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A rchive Date
[ 07-06-2005 ]
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[ Ecology ]

http://www.abetterearth.org/article.php/891.html

Core Concepts

Bootleggers & Baptists Reprise

by Max Borders

1) What do coal companies and environmental groups have in common?*

2) Why did consumer-safety advocates team up with a lawnmower manufacturer?

3) Why would leaders of developing nations support the

Kyoto Protocol

? **

Back in 1983, an economist named

Bruce Yandle

was working at the Federal Trade Commision. He had seen a couple of administrations come and go. One thing he had observed during his time in the government was a series of strange coalitions between very different special interest groups. Such strange bedfellows didn’t seem like they would have anything in common on the issues. However, being on the inside, Professor Yandle was able to look a little deeper into this phenomenon.

The answer to questions 1), 2), and 3), is:

concentrated benefits that flow from government regulation.

You see, whenever two interests groups team up on some issue, we should be suspicious; as each has something to gain from their favored regulation getting passed.

In the May/June 1983 issue of AEI’s

Regulation,

Bruce Yandle set out his particular take on public choice theory called “

Bootleggers and Baptists

,” which may be one of the best analyses of these unholy alliances.

OK, think of everything you’ve learned about the prohibition era: Recall that sales of alcohol (a government regulation) were strictly prohibited. Some of the most outspoken supporters of alcohol prohibition were religious folks – i.e. Baptists. The Baptists had what they thought were ethical grounds for their position on the liquor ban. After all, many saw it as a destructive force in their communities. But standing behind the Baptists in the picket line were others demonstrating in favor of prohibition, albeit for very different reasons. Those people were (you guessed it):

the Bootleggers.

The Bootleggers had an economic interest in prohibition. If sellers could legally produce alcohol, there would be stiff competition, and the Bootleggers would not be able to profit as handsomely from their illicit activities. Legal liquor producers were, after all, the

competition.

And while bootlegging liquor was risky, it wasn’t too risky to go underground—especially since hard drinkers and alcoholics were willing to pay a premium for just about anything they could get their hands on. (When supply goes down, price goes up—aka the

Law of Supply & Demand

That’s why you would have found Bootleggers standing in the picket line despite no particular interest in the relative ethics of alcohol consumption. Instead, they stood to benefit from government regulation while everyone else suffered the costs. But the moral of Professor Yandle’s story doesn’t stop with simply pointing out the unholy alliance. He asks us to look at little deeper at the unintended consequences of this regulation…

First, the Baptists didn’t get what they wanted. If anything, communities were made far worse off by the crime and deterioration associated with moonshine stills, organized crime, and persistent alcoholism (often exacerbated by the hard liquor sold on the black market). Second, if the Bootleggers didn’t end up in jail, they made big profits to be sure. But moderate drinkers and an entire sector of the economy (legal beverage producers) suffered terrible losses, not least of which were some of their personal freedoms. In short, prohibition didn’t work. Prohibition was therefore repealed in 1933.

When one looks hard enough, parallels to the Bootleggers and Baptists account can be drawn with all sorts of issues. And the parallels don’t stop with the dubious coalitions between moralizers and those out to use government to get rid of their competition. They extend to the terrible

unintended consequences

of regulations designed to further the “public interest.”

Take, for example, the fictional case of the Green activists (Baptists) and the gas-engine manufacturer (Bootleggers). Suppose, in this case, you are a gas-engine manufacturer (who competes with diesel-engine makers). The government is considering regulation of diesel engine emissions (to the dismay of diesel engine makers, your competition). Of course, Green activists want diesel emissions to go down, too. So what makes sense for you to do as a gasoline engine-maker? That’s right:

support the regulation of diesel emissions and use the power of the Green lobby to your advantage.

You can throw your money behind the legislator who wants to regulate diesel, because you know the increased cost of the regulation to the diesel manufacturers will send business your way. But you can also join with environmental groups in the name of "cleaner air" and hide behind their picket signs. This dubious coalition is just another example of the problems of special interests predicted by

public choice theory

, as well as the Baptists and Bootleggers story.

Here's an additional problem: because of this legislation, there are more gasoline-engine pollutants in the air because there are more engines sold using gasoline. Government has reduced the effects of one problem, only to have problems come back somewhere else. This is known as the problem of

unintended consequences

What's worse, diesel truckers who can't transition to gasoline engines and can't afford the more expensive diesels (post regulation) will continue outfitting and repairing older diesel trucks because they’re less expensive. The result? Older trucks throw out even more dirty diesel air! The problem, in the end, is worse due to the regulation. The regulatory costs are dispersed onto you and me. Now we're paying more for goods and services hauled by trucks even though there has been no environmental improvement overall.

Isn't there another way?

*Ackerman and Hassler's

Clean Coal, Dirty Air

gives a good account of this.
**Bruce Yandle's

Bootleggers, Baptists and Global Warming

gives a broader answer to this question.

Further Readings:

1. Bruce Yandle's original

Bootleggers and Baptists

2. aBetterEarth on

Public Choice Theory

3. James Buchanan on