National: Phusion Projects, the makers of the now-infamous alcoholic energy drink Four Loko, have reportedly reached an agreement with the Federal Trade Commission (FTC). After making nice with the FDA/TTB by removing the stimulants from their product, the FTC warned that the size of the can could constitute a deceptive act. To avert another government attack, the makers of Four Loko have agreed to add a resealable top to indicate that the drinks hold multiple servings.
Also at the national level, Ken Burns’s newest documentary, “Prohibition,” has the media all atwitter with articles on modern-day issues from marijuana, jobs, and the ongoing discussion about removing the constitutional protection alcohol currently has, as do most economic activities, from discriminatory state laws. See my discussion of Prohibition’s present incarnations here.
California: Gov. Brown signs a law solving a nonexistent problem of alcohol purchase through automated checkout lines at grocery stores. As I wrote about last month, the California grocery store workers’ union has pushed this measure as a way to pressure on one of the state’s largest chains to allow workers to unionize.
Iowa: Higher-proof beer is now on tap in Iowa as the law that capped beer alcohol content at 5 percent was raised to 15 percent when former Iowa Gov. Chet Culver signed a bill into law in March 2010.
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In a recent article for the Mackinac Center for Public Policy, I make the case that many elements of Prohibition did not fade away after the repeal of the 18th Amendment. In his October 13 opinion piece for The Detroit News, former police chief Jerry Oliver proves my point by digging up an old alcohol myth — one that was used to force Prohibition on the nation. In short, Mr. Oliver expresses the belief that producers of alcohol only seek to have customers consume as much alcohol as possible, thereby making it necessary for the government to intervene in the name of “moderation.”
Historically, it was unscrupulous alcohol producers selling directly to consumers or in cahoots with bars to sell only their products, sometimes at artificially low prices, that fostered an environment for abusive alcohol consumption. It was these excesses that helped trigger the Prohibition backlash.
…Today, most states require producers to sell to state-licensed distributors who in turn sell to local retailers. Exceptions abound where specific states allow direct-to-consumer shipments from wineries…
Critics of this time-tested approach argue the system is antiquated, citing its roots to the last days of Prohibition. That’s like arguing the Constitution is antiquated because it was written in the 1700s.
While Chief Jerry Oliver is correct that Prohibition was a backlash against Americans’ increasing alcohol use (or at least the perception of increasing use) there is no evidence that the system of direct sales or “unscrupulous” producers were the cause of increased consumption. His claim that “tied houses” (saloons owned or operated by alcohol producers) caused people to drink more is the same old myth used by the Temperance movement to push Prohibition on the country. However, we now have a large body of historical evidence that seems to debunk this presumption. Using cirrhosis of the liver as a proxy, historians have found that drinking sharply decreased in the decade preceding Prohibition — even though tied houses still abounded. While incidences of cirrhosis declined further at the start of Prohibition, they rose again toward its end.
This myth of “unscrupulous” producers has been used to maintain the mandatory three-tier system that forces alcohol producers, like brewers, to rely on a middlemen — wholesalers — to get their products into bars, restaurants, and stores. The only real reason not to shift to a voluntary system is to protect the profits of middlemen, who wield considerable political power. A voluntary distribution system would allow small producers to skip the middleman and cut costs, resulting in lower prices for consumers.
Have a listen here.
The World Series of Poker is underway. The tournament is perfectly legal. And anyone over 18 can play poker in a casino. But it has been illegal to play the game online since April 15, now known to poker fans as Black Friday. Policy Analyst Michelle Minton goes over the controversy and explains why prohibition doesn’t work.
Have a listen here.
Michelle Minton, CEI’s Director of Insurance Studies, takes a whirlwind tour of alcohol regulations across the country. From Pennsylvania to Texas to Colorado, there are regulations at every turn. They do everything from raise revenue to tell people what products they can buy at what times, to shelter politically favored companies from pesky competition. In this way, alcohol is like most other sectors of the economy.
Prior to arriving in America I imagined this country as being the land of the free. But somehow, it turned out this was a wrongly held reputation. Social restrictions and legal pressures have transformed the free Wild West into a regulated state. It seems like good things are banned. How can limiting alcohol consumption to those at least 21 years old protect teenagers when we know that in Europe alcohol related accidents are far more frequent in countries where the drinking age limit is high and strictly enforced? Where does this American rule come from?
Everyone has heard of bootleggers Al Capone and Lucky Luciano — big faces during the Prohibition period. Both built their empires on the prohibition of alcohol. Prohibition lasted for 13 years, bringing an era of gangsters and mob wars, underground activities and crime. It is widely acknowledged that alcohol is a part of Western societies, and that societies’ efforts to regulate its consumption are futile and disastrous.
