Monday, March 05, 2007

The Bootleggers and the Baptists Stop for a Smoke

One of my favorite theories of regulation comes from Bruce Yandle concerning his story of bootleggers and Baptists. The latter offers a good public face for some new regulation, say no selling alcohol on Sundays because it is a vile drink and Sunday is a holy day. The former offers politicians the money to pull off the face, in this case breaking the law and selling alcohol on Sundays for an inflated price.

In the standard story, these are two distinct groups but what's common is when they are the same group with two different faces. Consider smoking.

The Baptist. Phillip Morris wants to make it virtually impossible to advertise cigarettes. Young people watch these ads and might be tempted to smoke!

The Bootlegger. Phillip Morris's Marlboro brand captures a good 40% of the market. By making it nearly impossible for consumers to learn about new brands, PM restricts any competition and maintains, or maybe even grow, its healthy market share.

Note that this bill is supported by Ted Kennedy, not exactly a favorite of tobacco companies.

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