If you fly business class on KLM, you’ll be presented with a welcome gift from the airline: A small ceramic bottle of genever glazed in the style of Delft tiles and modeled after actual buildings in Amsterdam. This is a practice at KLM dating back to 1952, with a new house introduced each year. This I knew from my recent trip to Amsterdam. I have my own bottle, pictured above, of the House of Bols. This is the only one you can acquire without flying KLM or buying from collectors.
What I didn’t know is why this tradition developed. It turns out it’s an unintended consequence of regulation. Airline rules at the time capped the value of gifts to passengers at seventy-five cents, however they placed no restriction on the provision of drinks. KLM’s ingenious work-around was to hand out a single-serving of genever in a bottle that was worth far more than the spirit inside. Despite the cost-cutting that has deglamorized air travel in recent years, these ceramic bottles have become too beloved to eliminate.
See The Wall Street Journalfor the full story, and thanks to my friend Edgar Hutte for the tip.
The initial print run of 2,000 copies sold out within days. According to British intellectual historian Richard Cockett, Hayek’s publisher, Routledge, ordered an immediate reprint of 1,000 copies, and in the “following two years they were to be engaged in a losing race to satisfy the huge public demand for the book.” Because of wartime paper rationing, Routledge could not print as many copies as it wished. The summer following the work’s release, Hayek complainingly referred to it as “that unobtainable book.”
I don’t know if it was ever quite so rare here in the US, but wartime scarcity affected American publishers too. The book is very small, practically a pocket edition. The dedication page explains in tiny print:
“This printing has been redesigned to conform to the government’s request to conserve paper.” On the classic book against central economic planning. Gotta love it.
Another day, another study that finds no effect on consumer choices when mandatory calorie information is posted:
But the latest study from one fast food restaurant chain in Washington state found that the calorie counts did not make any difference in purchases that people made.
“I was surprised that we found basically absolutely nothing,” says Eric Finkelstein, a professor of health services research at Duke-National University of Singapore of his negative results. He found that even after the Taco Time food chain added the caloric information to their menus, consumers continued to chose the same items they had prior to the labeling.
One of the reasons hypothesized for the finding:
One factor confounding the impact of the calorie labeling may have been a logo that the taco restaurant chain Finkelstein studied used to highlight healthier choices. With that designation already in place, he says, the addition of the calories might not have made much difference in people’s assessment of better-for-them foods.
The alternative is not zero information. Chain restaurants are already responding to consumer demand for nutritional information without mandated displays. Many have been making it available on their websites or in literature within the restaurant, readily accessible for interested consumers. Some, like Subway, tout the healthiness of their menu and prominently advertise it. Others, like Hardee’s/Carl’s Jr., flaunt their excess. In between are hundreds of other restaurants that highlight their healthier offerings or entrées that comply with popular diets. There’s no compelling reason to think that the trend toward greater transparency won’t continue or that this multiplicity of approaches is somehow inferior to the single right way dictated by local government.
Given the lack of evidence that mandatory calorie labeling has any effect, the federal government should have refrained from imposing the costs of the mandate onto chains across the country.
Update: As long as we’re talking Taco Time, I should link to this thorough take down of a Taco Time owner’s claim that the chain’s tacos stand up to those of quality local taquerias and taco carts. Spoiler: Taco Time does not come out on top.
There are two problems, as we see it, and not only do they seem insurmountable, but they also appear to be linked. First, food carts would have difficulty policing alcohol service to make sure it is legal and responsible.
Second, if they found a way to solve that problem by fencing or roping off their alcohol service areas, other restaurants could gripe, quite legitimately, that the carts are undermining their businesses. [...]
And to the extent that the cart develops a fixed service area, where customers are confined and consuming alcohol, the cart would unfairly infringe on full-service restaurants that pay full freight and must jump through all the hoops to open their businesses.
Remember, markets are for consumers. If a restaurant owner with indoor seating, full service, and a real kitchen can’t compete with a cart, they might be in the wrong business — and it shouldn’t be regulators’ job to keep them in it.
Today is the day we celebrate the repeal of Prohibition, but the legacy of Prohibition lives on in a patchwork of anti-consumer regulations on the sale of alcohol. Via Jacob Sullum, here is one from Colorado so absurd you couldn’t make it up:
As the happy-hour crowd began trickling into The Celtic Tavern on Tuesday night, bar owner Patrick Schaetzle — flanked by placards and mirrors touting Murphy’s Irish Stout — got some unsettling news.
