GMO labeling: Bad science, good politics

Rally to Support GMO Food Labeling

Over at The Umlaut, I have an essay up today about why mandatory GMO labeling is probably inevitable in the United States, and why that may not be a good thing:

I would be more sympathetic to the cause of GMO labeling if its advocates were not so intent on stigmatizing genetic engineering. Instead, whether for reasons of political expediency, profit, or simply poor judgment, they too often associate with any idea that could bolster their cause, regardless of its scientific merits. Thus we end up with labeling advocates on stage in front of a Whole Foods banner, sowing fear among foodies that exposure to genetically modified crops may cause autism in their children.

Read the whole thing here.

[Photo via CT Senate Democrats.]

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Turley is right, but privatization is hard

Jonathan Turley has an op/ed in USA Today arguing for privatization of spirits sales and the end of state liquor boards:

Seventeen states continue to exercise control over liquor as absurd relics from the 1930s. Ironically, there is no better example of the failures of central planning than the “ABC stores” around the country from Alabama to Pennsylvania. Indeed, if Karl Marx were alive and trying to buy Schnapps today, he might reconsider aspects of Das Kapital after dealing with our central alcohol planners. […]

Most states have gotten rid of these boards and fared well in relying on the market and conventional regulations to protect consumers. Just last month, Washington state embraced the free market and got rid of its state control. Thirty-three states rely on what Adam Smith called the “invisible hand” of the market where consumers choose among products — and the law of supply and demand handles the rest. However, eleven of the seventeen control states — Alabama, Idaho, Maine, New Hampshire, Vermont, Oregon, North Carolina, Ohio, Pennsylvania, Virginia and Utah — exercise direct control over the retail sale and price of liquor, sometimes even owning the ABC stores where it is sold.

In the long run, Turley is obviously right. There’s nothing special about spirits that makes them uniquely amenable to state distribution. As with most normal goods, consumers would be best served in a bottom-up, unplanned market with minimal barriers to entry.

The problem, alas, is getting there from here. As clearly demonstrated by Washington state this year, privatization is difficult. Any process of privatization will have to contend with entrenched interests that include distributors, retailers, state employees, and the state itself all seeking to bend the new regulations to their benefit. Economists call this regulatory capture. Or, in this case, deregulatory capture: Using the guise of deregulation and privatization to protect their own interests.

In Washington’s case, latent support for privatization was widespread. Yet it was Costco who did the work of getting an actual initiative on the ballot. Included in the initiative was a rule restricting most new retail licenses to stores of 10,000 square feet or greater. This is good for large retailers, but not so good for consumers or for smaller entrepreneurs who’d like to take a more boutique approach.

The state made sure to keep its cut of spirit revenues too. Voters supported privatization envisioning California-style low prices. The Tax Foundation explains what they got instead:

… the initiative introduces several new fees which not only make up for the lost profit, but are likely to actually increase the state’s total revenue from alcohol sales. Private retailers are burdened with a new liquor retailer license fee of 17 percent of gross revenues, as well as an annual renewal fee of $166. Also, liquor distributors must pay a liquor distribution license fee of 10 percent of gross revenues. Unfortunately for consumers, these new fees will end up costing them more at the check-out than the old system they replaced.

When the Washington initiative first came up for debate, my friends and I in Portland, Oregon envisioned crossing the border to shop for liquor. In fact, the opposite has occurred: Consumers in privatized Washington are coming to state-controlled Oregon to buy their booze.

None of this means that privatization is not a worthy goal; it’s absurd that nearly eighty years after Prohibition ended we still have state boards determining which products consumers can and cannot buy. But advocates of privatization and deregulation need to be smart lest they give these goals a bad name (remember Enron, anyone?). Competition and privatization are not the same thing; we should seek the former without fetishizing the latter. And no amount of privatization will lower prices if the state imposes high taxes on the supply chain.

It’s too early to judge the results of Washington’s attempt in full, but that state’s experience should serve as a warning. When advocates present privatization as a magic bullet without bothering to get the details right, consumers may end up spending a lot more than they bargained for.

