Sunday Liquor Debate Is Textbook Economics

Reprinted with permission of IPR

by Cecil Bohanon

There are at least two theories of regulation, both applying to the ongoing debate over the sale of liquor on Sundays.

One is the public-interest theory of regulation. In its story, legislators strive to craft just and beneficent regulations that balance legitimate concerns. Legislators are like a good parent: They divvy up responsibilities and benefits among the children to so that the family works well.

A second is the capture theory of regulation. In its story, legislators use regulation to promote the interests of some at the expense of the many — and then use rhetoric from the public-interest theory to provide a fig leaf for their action. Legislators are like oriental potentates — using their power to lavish favors on their friends.

My nature, academic training and lifetime of observation, argue that the second view is a better explanation of regulation. But I have come to recognize that few legislators, interest groups or political activists ever think they are using the power of the state to redistribute wealth to their political allies: Rather, that is what their opponents on the other side are doing.

The current machinations of the Indiana Legislature are a case in point. Indiana is one of the few states that prohibit Sunday alcohol sales in retail stores. This is a remnant of a time where Sabbath-breaking was considered a more serious violation than it is today, and if the bluenoses could not make ‘em go to church, they could at least keep ‘em from buying booze.

Most everyone recognizes that package-liquor stores benefit from the current arrangement as lack of Sunday access keeps alcohol prices somewhat higher than otherwise. Package stores are quite predictably in favor of keeping the Sunday ban. Grocery stores, drug stores and convenience stores, all open on Sunday anyway, are on the other side of the issue. They favor a repeal of the Sunday restriction.

True to form, the arguments are rarely couched as package-store profits versus grocery-store profits. The grocery store lobby argues it is a matter of free markets and giving consumers a better deal. They also argue that repeal makes Indiana appear more modern and business friendly — though I’m not quite sure where being able to by alcohol on Sunday ranks on the list of factors that drive business location decisions.

Package stores argue it is about protecting small local businesses from out-of-state corporate behemoths. They also argue it is about protecting the public from alcohol being too available which is a strange argument coming from those who make a living selling alcohol.

Nevertheless, the package-store lobby is now supporting a bill that allows Sunday sales but also imposes a requirement that grocery stores construct separate in-store locations to sell alcohol — to, of course, protect children from seeing evil beer, wine and demon rum. (You can’t make this stuff up.)

Economist Bruce Yandle of Clemson University calls this the Baptist-bootlegger coalition. In Oklahoma, alcohol prohibition was not repealed until 1959. Small-town Baptists saw liquor as evil. Bootleggers and folks who transported liquor in from Arkansas saw illegal Okie liquor as profitable — and the coalition prevailed nearly a quarter of a century after repeal of the 18th Amendment.

My libertarian and "wet" instincts say abolish the ban on Sunday sales — and without the tomfoolery of imposing costs on grocery stores. I don’t really care that much, though, being neither a bootlegger nor a Baptist and having reached the stage in life where I buy alcoholic beverages faster than I drink the stuff.

Cecil Bohanon, an adjunct scholar of the Indiana Policy Review Foundation, is a professor of economics at Ball State University.
 

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