Sometime next year bars will have to stop selling his Lower Downtown pub’s signature stout along with an array of other beers that are lower alcohol. The looming restrictions flow from a bitter, three-year battle between liquor and convenience stores over who can sell full-strength beer. [...]
Once enforced, the rules will likely shut off taps of lighter versions of brands like Shiner, Amstel, Heineken, Yeungling, Michelob and Shipyard among others. Light versions of the big three — Coors, Budweiser and Miller — appear to have just enough alcohol to remain flowing.
Technically, bars, restaurants and liquor stores in Colorado should never have sold the lower-alcohol beers in the first place, though no one ever paid much attention.
Their licenses allow them to sell spirits, wine and beers that fall into the “malt liquor” category: Brew stronger than 4 percent alcohol by volume or 3.2 percent by weight.
That’s right, the state is taking enforcement action against bars and restaurants for selling beers that are too low in alcohol. It’s all part of a dispute between retailers currently forbidden from selling higher alcohol brews and the bars, restaurants, and liquor stores licensed to sell “malt liquor,” wine, and spirits. American politics at its finest.
My newest Examiner post covers the FDA’s draft rules for calorie labeling, which may extend not just to restaurants, but also to convenience stores, movie theaters, and supermarket salad bars — all without much evidence that they’ll do any good.
Improvements in information technology are another reason to doubt the merits of forcing restaurants to post calories directly on menus. Websites like Calorie Lab already provide databases of the nutritional information from more than 500 restaurants. As far as I know they don’t have a phone app yet, but they could easily make one (one competitor already has). As smart phones proliferate it will be easier than ever for consumers to access calorie counts in addition to much more thorough nutritional information about the foods they eat. Yet these archaic laws will still be on the books forcing unneeded clutter on printed menus.
Even better than smart phones, this week Eater takes a look at how iPads are replacing printed menus in a few restaurants. The devices are durable, interactive, can hold a lot more information than a printed menu, and can work with a restaurant’s point of sale system. If desired, an electronic menu could offer extensive nutritional information at the push of a button. They’re cost-prohibitive right now for most restaurants, but in the future we can expect the price to go down and electronic menus to become more common.
It will be interesting to see how the law is adapted for electronic menus. Will calorie counts have to be displayed prominently like they are now, or will it be enough to have them easily available on the device for interested consumers? If the former, that will be another sign this law is intended more to nag people than to provide them with desired information.
New York City is implementing a new system under which the letter grades given to restaurants by health inspectors must be prominently posted and in which further details are available online. This seems like a good thing: The more consumers know, the better the market works. But to some extent this just replaces ignorance about what goes on in the kitchen with meta-ignorance about what the grades signify. The letter grades are only as good as the inspection regime, and if consumers don’t know what the grades mean, then they may not be helpful. An article in The New York Timeslooks at some of the complications:
Under the former system, restaurants received points for each violation; a total score over 28 was considered a failing grade. But under the new system, in which 0 to 13 points gets an A, 14 to 27 points merits a B, and 28 or more is a C, officials have softened some rules, like those governing the temperatures of food held for service. And they will not count certain non-food-related violations, like burned-out light bulbs or improperly posted signs, toward the grade, although operators could still have to pay a fine.
So a restaurant that may have received 15 points under the old rules might score, say, 9 under the new ones, said Andrew Rigie, director of operations at the New York State Restaurant Association, a trade group that has been lobbying against the letter grades.
“That’s a big problem,” Mr. Rigie said. A person seeing an old 15-point score on the Web site “would determine that restaurant to be a B-graded restaurant, but there’s a possibility that under the new system it would have an A.”
It’s good that the city is not counting some non-food related violations against the grade, but one has to wonder what else goes into the score. There are 1,200 possible points that restaurants are graded on. Is the difference between a 13-point A and a 14-point B really that meaningful? Or even a 5-point A and a 20-point B? I have no idea, and I suspect that most diners don’t either.
I wrote about this when the new regulations were first announced, noting that the rule:
confuses the measurement with what we’re trying to measure. What we should care about is actual food safety, not the letter grades restaurants are receiving. If the grades aren’t highly correlated with preventing customers from getting sick, then restaurants are just wasting time and money to comply with arcane regulations and to create the illusion of safety.
