I agree with everything you said, but is worth mentioning that while, “There is put simply no way this experiment ends in a way that is positive for New Yorkers,” is true, the most likely outcome is that (a) the stores will open and consistently lose a small amount of money, relative to the NYC budget, (b) some small grocers or bodegas will be either priced out or receive city subsidies which incur another small cost on the city’s budget, and (c) customers will experience some kind of annoying quota or identity check system which prevents aggressive arbitrage, but which ultimately doesn’t make the stores unbearable.

This will indeed be far from Pareto optimal, and a slow drain on the city’s budget and local economy, but could be successful enough that the stores can remain in operation in perpetuity, which boosters will frame as a “win”

It could end up having positive effects on the population which could help with income for the city. I'm not an economist, but it seems possible to me