Bootleggers & Baptists in the Garden of Good and Evil

Understanding America’s Entangled Economy

Capitol Hill Campus

May 20, 2015

Exploring the Entangled Economy

KUDZU

Growth Policy Needed

Progressive Policy Institute president Michael Mandel responded: “Based on today’s release from the BLS, ten-year productivity growth has now plunged to 1.4%, the lowest level since the 1980s. By comparison, ten-year productivity growth was 2.2% when Bill Clinton left office at the end of 2000, and hit a high of 3% at the end of 2005.”

Is there a Wizard???

• Bootleggers & Baptists

• Good & Evil?

• Evolving Theory

• Recognition

• Effects

What do we mean by Bootleggers & Baptists?

BOOTLEGGERS & BAPTISTS

Unvarnished special interest groups cannot expect politicians to push through legislation that simply raises prices on a few products so that the protected group can get rich at the expense of consumers. There must be a better story! Efforts to obtain special favors must be fortified with public interest stories. Moral issues are offered as the reason for regulating. And the public interest may be served…a bit. (Bruce Yandle. 1983. Bootleggers and Baptists.)

Garden of Good & Evil?

Bootleggers & Baptists is a transmission theory

Politician/Brokers

Interest Groups

Broker first has a transfer knowledge problem. Then, a justification problem

Why Command and Control?

Targeting Benefits with Regulation

"Most of our business comes from wine sales so the legislation would definitely hurt smaller businesses like this," says Ryan Hollencamp, University Liquor.

"We don't see that alcohol is bringing a lot to the table that's benefiting our culture, but we are seeing a lot of damage," says Dr. Dan Riley, at Calvary Baptist Church

Baptist churches join liquor stores to fight supermarket wine March 4, 2009. WATE Knoxville.

http://www.wate.com/story/9949778/baptist-churches-join-liquor-stores-to-fight-supermarket-wine-salessales

Noble Energy, Anadarko, Encana Support Tightening Colorado Air Rules

Cathy Proctor, Denver Business Journal, Feb. 13, 2014

Three of Colorado’s biggest oil and gas companies and a national environmental group are maintaining their support of new, tighter regulations the state is proposing. The rules are meant to cut pollution from wells pipeline and processing plants and improve air quality across the state.

Colorado adopts tougher air rules for oil, gas industry

Bruce Finley, The Denver Post , Feb. 23, 2014.

Colorado adopted tougher air pollution rules for the oil and gas industry — the first in the nation to cover methane, a gas linked to climate change.State air quality control commissioners voted 8-1 on Sunday to pass the rules with the support of leading operators Anadarko Petroleum, Noble Energy and Encana.

But they did so over the protests of much of the oil and gas industry, including the powerful Colorado Oil and Gas Association and Colorado Petroleum Association trade groups. The Environmental Defense Fund led the creation of rules, which withstood COGA and CPA challenges.

Why Big Tobacco Is So “Concerned” about E-Cigs and Your HealthThe Unholy Alliance of Cronies and Busybodies Strikes Again

Nick Zaiac March 24, 2015

“When it comes to e-cigs, Big Tobacco is concerned for your health,” writes Martinne Geller for Reuters. Her article attempts to explain the recent trend of tobacco companies working with the US government and public-health advocates for more stringent regulation of electronic cigarettes (e-cigs).

Just days before this Reuters report hit the internet, a team of well-known professors of regulatory policy released a report explaining why this alliance would form. The answer lies in the familiar parable of “Bootleggers and Baptists” laid out by Bruce Yandle in the journal Regulation. Coincidentally, it is this same journal that would publish the report on e-cigarettes 22 years later.

Simply put, industry incumbents seek regulation to keep upstart competitors at bay, while moralizers (the “Baptists” in the parable, or anti-tobacco groups today) seek to regulate the industry to make selling products they dislike more difficult. Both sides seek regulation, but for very different reasons.

Mr. Putin and Hydraulic Fracturing

Speaking to a 2013 London economic conference, Russian President Vladimir Putin sounded a green alarm about the use of hydraulic fracturing for recovering natural gas: “If you frack, black stuff comes out of the tap.” A host of environmentalists would likely endorse Putin’s concern for drinking water purity. As stated on the Sierra Club’s web site: “Fracking for natural gas damages the land, pollutes water and air, and causes illness in surrounding communities. It is also a major threat to our climate…We need to move beyond natural gas.”

Quote from Robert Zubrin. Putin’s Anti-Fracking Campaign. National Review. May 5, 2014. http://www.nationalreview.com/article/377201/putins-anti-fracking-campaign-robert-zubrin.

Green Groups Go Red, Team With Putin To Fight FrackingGreen Groups Go Red. Team with Putin to Oppose Fracking.Investors Business DailyJanuary 27, 2015

http://news.investors.com/ibd-editorials/012715-736562-environmental-groups-take-russian-money-to-oppose-fracking.htm

[T]he anti-fracking movement has received funding from the fossil fuel industry. But the source of funds isn't a U.S.-based company. The money is from fossil fuel concerns linked to a country that is emerging as an enemy of America.

A shadowy Bermudan company that has funneled tens of millions of dollars to anti-fracking environmentalist groups in the United States is run by executives with deep ties to Russian oil interests and offshore money laundering schemes involving members of President Vladimir Putin's inner circle," the Free Beacon reported Tuesday. Russia and U.S. environmentalist groups have a common goal: They both want to see fracking shut down in the U.S. Russia wants to stop it because it's hurting that country's oil and gas industry.

The green groups oppose fracking simply because they loathe fossil fuels and the benefits they bring — though, apparently, not enough to stop taking Russian oil money, a fact that calls into question their integrity.

It's a bootleggers-and-Baptists relationship, in which two groups with seemingly opposite interests team together against a mutual foe. The Baptists, who want restrictions on the sale of alcohol, have common ground with the bootleggers, who know that the Baptists' prohibition of legal sales pushes business their way.

Bootleggers Subsidizing Baptists

Teamsters fund Sierra Club in 2009 fights NAFTA’s relaxation of trucking rules.

Chesapeake Gas and American Gas Association in 2012 provides $26 million subsidy to Sierra Club beginning in 2007 in an EPA struggle to eliminate coal-fired utilities.

United Arab Emirates funds 2012 Promised Land, an anti-fracking movie developed to build support for regulation limiting use of fracking to obtain natural gas and oil from deep shale deposits.

The Data

Budgetary Costs of Regulatory Agencies, 1960 -2015(2009 Dollars)

Susan Dudley and Melinda Warren. George Washington University, Center for Regulatory Studies, 2015. 2015 Regulators' Budget: Economic Forms of Regulation on the Rise. http://regulatorystudies.columbian.gwu.edu/2015-regulators-budget-economic-forms-regulation-rise

Shall. Must. May not. Prohibited. Required.

What about the Effects?

Patrick McLaughlin

Natalie Scholl, AEI, September 2, 2014. How Regulation Smothers Productivity Growth, in One Chart. http://www.aei.org/publication/how-regulation-smothers-productivity-growth-in-1-chart/print/

Source: Office of Advocacy, U.S. Small Business Administration, from data provided by the U.S. Bureau of the Census, Statistics of U.S. Business.

UNDERGROUND ECONOMY

Richard Cebula and Edgar L. Feige. 2012. America’s Unreported Economy: Measuring the Size, Growth and Determinants of Income Tax Evasion in the U.S., Crime, Law and Social Change. April, 2012: 265-286

How do you get untangled?