[Update with disclosure: For those of you who don’t read here regularly, I should mention that I work or have worked in various guises in the spirits industry. Opinions here are my own.]

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Are smoking licenses the future?

These are bad times for smokers, but there is one bright spot. Bills in Washington would create new exceptions to the state’s smoking ban, arguably the strictest in the country:

Both of the introduced measures, Senate Bill 5542 and House Bill 1683, call for the establishment of a special state licensing program whereby businesses would apply to the State Liquor Control Board for endorsement as either a cigar lounge or retail tobacconist. These businesses would receive a license, which could be renewed each year, and in return, patrons could light up within these establishments.

No more than 100 lounges would be licensed as a cigar lounge at $15,000 per year. Up to 500 businesses, each paying a fee of $5,000 per year, could receive a retail tobacco license.

Business owners shouldn’t have to pay tribute to the state in order to allow smoking on their own property. But it’s better than nothing, and with cash-strapped legislatures looking for new ways to raise revenue this could be a good way to take back some of the ground lost to smoking bans.

Last year the Tacoma restaurant El Gaucho spent thousands of dollars building a 25 foot airlock to separate its cigar lounge from the rest of the property. The state ruled that even this was not sufficient to comply with Washington’s smoking ban.

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A brewer behaving better

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.

Read the whole thing here. For more background, see this blog’s post from last week. Beer-loving economist Patrick Emerson agrees here.

[Via @DrinkGal.]

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Markets are for consumers

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.)

Keep this maxim in mind as you read about the Washington Brewers Guild’s opposition to Initiative 1100, which will liberalize alcohol sales in Washington:

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.

For more on liquor privatization efforts, see my recent post in the Examiner.

Hat tip to Drink Gal, who also has a good post on the subject.

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What does it take to open a cigar bar in WA?

There is only one cigar bar in Washington, a state of more than 6 million people. It re-opened recently at El Gaucho in Tacoma years after the state’s extremely strict smoking ban shut it down. The renovations necessary to comply with the law cost $15,000:

“The Washington state law on tobacco is the toughest one in the U.S.,” [owner Paul MacKay] said.

He’s had to jump through a lot of smoke rings to meet code. MacKay created a 25-foot long glassed off airlock walkway separating the restaurant from the VIP lounge. To stay within guidelines, the lounge is operated by owners of a newly created company — not employees and it isn’t open to the public.

“You can’t just come in, you have to be invited,” MacKay said.

That’s not enough for the Health Department. They’ve already served him papers telling him he needs to shut down again.

[Via the Stogie Guys.]

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Legalize it in Oregon

The good news: Oregon may have a marijuana legalization measure on the ballot soon. The bad news: It would give the state a monopoly on cannabis sales:

[Legalization advocates] plan to put the issue on the 2010 ballot with an initiative called the Oregon Cannabis Tax Act.

If they can gather 87,000 signatures to put it on the ballot, and voters then approved the initiative, the act would set up the Oregon Cannabis Control Commission. The new agency would sell pot to buyers 21 and over, with 90 percent of the profit going to the state’s general fund and 10 percent for drug treatment.

Activists last put a legalization measure on the ballot in 1986. It got just 26 percent support. But after decades fighting to legalize pot in Oregon, they believe the public has come around.

Have we learned nothing from the Oregon Liquor Control Commission? If we do this, it will take us forever to get new, artisinal brands of pot on the market, “coffeehouse” owners will lose money for months while they wait for licenses, and all the coolest cafes will open in California.

Here’s my idea for a compromise measure: Attach a rider eliminating the OLCC, transferring all its employees to the OCCC. Pot smokers are more relaxed than drinkers anyway, making them much better equipped to deal with lazy agency bureaucrats.

For a glimpse of what happens when the government is the sole distributor of a good, be sure to check out Doug’s write-up of the current state of liquor sales in Washington state. It’s hard to find stories that make the OLCC look good in comparison, but this is one of them.

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States going for online tax grab

The Seattle Post-Intelligencer reports on an nineteen state effort to start imposing local sales taxes on internet purchases:

On Tuesday, Washington joins 18 other states that require some e-commerce businesses to collect sales tax. About 1,100 online retailers have volunteered to collect, and in return, Washington promises not to sue them for back taxes they might have owed. Three more states are on the way to adopting the law.

