libertarianism: Wine across state lines

John Gorentz (

johngorentz) wrote in

libertarianism,
@ 2004-12-13 21:29:00

Wine across state lines
The Wall Street Journal editorializes in favor of allowing wine to be sold across state lines. At the moment, state regulations can permit it. Last year, for example, we visited a winery on South Bass Island in Lake Erie and took some wine home with us. The wines were not superb, but they were good enough that I would have ordered more by mail if I could have. But I'm not a resident of Ohio, so I can't. They can't ship them to us, even though the winery does mail-order business within the state of Ohio.

The Supreme Court is considering the constitutionality of this ban, and the Wall Street Journal hopes they'll strike it down.

Opinion Journal article

I have mixed feelings about it. On the one hand, I am instinctively in favor of free trade. On the other, though, I don't like what will happen when this ban goes away.

Some wineries will do more business, but a lot of small ones will also go out of business because they can't compete. When you take down the admittedly artificial trade barriers, we'll have more of a winner-take-all situation.

I don't know whether the Peterson and Sons winery would be one to grow or go away. The owner is at retirement age and one of his sons is taking over, he told me last time I was there. The guy started the winery when he lost his job in industry. He was too old to find other work, so he did this. I think it's an extremely good thing when people who are sufficiently motivated and talented can do that. When there are self-employment outlets, it puts upward pressure on wages and working conditions for those who do work for big companies. And it means people don't have to desperately cling to their wage-slave jobs when employers want them to do things that are morally shoddy.

Not only are we better with an economic environment that's friendly to small businesses, but the country is more interesting that way, too. The country is boring when you can buy the same stuff everywhere you go. It's interesting when you have to learn new things in new places.

On the other hand, if we applied this same way of thinking to the world economy and put up trade barriers between countries, we'd have a repeat of the Great Depression of the 1930s.

Well, I can see a possible major flaw in what I just wrote, but I'm going to post it anyway (to my journal and to libertarianism) and see what folks have to say.

BTW, this is a new experience for me, being on this side of a trade issue.

(Post a new comment)

calcslacker
2004-12-13 06:48 pm UTC (link)

Not only are we better with an economic environment that's friendly to small businesses, but the country is more interesting that way, too. The country is boring when you can buy the same stuff everywhere you go. It's interesting when you have to learn new things in new places.

Agreed. But totally free markets wouldn't change this. Why? It's a pretty good bet you're not even close to the only one who feels this way. And everyone votes with your pocketbooks. To take an example, in the suburb I live in, we have a ice cream place called Hand-D-Dip. Its prices and quality are comparable to - perhaps even a bit better than - Dairy Queen. But it's a tradition in my town to go to Hand-D-Dip to hang out. Why? Because people like that variety, the change in their lives.

(Reply to this) (Thread)

	johngorentz 2004-12-13 10:18 pm UTC (link)
	Sometimes the local businesses do hang on. They find some niche whereby they can continue to make a go of it. But a lot of them have been driven out by the McDonalds and Walmarts of the world. (Reply to this) (Parent)

	zenala 2004-12-13 07:12 pm UTC (link)
	Ohio's rules regarding wine are messed up--they have a minimum retail price that stores have to charge, which means that unlike just about everything else, wine is actually cheaper when I'm in New York than when I'm in Ohio. I think if Ohio repealed the minimum retail price on wine, it wouldn't hurt the wineries, since they don't benefit. (Reply to this) (Thread)

	kylebee 2004-12-13 10:12 pm UTC (link)
	Gotta love the fucking midwest. I hate living in Ohio. (Reply to this) (Parent)

induke
2004-12-13 07:16 pm UTC (link)

While you may romanticize about the fate of small wineries, consider what's going in Pennsylvania: all the wine and hard liquor stores are owned by the state, making PA the largest liquor buyer in the world, I believe. What happenes in the end is that those of us who live close to NJ have to "smuggle" vodka from across the border, because of the draconian regulations here.

(Reply to this) (Thread)

	johngorentz 2004-12-13 09:42 pm UTC (link)
	Get the govt out of the liquor business, yes. But what on earth is that word "While" doing at the beginning of your post? Getting the government out of the distribution would I think be one step toward creating an economic environment in which the small wineries can thrive. (Reply to this) (Parent)(Thread)

	induke 2004-12-14 07:03 am UTC (link)
	The point is that to get the government out of the liquor business, we need that Supreme Court decision as a stepping stone towards outlawing such practices by the state. If we can have out-of-state competition, pretty soon they'll have no choice but to allow in-state competition too. (Reply to this) (Parent)

a_new_machine
2004-12-14 06:32 am UTC (link)

NH does the same thing. For some reason, most of the state-owned liquor stores are along the biggest highways in the state. Why? No idea. Our laws on having alcohol are pretty hardcore, too. If it's in the car, even unopened, it has to be in the trunk. Otherwise, you get charged with driving with an open container, or whatever the formal term for that is.