Coming out of the Prohibition America’s mechanism of “laboratory states” was alcohol regulation. The concept of laboratory states is fundamental to the good functioning of the United States. It implies that every state can test-run a regulation in its own way (e.g., taxes, speed limits, etc.) in order to see what works best. In 1984, this privilege was restrained through the National Minimum Drinking Age Act. The law put restrictions on highway funding set up under the Federal Aid Highway Act (which created the Interstate system in 1956). The states could enjoy these funds if they adopted specific laws on alcohol sale and consumption.
I still wonder whether the 21-year restriction is a simple act of Puritanism or misplaced good intentions. I can understand the point made that adults want to prevent teenagers from falling for the “vices” of alcohol. We all know that there are many problems linked to abusive alcohol consumption, such as binge drinking, alcoholism, accidents, violence, and many others. But having the minimum drinking age set at 21 will not solve them. On the contrary, it will push youngsters into illegal paths.
A person that has broken a law and enjoyed it is very likely to do it again. Now, if a teenager buys alcohol with a fake ID or gets someone of age to buy it for him, what stops him from taking any further illegal action? Simply: laws of this type essentially condition people from a young age to disrespect the law. Isn’t prevention or limitation a way to awaken curiosity? Being told not to do something can in fact drive teenagers, an already high-risk demographic, to engage in more risky behavior. Positioning alcohol as a social “forbidden fruit” will merely get more minors to drink in secret – without the benefit of having parents around to monitor behavior.
One of the problems with current immigration laws is that they raise the price of immigrating legally. Basic economics tells us that when something costs more, people consume less of it.
That’s why so many of America’s immigrants are turning to dangerous but cheap immigration black markets to enter the country. This is a problem with an obvious solution. In today’s American Spectator, Alex Nowrasteh and I make the case that lowering the cost of legal immigration through liberalization will reduce the amount of illegal immigration, and shrink cruel black markets.
Basic economics wins again.
It is illegal for grocery stores to sell wine in the state of New York. Only liquor stores are allowed to sell the stuff.
This regulation, a relic of Prohibition, lives on because of one of the central concepts in public choice theory: diffused costs and concentrated benefits.
The benefits are concentrated in one constituency: liquor stores. Regulations give them get millions of dollars in free business. That means they have millions of reasons to lobby to keep the status quo.
Consumers, on the other hand, are hurt by the ban by the exact amount that liquor stores benefit. But that hurt is spread far and wide. No one consumer feels enough pain to hire a high-priced lobbyist to open up the market.
That means New York’s misguided restrictions on competition are likely to continue for some time. It’s hard to imagine an aggrieved shopper suing New York’s wine cartel because she has to make an extra trip to get the wine on her grocery list. Or because she pays a bit more than if she lived in a different state.
(Hat tip: Jonathan Moore)
It is illegal to buy more than 288 bottles of wine per year in Ohio.
If you drink that much wine by yourself, then you have more important problems to worry about than regulatory compliance. But if you host of lot of parties or are building up a wine collection, you run a real risk of hitting the limit.
“The level was set to establish what would seem to be a reasonable amount for personal use,” according to the Ohio Wine Producers Association’s executive director, Donniella Winchell.
Since the law is somewhat difficult to enforce, no violators have yet been found. But when there are, the Ohio Department of Public Safety Investigative Unit will come knocking. Because while buying 288 bottles of wine is perfectly fine, buying 289 poses a threat to public safety.
(Hat tip to CEI colleague Megan McLaughlin)
In a time when the federal government’s involvement in the economy appears to only grow, it’s encouraging to see at least one industry where the trend may soon move in the opposite direction, even if at the state level. Virginia Governor-elect Bob McDonnell has proposed priviatizing the state’s liquor stores — known as ABC stores, for Alcoholic Beverage Control.
As Garrett Peck, author of The Prohibition Hangover, notes in The Washington Post, this is long overdue. (The op ed is due to appear in the Post‘s Sunday edition, but it’s already online.) The ABC system, which several states adopted after the end of Prohibition in 1934, is today an anacrhonism that doesn’t even work very well.
ABC was once about promoting temperance, but the abstinence movement has basically died. Two-thirds of American adults drink alcohol. In reality, Virginia ABC is now about generating revenue for the state — and at that, it isn’t particularly efficient. Virginia can make more money — as can localities — by privatizing the system, both from auctioning the licenses and through ongoing tax revenue. The private sector will assume the operating costs, shifting ABC authority to where it properly belongs — regulation and enforcement.
And then there are the consumer implications.
Virginia’s ABC stores are a tower of mediocrity. They are centrally managed retail outlets that would have been palaces in the Soviet Union, but today they are anachronistic. They offer highly limited choices, often lacking exciting new brands or those with a cult following. Staff members generally aren’t knowledgeable about how to mix drinks or make cocktails. And the prices are artificially high because there is no competition: The state decides what to charge.
For more on The Prohibition Hangover, see here.
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