Cracker Barrel on Regulating Responsibility

Business and the Environment

“Bootleggers and Baptists”

In Bruce Yandle’s “Bootleggers and Baptists” dichotomy Baptists seek to limit alcoholic beverage consumption by banning liquor sales on Sundays.  Bootleggers, entrepreneurs who run alcohol from Canada, make their own or buy liquor when it is legal and sell it when it is not, are keen to support this measure because it means less competition for their contraband.  In this scenario, alcohol consumption did not decrease — sales for the bootleggers increased.  The great thing for Bootleggers is that they can count on Baptists to ensure that anti-liquor laws are enforced.

How does this play out in the social and environmental regulatory environment?  Does command-and-control enforcement vs. common law control give both Bootleggers and Baptists an advantage?  Do standards raise the barriers to entry of new firms in the marketplace and give a cartel-like advantage to existing producers?  Common law is perhaps too discretionary for Baptists – it’s easier to regulate from the federal level, you might save on advocacy by a factor of 50.

In practice, Bootleggers in the forestry industry might set aside (comparatively) small parcels of land for exploitation and claim to protect the spotted owl on the protected lands.  Baptists have the protection standards they celebrate and Bootleggers have raised transaction costs for their competitors by limiting the resources available.  Win-win?

The B&B theory claims to be a theory of how the world will work – not necessarily how we would like it to work.*  Consumers pressure the pharmaceutical industry for FDA regulations, environmental groups decrease competition for new farm chemicals to enter the market, Wal-Mart lobbies for a federal minimum wage increase so that they aren’t the only ones with decreased profit margin, and so on.

*”The footnote says that rhetoric matters a lot in the world of politics but that neither well-varnished moral prompting nor unvarnished campaign contributions can do the job alone. It takes both.” – Bruce Yandle, “Bootleggers and Baptists in Retrospect”, Regulation 22 (3): 5-7.

What are the moral implications for Baptists?  Do we care how the air becomes cleaner?  Maybe we should identify the Bootleggers and design regulation for mutual benefit.

Originally posted: 2/19/10

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