Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics.

• Author: Carden, Art
• Position: Book review

Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics

By Adam Smith and Bruce Yandle

Washington, D.C.: Cato Institute, 2014.

Pp. xiv, 215. $24.95.

In 1983, economist Bruce Yandle offered an illustration in the journal Regulation that helped change the way economists think about public policy. Drawing on the history of Blue Laws and Prohibition, Yandle noted that public policies tend to be supported by "bootleggers," who saw their incomes increase as a result of a particular policy (as bootleggers did under Prohibition and under Blue Laws), and "Baptists," who supported public policies for moral reasons (Baptists tended to support prohibition and Blue Laws because they believed that alcohol was evil). Yandle used this illustration to explain some of the outcomes he observed during his "education (as) a regulatory economist" ("Bootleggers and Baptists: The Education of a Regulatory Economist," Regulation 7, no. 3 [1983]: 12-16).

According to popular opinion and too many undergraduate textbooks, governments regulate in order to fix market failures. This public-interest view, though, does not begin to explain the regulations we see in practice, many of which are at best unnecessary and at worst actually destructive. In the new book, Bootleggers and Baptists, Yandle teams up with his grandson, an economist at Johnson and Wales University, to survey the theory and evidence and to apply the framework to cases such as the English Factory Act of 1833, health reform, tobacco regulation, and the Troubled Asset Recovery Program (TARP) of 2008. They present us with a convincing story for why bootlegger-and-Baptist coalitions emerge, why the phenomenon is stable, and why institutional constraints on governments are necessary if we are to avoid waste.

Smith and Yandle argue that successful regulation sometimes requires "a respectable public-spirited group seeking the same result [to] wrap a self-interested lobbying effort in a cloak of respectability" (p. viii). Occupational licensing in Alabama provides a recent illustration with which I have some personal familiarity. The Johnson Center at Troy University is releasing, chapter by chapter, a series of studies for a volume titled Improving Lives in Alabama. The first is Daniel Smith's survey of the literature on occupational licensing, which argues that licensing restricts entry into the professions and raises incumbents' incomes. Bootleggers responded...