Tuesday 9 December 2008

Windfall gains for existing take-away food outlets!

From The Metro:

A crackdown on takeaways to tackle childhood obesity is threatening the future of the high street, business leaders warned on Monday. The move to block fast food outlets opening within 400m of schools, youth centres or parks will lead to streets 'riddled with charity shops and hairdressers'. Although the restrictions are backed by children's secretary Ed Balls and chef-turned-healthy-eating-campaigner Jamie Oliver ...

I've bolded the key word there for you.

The mechanism by which free markets ensure fair quality and prices is competition. So existing take-aways in the now restricted areas will be protected from new competition. Inevitably, some take-aways in those areas will go out of business*, so the remaining ones will have an ever larger share of the captive market. These survivors can respond to this by keeping prices constant (and having longer queues) or by hiking prices slightly (there's no point in letting the queue get so long that people walk out of the door again), or indeed they might reduce quality slightly, or any combination of the above.

Further, most of these shops are tenanted, so if you're the landlord of one of the survivors, you'll be able to hike the rent to capture part of the super-profits, enhancing the value of your freehold without you lifting a finger. Brilliant. It's like Land Value Tax in reverse.

* I'm assuming that councils won't actually force existing take-aways to close, even though this would have much the same effect.

3 comments:

Simon Fawthrop said...

I wonder if any of the existing businesses lobbied for this? If they didn't I'll bet they suport it.

As I'm still ill and feeling especially cynical, I wonder if any of the property or fast food businesses in the area?

Anonymous said...

According to that 'Metro' article, it isn't going to be plain sailing for the existing shops either:

"New rules on littering, hygiene and waste disposal would be brought in for those fast food shops already open."

Anonymous said...

I've long believed that fast food outlets should be responsible in cash terms (or physical terms) for clearing the neighbourhood of the negative externality of their litter. Another case for Pigou taxation if ever there was one. Let those who pigout, pay :-)