The Lucid Line

Economist Bruce Yandle proposed in 1983 that most economic regulation can be explained with a simple anecdote called "Bootleggers and Baptists." Many laugh his story off for its striking simplicity, but recent actions in Colorado's legislature suggest that Mr. Yandle's simple theory may have been quite accurate.

The Bootleggers and Baptists story uses a simple explanation of alcohol prohibition to provide a model (or way of viewing certain events) for dissecting and analyzing the causes of economic regulation in general. The story goes like this: Two sets of people had an incentive to limit or restrict legal alcohol transactions, one for financial reasons and the other for moral reasons. The bootleggers knew that if alcohol sales were banned, they could monopolize the sales of alcohol by illegally smuggling the stuff. The Baptists believed alcohol consumption was morally wrong, so they wanted to ban it entirely.

The groups ended up, then, on the same page, both striving toward the same goal for very different reasons. Yandle's insight was that this basic model of moral and financial incentives aligning towards the same policy goals could explain a great deal of economic legislation, from Marijuana restrictions to labor-union backed women's and child labor laws.

It may even explain the recent squabbles over energy law in Colorado. State Senator Bruce Whitehead has been ramming through the General Assembly HB 1001, which would force the state's biggest energy producers – Xcel Energy and Black Hills Energy – to obtain nearly a third of their power from "renewable" sources by 2020. That's a 200% increase from 2007 and will drastically alter the way these companies do business and the profits they make.

The purported reason for this legislation is to "create jobs." What it will actually do is destroy jobs in one sector – mainly coal – and merely replace them in less efficient and more wasteful "green" sectors, which means it will likely result in a net loss of jobs.

As Diana Orf of the Colorado Mining Association said of mandates like this to use solar and wind power, "Why is it necessary to guarantee them a piece of the market? No one else is guaranteed a market share." You see, coal has the market right now because coal is, well, a good source of energy. Green sectors need government force to create a spot in the competitive market for energy because they deliver less bang for the buck.

Artificially transferring profits from one sector to another does not "create" anything: It forcefully moves money from one place to the other. But for some reason, any legislation with "jobs" in the title tugs at our heart strings. Add to this the largely moralistic, "green" feel of Whitehead's law, and it's easy to see who the Baptists are: People obsessed with jobs and environmental hippies.

So who are the bootleggers? In other words, who would benefit financially from this legislation? In this case, we need no great amount of digging to find the answer: Natural gas.

Interestingly enough, the oil and gas industry, who we would expect to be lining up against green industry advances, has stayed quite neutral on HB 1001, and natural gas has allied with renewable energy advocates against coal. Two natural gas trade associations, in fact, showed up the day of the bill's recent committee vote to actually call for the shutdown of coal plants. The industry's position is focus on clean energy seems inextricably tied with stifling the competition of coal.

The natural gas industry would love to get a bigger share of the electricity-production market at coal's expense, and has no problem putting that sentiment out in the open. Its proponents would love to see coal production artificially stifled – even in favor of the green sector – and made more expensive so that natural gas' main competitor is made more weak. Such incentives are not hard to see, even for the average student.

What is hard to understand is how the public can hear such things and react passively. For industries to stealthily use government force to help themselves at the expense of their competitors is one thing. For them to do it so openly and not attract public outrage is another entirely.

After all, green energy is not cheap, and neither will natural gas be if we allow the state to cut out its main competitor for electricity production. We may not care now, but when this and similar policies start affecting our way of life – increasing the cost of everything from the clothes we wear, to the food we eat, to the goods we buy, to the trucks on which these goods are delivered, the the tires on the trucks, to our basic utility bills – we might start thinking differently. We might start understanding that political fads like the green movement have a cost; a very real, very expensive cost.