How Philly Avoids the Misery of the PA Tavern Cartel

When I read that GQ named Philadelphia one of the nation’s 5 Best Beer Cities, I was puzzled.

How could this be true? Pennsylvania state law caps tavern licenses at 1 per 3000 people per County. Why is the city’s beer scene not hamstrung by this foolishness?

In many smaller PA cities, the depressing evidence of a liquor license shortage is unmistakeable.

Restaurants that would likely have an impressive beer list in any other state are relegated to embarassing BYOB status*. The best bars feature long lines or are overcrowded. Too many new restaurants go bust too soon since they are unable to rely on booze to cross-subsidize the food. Mexican restaurants with no margaritas have to compete with Mexican restaurants selling margaritas. It’s madness out there.

And worst of all, downtowns that “want” to be nightlife clusters too often fail to reach a critical mass of great bars and restaurants. It’s so bad that the state had to create special “economic development liquor licenses” for cities to sell to new bars and restaurants for *only* $50,000, instead of the usual $80-250,000 the licenses sell for. Naturally this leads to some nasty political skirmishes as license holders who paid the full price for their licenses resent the sale of special cheap licenses to their competitors.

How has Philadelphia avoided these problems, despite living under the same fake scarcity regime as the rest of Pennsylvania?

The secret is population density. Philly’s population was 1,526,006 as of the 2010 Census. That works out to about 508 liquor licenses across 135 square miles of land.

Contrast that with Lehigh County, whose population of 349,497 is spread across 347 square miles of land, affording it only 116 liquor licenses. Allentown has no hope of becoming a decent beer city with such a low density of liquor licenses.

Even Pittsburgh cannot become a truly excellent beer city with just 407 liquor licenses spread across 730 square miles of land in Allegheny County.

The ratio of liquor licenses to land in Allegheny County is a measly 0.55 – far short of the massive 3.76 ratio in Philadelphia County, and only a little better than Lehigh’s 0.33.

Relatively high population density is the key to supporting a deep bar and restaurant market in a general sense, since the more people who live nearby, the more eateries a neighborhood can support. There are just more customers around to sell food and drinks to when a neighborhood’s land parcels house a few dozen households, instead of just one per lot.

But higher population density is especially important in Pennsylvania’s cities, as a way to get around the stupid state liquor license cap. We need to put the pressure on the state to uncap liquor licenses, but city governments should keep in mind that they can improve the situation at the margins through pro-density land use reforms in their downtown districts.

*BYOB is also prevalent in Philly, so the city is not totally without symptoms of the liquor license cap’s malign effects.

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