This isn’t an issue I’ve followed closely, but I’m generally in favor of tax-free sales as a useful form of competition that keeps local rates in check. (They’re not technically tax-free now, but the legal obligation to pay falls on consumers and is largely unenforceable.) Changing the point of taxation to the location of the buyer from the location of the seller also threatens to hit businesses with high compliance costs:

The law was poorly thought out, said Karen Evans, accounting manager at Aptech Systems Inc. in Black Diamond.

“I’ve been talking to our state representative, trying to figure out how in the world this legislation got passed,” she said. “I know there are reasons for it. Some of the bigger companies are pushing for it, but they’re doing it on the backs of all the small businesses around the state.”

The problems facing small businesses are two-fold. First, businesses must change their online software to recognize Washington’s 350 taxing districts.

“Ninety-nine percent of our sales goes out of state,” Evans said. “We’ve had to invest $1,000 so far for something that affects less than 1 percent of business.”

Second, if the law goes national, small businesses will have to decipher the thousands of tax codes in the U.S. and file tax returns up to several times per year for each of them.

And the end of this paragraph stands out:

The change does not affect deliveries to outside of the state, wholesale sales, services, sales of vehicles, aircraft, mobile homes or boats or towing companies. Florists also are exempt.

Why are books taxable and flowers not? No logical reason, florists just happen to have a well-connected lobby. That’s the kind of random exception that’s bound to creep into local tax laws, making life hell for retailers trying to keep track of them all.

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Sweatiest cities

Old Spice has released a “scientific” ranking of the nation’s sweatiest cities, based on simulations of how much people would sweat walking around in the summer months. Phoenix tops the list. The good news for me is the bottom three: Portland at 98, Seattle at 99, and San Francisco at 100. The case for the Pacific NW looks better and better.

Houston ranks predictably high at number 7, while Washington comes in surprisingly low at 48. Having lived in both cities, I can say that Washington deserves a much higher score. The difference is in adaptation. In Houston you step out of your air conditioned home into your air conditioned car and park right next to your destination, which of course will also be air conditioned. Even in the denser parts of downtown parking isn’t better than in DC, and if you have to walk you can do so along the extensive underground tunnels.

In DC, in contrast, you have to walk more. If you do drive odds are you won’t be able to park very close to your destination. Taking the Metro involves significant waiting time in balmy tunnels. And our buildings, being older than Houston’s, often feature much less effective AC systems. People who tell me that since I grew up in Houston I must find DC’s humidity easy to deal with have no idea what they’re talking about. Aside from playing sports or doing yard work, it’s not something you have to deal with nearly as much there. In this aspect, at least, Houston has the advantage.

[Via the Capital Weather Gang.]

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The unbearable baring of baristas

Forget Slutbucks. Cowgirls Espresso, the Washington chain of coffee shacks that features attractive young female baristas in skimpy clothing (previously mentioned here), is *ahem* under scrutiny of the Bonney Lake City Council:

The City Council has set aside 30 minutes at a workshop tonight to discuss concerns that the employees at the coffee stands “offend the public decency.”

At the council’s May 13 meeting, 18 citizens complained about the display of skin at the two coffee stands.

“This Saturday I was pumping gas across the street when my children looked over and said, ‘Mom, I see a naked girl,'” said Tawnya McLavey. “Here we have it right in our city and our community people barely wearing clothes that are serving coffee. I was so disturbed by that.”

Councilman Mark Hamilton said the council has asked the city attorney to review the law to see if anything can be done, but he’s not sure whether the city can regulate coffee stands. That’s what the council will be discussing tonight.

“It seems to be the crux of the problem, that these ladies can be viewed from a public street,” Hamilton said. “We know we can’t regulate the establishment or what the girls are wearing, but we’re hoping something can be done about them being visible from the drive thru. We know it’s a stretch.”

I don’t have a strong opinion on this, but with me likely going back on the job market soon I hate to see any work possibilities closed off…

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