cunning plan:
Mamdani has proposed a pilot program of five city-run supermarkets, one in each borough, to improve New Yorkers’ access to low-priced groceries—especially in so-called “food deserts” that lack healthy options. To achieve these goals, the stores would 1) operate on a nonprofit basis, buying and selling at wholesale prices; 2) be located on city-owned land (to avoid recurring rental payments); and 3) reduce transportation costs by utilizing centralized logistics and sourcing from local neighborhoods. Then, BOOM, socialist food paradise (or something).
Lincicome runs through a couple of Mamdani’s main arguments. Repeating them would take too long in a short post, but there is no paywall, so please take a look for yourselves. In brief, the grocery sector is already low margin and highly efficient, leaving little room for “profiteering,” although one of the real purposes of the Mamdani stores will be to act as bricks-and-mortar propaganda claiming that profiteering has been the name of the grocery game. And then there is the claim that the such stores could be oases in “food deserts,” a wildly exaggerated phenomenon: “According to the USDA in 2021 . . . the New York City area had just 3.5 percent of its low-income population living in supposed ‘food deserts’—one of the lowest shares in the country.”
Then there are the costs:
“Offering food items below cost would also necessitate endless subsidies and—as we know from explicit price caps—risk empty store shelves, long lines, and illicit resale markets, while potentially pressuring private stores to leave the affected area (thus demanding even more city involvement!). Using city land for unnecessary public grocery stores also imposes opportunity costs, as [here Lincicome is quoting his Cato Colleague Ryan Bourne] it “means fewer resources and less space available for more productive public purposes like housing, schools, parks, or other essential infrastructure, or else a forgone sale or rental value that could be accessed to give money back to taxpayers.”
And, of course, “New York politicians would have a strong incentive to use these new enterprises for political gain, compounding the risk of cronyism, corruption, and inefficiency.”
Lincicome highlights the way New York’s own rules stand in the way of increasing competition still further:
If New York and other places need improved grocery options, moreover, many simpler and better policy fixes can do the trick while offering broader community benefits and avoiding government-linked pitfalls. Indeed, as economist Richard Sexton just napkin-mathed in the Wall Street Journal, simply allowing Walmart to operate in New York City could—assuming it provided similar cost savings as it does elsewhere in the U.S.—reduce New Yorkers’ grocery spending by thousands of dollars per year (along with plenty of other pro-competitive effects too).
Such an approach, however, runs, Lincicome argues, against the ideological beliefs of many New York politicians, “and they don’t offer nearly the level of state involvement and political opportunity” offered by interventionist plans such as city-run supermarkets.
It’s the latter opportunity that counts. I don’t know whether those politicians (including Mamdani) actually hold the beliefs they profess so loudly, but I am pretty sure that they understand how proclaiming such ideas — and pursuing policies in keeping with them — can be a good pathway to power even if they prove to be economically destructive and work against the interest of those they are supposedly designed to help.
Rent control is the classic example of this phenomenon. Study after study has shown that rent control restricts the supply of affordable housing. To quote the Swedish economist, Assar Lindbeck, a Social Democrat, in 1971, “In many cases, rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.”
And yet, last fall, Kamala Harris proposed a version of rent control for the entire country. She (or her advisers) must have known how damaging such a policy would be, but they must have calculated that the political return to her of introducing or even proposing such controls would outweigh the political cost of the economic damage (including to would-be renters) they would bring in their wake. Never underestimate the extent to which the positive political value of an idea to its advocates can outweigh its likely negative economic consequences.
And so what we do we find in Mamdani’s program:
A majority of New Yorkers are tenants, and more than two million of them live in rent stabilized apartments. . . . As Mayor, Zohran will immediately freeze the rent for all stabilized tenants . . .
But of course.