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Bootleggers, Baptists, and televangelists: there's a new player in Yandle's classic dynamic.

Article Excerpt
In 1998, 46 state attorneys general, together with a group of private attorneys, reached a Master Settlement Agreement with Philip Morris, R.J. Reynolds, Brown & Williamson, and Lorillard, the nation s four largest cigarette manufacturers. The agreement effectively imposed a hefty tax on smokers nationwide to fund billions of dollars in payouts to the states (and the participating private attorneys) and created barriers to entry into the cigarette business to protect the signatories from price competition. The agreement included a model statute that states had to adopt in order to receive the cash, foreclosing the opportunity for state legislatures to exercise independent review of the settlement. One observer of the agreement described it as "the largest privately negotiated transfer of wealth arising out of litigation in world history."

The settlement and proposed statute substituted a private agreement for the normal processes of regulation and taxation. They dramatically reduced the public's opportunity to participate in both and to hold accountable those responsible for regulatory burdens and tax increases. How Americans ended up with regulation and taxation without representation is a story of "bootleggers, Baptists, and televangelists."

BOOTLEGGERS AND BAPTISTS

In 1983, economist Bruce Yandle published an article in Regulation entitled "Bootleggers and Baptists: The Education of a Regulatory Economist." In the article, Yandle set out a crucial insight of public choice theory using the metaphor of the implicit coalition of bootleggers and Baptists behind laws that forbade liquor sales on Sundays. He noted that despite their quite different views on liquor generally, bootleggers and Baptists shared a common interest in restricting Sunday sales. The Baptists, of course, opposed liquor sales generally for moral reasons. The bootleggers wanted to restrict competition on Sundays from legal liquor sellers. While the bootleggers could hardly lobby explicitly for Sunday closing on the grounds that it would allow them to charge more for their product, they could use Baptist arguments to support politicians who publicly supported Sunday closing laws. The implicit coalition of bootleggers and Baptists thus married the economic muscle of the bootleggers to the publicly acceptable policy arguments of the Baptists, allowing both groups to achieve a policy objective neither was strong enough to obtain on its own. Much regulation, Yandle surmised, is the product of similar coalitions.

The history of tobacco regulation includes quite a few episodes of bootleggers-and-Baptists coalitions in the 1960s and 1970s. While there were sporadic efforts to suppress tobacco use almost from the time it appeared in Europe--James I of England published A Counter-Blaste to Tobacco in 1604, denouncing smoking as "a custom loathsome to the eye, hateful to the nose, harmful to the brain, dangerous to the lung, and the black stinking fume thereof, nearest resembling the horribly Stygian smoke of the pit that is bottomless"--serious regulatory efforts appeared in the United States only in the 1960s. Prior to then, smoking was a widely accepted practice that government at all levels mostly ignored. Indeed, the federal Food and Drug Administration had been explicitly foreclosed from regulating tobacco when it was created by the 1906 Pure Food and Drug Act and the agency consistently foreswore any jurisdiction over smoking even after the 1938 Food, Drug and Cosmetic Act granted the agency powers over "articles (other than food) intended to affect the structure or any function of the body," a definition that arguably could have been read to include cigarettes as nicotine delivery devices. When confronted with proposed amendments to the food and drug laws to give the FDA jurisdiction, Congress repeatedly rejected such efforts.

A 1953 study of the impact of the tar from tobacco smoke on mice prompted widespread discussion of health concerns about smoking. Responding to the demand for safer cigarettes, manufacturers introduced low-tar brands and added filters to existing brands, resulting in what became known as the "tar derby," an expensive competition to improve safety. When anti-smoking groups demanded government action, however, the tobacco companies were able to negotiate a deal with the Federal Trade Commission to ban all tar and nicotine claims from cigarette advertising, short-circuiting market pressures for safer cigarettes by eliminating health effects as a margin for competition. Although the FTC touted the ban as an example of "industry-government cooperation in solving...

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