Bootleggers & Baptists. Bruce Yandle

At least that is one explanation.

      A more subtle explanation exists, however. First, regulatory activity is a growth industry. Growth in Bootlegger/Baptist media references is a product of that industry. Because of this growth, an extensive and dense lobbying network has been built that now encompasses every significant part of America’s political economy. Instead of investing in new plants, private hospitals, and universities and taking their chances as capitalists in a relatively free market, Bootleggers and Baptists prefer regulations that wall out competition. They want subsidies that keep weak and obsolete enterprises afloat, and when things still don’t work out well, bailouts paid with taxpayer dollars. Put another way, Bootleggers and Baptists, just like other normal people, respond to incentives. Lobbying for pork often pays a whole lot better than struggling to bring new and better goods to market—at least in the short term. Put another way, political incentives cause Bootleggers and Baptists to become anti-capitalists, participating in what former Office of Management and Budget (OMB) director David Stockman and others term “crony capitalism” (Moyers 2012). In that sense, the count of Google hits is a crude barometer of capitalism’s health. More hits mean poorer health. We are pleased that the Bootlegger/Baptist theory is part of a growing conversation on regulation but alarmed that Bootlegger/Baptist interaction is occurring at such a high pace.

      Other commentators are alarmed as well. Writing in Newsweek magazine, George Will (2009) called attention to the theory and applied it to health care legislation funded by an increase in the federal cigarette tax, implying that the government may need more tax-paying smokers. Making reference to our theory, Max Borders (2012) proposed the development of a crony capitalism mitigation index. Borders even devised components for the index that would include the dollars per employee firms receive from government grants and contracts along with the campaign donations, per employee, contributed to aspiring presidents. After commenting briefly on California’s approval of funds for initiating a bullet train in the Central Valley with green jobs justification, Peter Gordon (2012) recommended that a Bootlegger/Baptist prize be awarded annually to recognize the most egregious examples of wasteful political action.

      We aren’t quite ready to manage an annual contest for the ugliest special interest engagements, but we are convinced that the rising tide of crony capitalism, or what we would call Bootlegger/Baptist capitalism, is drawing some seriously critical attention to capitalism itself. Capitalism has taken lots of hits recently. Everything from bailed-out banks and auto companies to subsidized solar product firms that fail spectacularly leaves the public with the feeling that the marketplace is seriously flawed. Anti-capitalist messages seem ubiquitous. Yet the proposed remedies for the system’s failings all seem to involve more government regulation, which means more opportunities for Bootleggers and Baptists to line their purses with transferred rather than newly produced wealth.

       How the Book Is Organized

      With capitalism under misguided attack and with just over 30 years having passed since Bootlegger/Baptist theory first saw the light of day, we think it is time to update and add new muscle to the theory. This book seeks to do more than retell the Bootlegger/Baptist story. A lot has been learned about regulation over the last 30 years as a host of empirical studies and new economic theories have produced new insights. We seek to include the essence of this work in our book—but not just for the sake of padding our bibliography. Rather, weaving new knowledge into an old theory extends the theory and enables us to offer more carefully structured explanations of what is going on in our world—and why capitalism, the most productive way to organize wealth production that improves human well-being, is again threatened.

      Our aims in this book are the following:

      • To provide a richer, more detailed presentation of the theory and thereby situate it within a growing body of literature that seeks to explain government action in ways that yield richer forecasts of regulatory outcomes

      • To present an illustrative collection of Bootlegger and Baptist episodes, organized in categories that can be linked to empirically observable economic effects

      • To show that our account is not just a theory of political economy but rather a fundamental theory of human behavior that can be found beyond the halls of government because it emerges from basic and universal evolutionary forces

      • To provide a series of in-depth applications that demonstrate the power of the theory in illuminating old and new regulatory episodes in a variety of governance situations

      Our book has two parts. The first part focuses on theory while providing numerous applications. Chapter 1 describes federal regulation’s explosive growth during the 1970s and 1980s, when the theory was germinating, and presents an array of Bootlegger and Baptist stories stretching from Magna Carta to President Barack Obama’s 2012 efforts to coordinate U.S. energy producers. We organize these stories into four modes of Bootlegger/Baptist interaction, which we use throughout the book. The chapter also provides evidence of regulation’s effects on U.S. gross domestic product (GDP) growth.

      Chapter 2 connects the theory to the discipline of public choice economics with a focus on the Bootlegger side of the story. Here we examine a stream of economic thought that has emerged to explain regulatory activities. We build this account by reviewing discussions of regulation that have appeared in the Economic Report of the President over 45 years. Doing so enables us to illustrate how the ideas of academic scribblers shape the mental models of presidents and their senior staff as they attempt to explain and communicate their actions. Chapter 3 speaks to the question: Why Baptists? Why do politicians find offering moral justifications necessary for actions they seek to take when serving their constituents? Why not an economic or patriotic justification? This chapter reaches into philosophy, experimental economics, and evolutionary psychology to answer the question and concludes that politicians must always offer a “Baptist” justification for their actions if they hope to survive in the political realm.

      The book’s second part is a collection of specialized case studies, each illustrating an important facet of Bootlegger/Baptist theory. Chapter 4 begins, naturally enough, with the struggles over sinful substances that gave our theory its name. Here we describe regulatory episodes involving alcoholic beverages, tobacco products, and marijuana. In each case, Bootlegger/Baptist theory explains how certain rules arose in the first place and how they disappear when a Bootlegger/Baptist coalition breaks down. The alcohol regulation story is about the industry’s successful cartelization by government, acting at the behest of moral lobbyists. Similarly, the tobacco story explains how anti-smoking crusaders successfully obtained regulation that actually strengthened the tobacco industry’s profits. And as strange as it may seem, the marijuana story is about efforts to legalize pot openly opposed by the illegal growers themselves, with an unwitting assist from moralists committed to the view that everyone must not get stoned. This chapter exposes how Bootleggers undermine and manipulate even the most seemingly pure social causes, all while appearing to be at odds with the Baptists who—typically, though not always—are rallying against them.

      Chapter 5 applies the theory to one of its most fertile fields—environmental regulation. We focus on the debate over global climate change, beginning with the 1997 Kyoto Protocol and then describing frustrated attempts by various interest groups to establish stricter U.S. regulation of greenhouse gas emissions. The story we tell is about Bootleggers who seize upon such regulations as a way to gain markets and grow profits, joined by environmental Baptists who lobby for emission reductions. Ours is a story of coalitions that form and split, of Bootleggers who openly join Baptist efforts, and ultimately of failed efforts to “do something” about carbon emissions. We show how the ultimate results of noble-minded efforts to effect change in the public interest prove to be neither noble nor in the public interest, but instead a product of Bootlegger manipulation.

      The financial collapse of 2008 and the organization of the Troubled Asset Relief Program (TARP) are the subject of chapter 6. TARP’s injection of federal funds into banking and other institutions was devised during some of the darkest days of the financial crisis, when White House officials were operating in uncharted territory. With all the constitutional barbed wire cut and pushed to the side, cabinet members acted to form cartels involving the nation’s largest financial institutions. Our theory is used to explain the rise