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Death to Prohibition

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The end of alcohol prohibition in 1933 and the subsequent War on Drugs might just be what spreads a widespread revival of libertarianism and Austrian Economics. On January 17, 1920, America embarked on an official policy of prohibiting alcohol nationwide backed by the Eighteenth Amendment to the Constitution and the Volstead Act. The idea had ...

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The end of alcohol prohibition in 1933 and the subsequent War on Drugs might just be what spreads a widespread revival of libertarianism and Austrian Economics.

On January 17, 1920, America embarked on an official policy of prohibiting alcohol nationwide backed by the Eighteenth Amendment to the Constitution and the Volstead Act. The idea had been tried before at the state and local levels and failed. Progressivism, the ideology of the age, however, provided optimism that government could produce a pure white Protestant society free of all social evils.

Also backing the optimism for alcohol prohibition’s success was the success of temperance movements that had begun to stir almost a century before. The temperance idea and the temperance societies that were built around it generally promoted the idea of voluntary moderation, in which alcohol should only be consumed in small amounts and intoxication should be strictly avoided. This was considered healthy living.

Previously, in the eighteenth and early nineteenth centuries, Americans had on average consumed very large amounts of alcohol, but throughout the day, as a calorie and beverage substitute, and rarely to the point of intoxication. During the heyday of the Temperance movement (1830–60) historians actually found a sizeable caloric deficit in the American diet.1

Even though it is still a matter of some debate, scientists have consistently found that consuming small, regular amounts of fermented alcoholic beverages is indeed healthy living. Moderate drinkers, for whatever reason, live longer than heavy drinkers and people who do not drink at all. This is probably because beer has nutrients and red wine has resveratrol, both of which are considered health promoters. Others argue that the reason beer and wine increase longevity is that they reduce stress and promote happiness. The reasons could be demographic as well.

Despite the success of the Temperance movement, there were calls to prohibit distilled spirits, and eventually for complete alcohol prohibition. The Maine laws, establishing total statewide prohibition, were passed and repealed in the 1850s. Several states passed alcohol prohibition later in the nineteenth century, and that continued, with alternations, until the Eighteenth Amendment made alcohol prohibition nationwide during the peak of the Progressive era.

Most American economists, notably Irving Fisher, were big proponents of alcohol prohibition. They held the idealistic views that alcohol prohibition could be effectively enforced and that prohibition would lead to a better life at both work and home. They continued to hold these views despite the dreadful real-world results that they could plainly see.

As H. L. Menchen noted as early as 1925,

There is not less crime, but more. There is not less insanity, but more. The cost of government is not smaller, but vastly greater. Respect for law has not increased, but diminished.

In my work I have shown that while there was a small decline in overall alcohol consumption during the period (it should be noted that some people gave up consuming alcohol altogether), there was a massive shift from beer and wine to more harmful spirits. And most of those spirits, e.g., whiskey, were much stronger and not produced commercially, containing impurities and poisons. The small decline, then, is no success whatsoever.

In addition, Prohibition caused an increase in crime and the prison population. The murder rate went from around 6 to about 10 per 100,000. After Prohibition ended, the murder rate began to decline back to the rate of 6 per 100,000. The rates of other serious crime also increased during Prohibition.  Before Prohibition and the Harrison Narcotics Act (1914), there had been 4,000 federal convicts, fewer than 3,000 of whom were housed in federal prisons. By 1932 the number of federal convicts had increased 561 percent, to 26,589, and the federal prison population had increased 366 percent.2

Of course, corruption by public officials, especially Prohibition agents, police, mayors, and judges, increased and organized crime expanded enormously.3

These results, while surprising to many at the time, should have been expected. They should have been expected for reasons of economic theory. American economists at the time were generally of the Institutionalist and historicist bent. As far as they were concerned, if you raised the cost of alcohol, you would reduce consumption and therefore the policy would be successful. The problem with prohibition is that although it does change prices, it also changes everything else—production, distribution, consumption—with important side effects on law enforcement, the judicial system, criminal organization, and more.4

Marijuana and the Future of Prohibition

The Marijuana Tax Act of 1937 might be even more of an historical embarrassment for Americans. In this case, there was no perception of a social problem, unless you believed the ridiculous storylines of the B-rated movies of the time, e.g., Reefer Madness. Representatives from many industries, such as medicine, pharmaceuticals, and the veterinary field, testified before Congress that cannabis was both safe and effective for a variety of ailments, while others testified to its widespread applications in industry (i.e., hemp).

The costs of cannabis prohibition in taxes, deaths, imprisonments, crime, corruption—the list can go on and on—are incalculable but are certainly on par with any war in American history. The costs are so widespread, and so many people are now aware of the benefits of cannabis, that ideologically the American people who support legalization of cannabis has risen from 12 percent in the early 1970s to 67 percent today. Support for legalized medical cannabis is approaching 100 percent and is strong even among the elderly.

That is all leading to political changes for the good. Many American states have legalized cannabis for medical and recreational purposes, usually by a vote of the people. This is all in defiance of federal and international law. So why have the Feds not intervened to any great extent?5

My theory is that if they did start arresting people in states that legalized cannabis, verdicts would be nullified by local juries and federal dominance over states would be brought into question.6

I surveyed economists about their views on illegal drugs in 1991 and found that support for legalizing drugs among professional economists was no different than among general population adjusted for demographic characteristics.7

I was also asked by Oxford University Press to write an entry on Milton Friedman’s views on drug prohibition. My survey of his publications finds that the reasons he gives for his views were constantly changing over time, and that the real fundamental reason might have been his real-world observations as a young man during alcohol prohibition.8

I was also asked to survey professional economists for their published statements on illegal drugs. It was almost entirely Austrian economists and fellow travelers who supported the legalization of drugs.9

The vexing opioid crisis is starting to get people to think that we need an entirely new approach to all drugs, including the idea the public policy of criminalization be replaced with a healthcare policy, both medical and mental, towards all drugs.

My view is that these positive outcomes of prohibitions will eventually be a major victory for libertarianism and Austrian economics, and that possibly these victories could impact American ideology and powerfully influence other public policies.

Mark Thornton
Mark Thornton is Senior Fellow at the Mises Institute. He serves as the Book Review Editor of the Quarterly Journal of Austrian Economics. His publications include The Economics of Prohibition (1991), Tariffs, Blockades, and Inflation: The Economics of the Civil War (2004), The Quotable Mises (2005), The Bastiat Collection (2007), An Essay on Economic Theory (2010), and The Bastiat Reader (2014).

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