Corn ethanol, bootleggers & Baptists

Bruce Yandel’s Bootleggers and Baptists framework explains many odd informal political alliances. Corn ethanol is one example:

…corn ethanol has been the lucky beneficiary of an American political quirk, first pointed out by economist Bruce Yandle in a famous 1983 article in the journal Regulation. In the article, Yandle, now dean emeritus of the Clemson College of Business and Behavioral Sciences, recounted that, while he worked at the Federal Trade Commission, he noticed a funny thing about regulations that captured the public’s imagination and managed to endure. These regulations evolved not because of rational cost-benefit analysis, Yandle wrote, but because of odd alliances between what he called “Bootleggers and Baptists.”

The theory goes like this: during America’s long debate over alcohol in the first part of the 20th century, religious folks in shorthand, the Baptists provided a moral narrative for limiting sales. They sincerely believed government should support sobriety. They lobbied their representatives to enact Prohibition. That belief, however, sealed them into a marriage with the bootleggers, who were, in effect, rent-seekers profiting from rules that prevented law-abiding competition.

In 2005, ethanol plants consumed 14 percent of the nation’s corn crop. Producing seven times as much fuel, under Bush’s proposed mandate, would put the proportion close to 100 percent.

Yandle suggested that most regulations could be viewed in this light. Groups with moral motives provide cover for those who benefit economically (groups that, unlike bootleggers, typically operate within the law), even if the two sides don’t have much else in common. So far, this dynamic has propelled ethanol from obscurity to the center of American energy policy. Environmentalists play the Baptist role, urging governments to force us to be moral in our fuel choices. The Natural Resources Defense Council, for instance, has called ethanol “energy well spent”. Corn farmers and ethanol industrialists become the bootleggers, quietly enjoying the monetary green their questionable green status confers on them. (And, of course, you have the delightful irony of ethanol being alcohol, source of the real bootleggers’ lucre.)

From teachers’ union bosses pushing smaller class sizes “for the children” to banks cheering consumer-protection laws that crowd out small players, Yandle’s theory holds pretty well. In the politics of ethanol, though, the VCs and the biofuel entrepreneurs they are funding are creating a new twist to these odd alliances: they’re combining the bootlegger and Baptist roles.

I highly recommend Russ Roberts’ Econtalk interview: Bruce Yandle on Bootleggers and Baptists. For the original paper see Bruce Yandle’s Bootleggers, Baptists, and Global Warming for a
summary including full pdf link from the Political Economy Research Center.

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