“Lincoln” and Liquor License Reform

Everybody’s saying what insights they think should be drawn from Lincoln for current policy debates, so I’ll join in and talk about liquor licensing and alcohol reform.

In both cases, you have a market that lots of people would like to change, but where any meaningful change will impose huge losses on powerful incumbents.

Abolitionists who wanted to ban chattel slavery were faced with a powerful argument that this would mean wiping out about a quarter of the nation’s private property wealth, and destroying the economy of the South.

People who want to end PA’s County Quota System and let any restaurant or bar sell alcohol are faced with a similarly powerful argument that this would mean wiping out the value of incumbent bar and restaurant owners’ licenses, which they’ve paid tens or even hundreds of thousands of dollars for.

In this kind of situation, the political strategy calls for side payments to compensate incumbents for their loss.

And Lincoln did try this. Early in the Civil War, Lincoln tried to end slavery in the border states by paying compensation to slaveowners. Predictably, nobody went along with it, just like tavern license owners in PA have rejected all attempts to make a deal that would compensate them for opening up six-pack sales to beer distributors and supermarkets.

The lesson for PA politicians to learn from Lincoln is that Lincoln didn’t stop trying to end slavery just because slaveowners rejected his offer to compensate them.

Instead of giving up, Lincoln built a political coalition to rout them anyway. The 13th amendment got passed and the slaveowners got nothing.

That’s the way it ought to go down with these big market reforms. Too often politicians let stakeholder opposition scare them into inaction, and get trapped thinking that compromise with stakeholders is the only viable solution. But compromise is only a useful tactic to achieve your desired ends, it shouldn’t be a goal in itself.

If compromise and side-payments get liquor license reform passed, that’s great, but if people don’t want to take the side-payments then you need to wipe them out, not give up.

Comments

  1. GDub says:

    Jon,

    I don’t want to be insulting, but this is about as poorly done of an analogy as an educated person can make.

    1. I don’t like PA liquor laws, but I don’t think that owning a human being is the same as buying a liquor license.

    2. Don’t get cute with happy wonk talk. Sure, Lincoln did an “end around” that “outflanked opposition” and gave the slaveholders “nothing.”

    However–it actually ended in the physical death of 2% of the population of the United States, and the wounding of many many more. As helpful as that “political coalition” was, I don’t think the Victory Brewing company has warfare in mind to sell six packs. At least I hope not.

    We sometimes have to pay for the plans of our ancestors. They came up with the license idea, we’ll have to buy them back. Its probably worth it.

    • Jon Geeting says:

      Obviously there’s no moral equivalence between the two problems, but the political strategy required to deal with them is the same. Side payments to incumbents are required, but the incumbents don’t want to take the side payments for various reasons.

      In the case of the liquor license owners, they like that the requirement that would-be bar owners purchase an extremely expensive asset is a huge barrier to entry.

      My first order preference would be to strike a deal and buy them out, but if that fails then there’s nothing wrong with uncapping licenses anyway.

  2. Lew Bryson says:

    I’ve made this same argument about the beer distributors (D distributors, case stores) who are trying to end supermarket sales in Pennsylvania by suing the PLCB. Think about what happens if they win: you become the people who took convenient beer sales away from a lot of Pennsylvanians who really liked that…they’ll make you pay for it. Then think about what happens if you lose: you’ve spent a lot of money, and you got NOTHING. The thing to do is negotiate. But your corollary is right: if they WON’T negotiate, plow them under. Why is the system set up to benefit the few over the many?
    I don’t see war coming out of this, GDub, anymore than you do. But I don’t see Pennsylvanians putting up with the broken system forever, either.

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