To this end, making detailed reports available online is a good step. I’m more skeptical that the letter grades will provide useful information. This is the same city, after all, that has cracked down on sous vide cooking and putting egg whites in cocktails (to say nothing of banning trans-fats). Should we trust the experts to identify the most salient concerns with these grades, or should we instead ignore the differences between As and Bs and focus on the worst offenders?
Over at the Examiner, I take a look at the CARE Act, a wholesaler-backed bill that would essentially reverse Granholm v. Heald and exempt state alcohol laws from Commerce Clause challenge.
Gear, for instance, said he was concerned by suggestions that Costco and Wal-Mart would be able to sell liquor in a new system. He said he’s worried the big companies could make it tough for small retail businesses to successfully compete in the market.
“My idea was to create jobs from small operations, mom-and-pop stores,” he said. “Costco can put in liquor and never have to hire a single person.”
As Jacob Sullum notes, “Gear evidently sees liquor privatization as a stimulus program that should be judged by the number of jobs it creates.” And as this blog said recently in regard to Washington brewers’ opposition to that state’s own privatization bill, “markets are for consumers.” They’re not for uncompetitive craft brewers or inefficient retailers. They’re for consumers, and consumers are best served by a system that forces sellers to compete on price, selection, and various other factors.
Fantastic post from Nate McLaughlin, who’s in the process of opening his own Washington brewery, on why he supports I-1100:
For years craft breweries have been saying how horrible the three tier system is and that we need to abolish it. Now here comes the chance to whack away at the Washington Liquor Control Board and the craft breweries decide that they would much rather hide behind the status quo.
[...]
WBG makes claims that this new way of competing will crush all our small breweries. Let’s be honest, these places are not competing with the large breweries that they are worried about being able to “give discounts, free product and services to obtain shelf space or handles at big box stores, chain restaurants, and other retailers.” They really are kidding themselves if they think they don’t already do this. Yes, it is illegal, but no one is making any arrests or sending out fines, we know this goes on and I am not surprised at all. This just makes it legal. But don’t belittle your product, be glad that people have to bribe to get their brand of booze into a place when people are clamoring to get yours in. We’re smarter and more innovative than they will ever be. We can beat them.
One of my college economics professors had a maxim that he drilled into us students: “Markets are for consumers.” Economic logic can help to predict how certain changes will affect people up and down the supply chain, but if you start using that knowledge to protect producers’ interests at the expense of consumers, then you’re doing economics wrong. Markets are for consumers. (The maxim applies to monopolies too. They are problematic because they raise prices or are unresponsive to consumers, not because they wipe out competitors.)
Beer brewers and drinkers opposed to privatization of state liquor sales? Indeed, says Heather McClung, president of the Washington Brewers Guild, which represents the state’s small craft breweries and, roundaboutly, craft-brew drinkers. Her industry is lined up against I-1100 - though still weighing I-1105 - the privatization measures headed for the November ballot and detailed in last week’s SW cover story. “There is something that is being left out of the discussion it seems,” says McClung.
I-1100, for example, is actively promoted as a modernizing of liquor laws, she says, when it’s actually a sweeping proposal that repeals 39 state laws, enabling the biggest retailers, distributors, and producers to own and give favorable pricing to each other. That, says McClung, of Seattle’s Schooner Exact Brewing Company, would eliminate the level playing field that small breweries such as hers need if they are to prosper.
At issue is a section of the initiative that would allow breweries to self-distribute and offer discounts to bulk buyers like Costco, grocery stores, and bars. Beer in Washington must currently sell at a uniform wholesale price: Costco pays the same amount for crates of it that a small retailer pays for a few cases. As a result, beer prices at large retailers are higher now than they will be if I-1100 passes.
Eliminating the uniform price requirement might make it harder for craft breweries to compete with the big beer companies who can offer greater discounts and benefits. Does this make the initiative anti-consumer? Only if you look exclusively at craft beer drinkers. Craft beers currently make up about 7% of the US market (probably somewhat higher in beer savvy Washington). The vast majority of beer consumers will benefit from being able to buy macrobrews at lower prices.
