Bootleggers and Baptists Everywhere

Bruce Yandle’s insight of how erstwhile alliances of “Bootleggers and Baptists” help drive state intervention into economic matters is extremely useful when looking at the political dynamics behind certain policy proposals. The “Baptists” are the self-appointed moral guardians who strive to ban certain products or behaviors under the justification of protecting the public’s morals. The “Bootleggers” are the clandestine entrepreneurs who take advantage of the prohibitions supported by the Baptists by charging (often exorbitant) prices for giving people the ability to consume or do what they want, contra the law.

Two items today show different aspects of this phenomenon at work. First, at Tech Liberation Front, Adam Thierer takes to book some Silicon Valley entrepreneurs for giving in to the temptation that makes Bootleggers & Baptists alliances possible: The seduction of political power. He cites a Politico story in which Carl Guardino, president and CEO of the Silicon Valley Leadership Group, complains: “All too often, people see Silicon Valley as the wallet and set aside the words or wisdom that [it] can provide.” Thierer retorts:

Well, boo-hoo.  If Mr. Guardino and his fellow Silicon Valley travelers don’t like being treated like an ATM, then they should stop behaving like one!  No one makes them give a dime to any politician.  And once you start playing this game, you shouldn’t be surprised by how quickly you’ll become entrenched in the cesspool that is Beltway politics and become less and less focused on actually innovating and serving consumers.

Well said. And at, filmmaker Ann McElhinney provides a good example of where businesses’ priorities shift to when they turn to politics as a business strategy. At issue is California’s ballot Proposition 23, which would suspend the state’s Global Warming Solutions Act (AB 32), a climate change bill, until unemployment in the state drops below 5.5 percent. As my colleague Marlo Lewis notes:

In a just-published study for the Pacific Research Institute, Dr. Benjamin Zycher estimates that adoption of Proposition 23 will increase aggregate employment in the State by a bit less than 150,000 in 2011, about half a million in 2012, and 1.3 million in 2020, relative to the case in which AB 32 goes into effect.

So who would benefit from a bill as destructive as AB 32, enough to fight to have it implemented right away? McElhinney provides one possible answer.

Thomas Steyer owns Farallon Capital Management, a $33bln hedge fund. He’s also donated $2.5m to blocking Prop 23 and has pledged a further $2.5m if needed.

There has been almost no investigation of why this citizen would give so much money and of course no suggestion that these donations would make Thomas Steyer a “vested interest”.

But bury deep into Farallon’s website and you will see Steyer admits his hedge fund  invests in areas which will become profitable “due to a catalyzing event or a change in circumstances, including regulatory or legislative change.”

Of course, we’ve seen this story before.