The Economics of Unholy Alliances: Bootleggers and Baptists

The class-warfare crowd and tax lawyers don’t have a lot in common, but both groups oppose the flat tax. An even stranger unholy alliance involves the War on Drugs, which has the support of both the activists who despise drugs and the criminals who get rich selling drugs in the black market.

Professor Bruce Yandle explains this “bootleggers and baptists” phenomenon.

Professor Yandle, who is at Clemson University, even has a book on this topic, co-authored with Professor Adam Smith of Johnson & Wales University (no relation to has namesake, the author of The Wealth of Nations, at least to my knowledge).

One message of the book is that politicians often have noble-sounding reasons for the things they do, but closer investigation usually reveals that interest groups are the real beneficiaries.

In other words, the phenomenon of bootleggers and baptists is run-of-the-mill government corruption, an example of “public choice” in action.

What’s motivated me to write about this issue is a story from Petaluma, California. As reported by Axios, the city wants to ban new gas stations for the supposed purpose of fighting climate change.

Petaluma, California, has voted to outlaw new gas stations, the first of what climate activists hope will be numerous cities and counties to do so. …Expect more such ordinances, particularly in liberal towns. Grassroots groups are popping up with the mission of spreading this type of ban… “This is not a ban on the existing gas stations, which are providing all the gas currently needed,” Matt Krogh, U.S. oil and gas campaign director for the environmental group Stand.earth, tells Axios. …The city councilor who introduced the measure, D’Lynda Fischer, is quoted as saying: “The goal here is to move away from fossil fuels…” A Seattle-based group called Coltura, which aims to phase out gasoline altogether, is working on the issue locally and nationally. …In the 2020s, this is not the time to be expanding fossil fuel infrastructure,” Woody Hastings, co-coordinator of CONGAS, tells Axios. …He says his group has succeeded in blocking three applications to build new stations in Sonoma.

Given my views of climate activists, I don’t want to say this effort is noble. But I’m sure the average person might say this is a well-meaning crusade.

But let’s take a jaundiced look at what’s really happening. At the risk of being the skunk at a garden party, I’ll state that what’s happening, either in the town of Petaluma or in Sonoma County, will have zero impact on the climate.

But it could have a big impact on the owners of existing gas stations. They now have no reason to worry about new competitors. Which makes their gas stations more valuable and gives them greater leeway to raise prices.

Mr. Hastings, the climate activist quoted in the above excerpt, even acknowledged in the story that a ban would help existing stations.

“The problem with allowing new gas stations is we don’t really need them and they’re putting existing gas stations out of business.”

The bottom line is that consumers will lose because the government is limiting competition.

Which is good news for the bootleggers (the owners of gas stations that already exist) and the baptists (the green activists who feel good because they think they’re saving the planet).

P.S. There are countless examples of bootleggers and baptists working together in Washington.

• Big business and big labor supporting higher minimum wages (to screw over small businesses and low-skilled workers).
• Wall Street firms and anti-free market groups supporting Dodd-Frank (to raise compliance costs for small firms).
• Environmental groups and farmers supporting ethanol (a back-door handout for big agri-businesses).
• Drug makers and health insurance companies endorsing Obamacare (higher prices enabled by third-party payer)

The moral of the story is that it’s almost always insiders who benefit when politicians do something.