To put this another way, the Washington Brewers Guild is saying that the state should keep beer prices artificially high for 93% of the beer market in order to maintain the same broad selection for the remaining 7% (or whatever the actual figures are in Washington).
Personally, I doubt that the results will be as bleak as the WSG predicts. Craft brews are growing in popularity while macros are declining, and that’s unlikely to change. Smaller breweries are also starting to merge, operating independently while taking advantage of economies of scale. There may be some closures — this is true regardless of I-1100 — but craft beers don’t show any sign of going away.
However, even if I’m wrong, that doesn’t mean this is a bad bill. As much as I love good beer, it would be improper to elevate my preference to force of law. If the only way the current high number of small breweries can survive is by shackling their larger competitors, then we may need to settle for having fewer breweries. I hope that beer drinkers will continue pay more for quality, but that’s their decision to make. Markets exist for consumers — all consumers, not just the ones who like microbrews.
Additional notes: The question of tied houses is complicated, and arguably the matter of most concern. It’s the aspect of I-1100 I would be least confident in supporting.
File this story under the “Brewers Behaving Badly” label, which previously featured California craft brewers lobbying against laws that would allow beer companies to hand our more swag or offer free tastings in bars, Pennsylvania brewers opposing a measure to let consumers buy beer in 18 packs, and Michelle Minton’s coverage of Colorado brewers opposing the sale of good beer in grocery stores.
A net revenue of $163.5 million (fiscal 2008-2009) just from liquor sales was returned to the citizens of Oregon. What retail business can generate net profit revenues of 40 percent of sales? I’d sure like to invest in such a company. Even a wildly successful company like Apple posted only a 19.9 percent net profit margin for 2009, which is far less than what OLCC liquor revenue generated for Oregonians.
And in the same article:
If the citizens of Oregon think that getting the state out of liquor distribution and retailing will reduce the price of alcohol at the checkout counter, think again. I’ve compared retail prices in California and Arizona to ours in Oregon, and except for the best-sellers (less than 10 percent of the inventory) the prices are the same or higher in those states.
So his arguments are that 1) monopoly liquor distribution yields enormous excess profits for the state and 2) introducing competition will increase prices for consumers. If this is the best the anti-privatization side can come up with, I think it’s safe to say the pro-privatization side wins the economic argument.
OK, one quick post from Tales with a couple links. I’m at the Washington Examiner today with a post about why the FDA’s menthol hearings are asking the wrong questions. Then at the Portland Examiner, Hoke Harden has a great (and way too flattering!) write-up of the Brewing Up Cocktails event. If you’re curious about the drinks we served, go check it out.
Law enforcement officials are putting a stop to the home-brew and home-wine-making competitions at this year’s Oregon State Fair.
KATU reported on the glitch in state law that at the time put the home-brewing competition in jeopardy. Late Friday, Oregon State Fair Manager Connie Bradley learned from the Department of Justice that the law requires both its beer and wine competitions to be shut down.
“The issue has to do with the judging,” Bradley said Monday. “Judges are considered the public, and we cannot have the public tasting amateur wine or beer.”
The competitions have been going on for 30 years under existing law. The agencies have just now decided to interpret the rule to mean that allowing judges to taste homemade beers and wine counts as serving to the public.
People actually get paid with tax dollars to enforce these stupid rules. With the state budget in a mess and OLCC privatization an issue in upcoming elections, hopefully this will be one more nail in the coffin of one of our least useful agencies.
Mixologist Todd Thrasher joins forces with my friends at Reason.tv to serve a tasty cocktail and discuss the archaic control and safety regulations that inhibit the craft of bartending:
I’m not sure Todd’s right that the acidity in a drink would be enough to kill bacteria in the short time between when it’s shaken and consumed, but in any case the risk of contamination is very low and we’re all adults enjoying these concoctions.
To make your own Melanie’s Pisco Pipe Dream, visit Crispy on the Outside for the recipe.
Jacob Grier is a freelance writer, barista, mixologist, and magician in Portland, OR. He writes, eats, and drinks a lot. His articles have appeared in The Washington Post, Reason Online, The Oregonian, and other publications.
Jacob Grier is a freelance writer, barista, mixologist, and magician in Portland, OR. He writes, eats, and drinks a lot. His articles have appeared in The Washington Post, Reason Online, The Oregonian, and other publications.
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