Though, like the original poster, I have no idea what this has to do with the post.

(Reply to this) (Parent)

garthnak
2004-12-13 07:37 pm UTC (link)

First I'd like to ask why exactly you are assuming that free trade would necessarily hurt smaller wineries more? Wouldn't it help them by allowing them the possibility of easy interstate trade?

Not knowing anything about the wine business, I can not say. But the market for wine already seems extremely competitive - if I go to my local wine store, I find hundreds of different wines of many vintages and vineyards. I have found that I often like wine from smaller vineyards better than the great big ones, so that keeps me coming back. I doubt that I am so terribly unusual in this respect, as far as consumers of wine go. I would be happy to have trade barriers loosened so that I could experience a whole new range of small vineyards to sample, hence enriching those small winemakers whome I like the best - would that not be better for them by providing a greater possibile range of clientele?

In any case, practical considerations aside, I generally prefer open trade for selfish reasons - I want more choice, and I can't get that if I am stuck with only locally-produced brands. A good analogy is the city of Berkeley, California: There are no chain restaurants allowed there. No McDonalds, not even Denny's (from what I have heard). Instead, they have small privately owned restaurants - which consequently are able to charge an arm and a leg. If McDonalds was allowed to move in, then sure, some of the local restaurants might have to lower prices or go out of business - but poor UCB students would then be able to go out to eat for a change. In the end, the market is there to serve both customers AND producers - not just one or the other. Trade restrictions only help some producers at the expense of consumers and other producers.

(Reply to this) (Thread)

johngorentz
2004-12-13 08:44 pm UTC (link)

First I'd like to ask why exactly you are assuming that free trade would necessarily hurt smaller wineries more? Wouldn't it help them by allowing them the possibility of easy interstate trade?

I take it as a given that improvements in a) communications and b) transportation will result in more of a winner-takes-all economy in which there is a growing disparity in i) political power and ii) wealth.

I can think of examples in music, baseball, and food. I was recently reading a book on how it worked in the upper Mississippi basin -- how transportation improvements that were desired by small town businesspeople om the 19th century eventually came about -- and wiped out the world of the small town businesspeople in favor of megabusinesses based in St. Louis and Chicago.

Removing trade barriers between states is a form of improving transportation between them.

Some businesses will be aided, as you say. The Peterson and Sons winery that I mentioned would probably benefit, and deservedly so. (If you like fruit wines, theirs are probably the best ones you can find. I've sampled the wares of small fruit wineries in other states. They are not nearly as good.)

It's kind of a paradox. Frictionless, free trade will result in growing disparity between rich and poor, which will result in resentments on the part of the poor and corruption of the powerfully wealthy, which will result in a tearing down of the free society that made it possible.

The powerfully wealthy will use their clout to put up barriers to the entry of small entrepreneurs, accepting governmental regulation as a way to keep the upstarts out, thus making the problem worse. Demagoging, control-freaking politicians will blame free trade for all of the problems and use it as an excuse for enacting regulations that exacerbate those same problems.

On the other hand, any governmental intervention to keep the playing field level, no matter how unintrusive, will be used as a camel's nose to bring intrusive regulation into the tent.

(Reply to this) (Parent)(Thread)

ilcylic
2004-12-13 09:25 pm UTC (link)

Music? MUSIC? Improvements in transportation technology haven't narrowed the playing field for musical diversity, they've vastly improved it! The advent of the internet has destroyed the hammerlock that the music industry had on bands, and has allowed many times the numbers of artists to get distribution to the people that want them.

Tastes are infinitely diverse. Letting wineries sell to the people who have a taste for their product won't hurt them.

Frictionless, free trade will result in growing disparity between rich and poor, which will result in resentments on the part of the poor and corruption of the powerfully wealthy, which will result in a tearing down of the free society that made it possible.

Did I wander into

socialism by mistake? Free trade allows the poor to find an outlet for their skills.

-Ogre

(Reply to this) (Parent)(Thread)

johngorentz
2004-12-13 09:39 pm UTC (link)

Music? MUSIC? Improvements in transportation technology haven't narrowed the playing field for musical diversity, they've vastly improved it! The advent of the internet has destroyed the hammerlock that the music industry had on bands, and has allowed many times the numbers of artists to get distribution to the people that want them.

I am assuming it has decreased the number of people who make a living doing music, and has greatly increased the gap between rich and poor. You are right, though, that the same technology also does provide ways for more people to distribute their stuff cheaply. So it's not quite so simple as I said.

Tastes are infinitely diverse. Letting wineries sell to the people who have a taste for their product won't hurt them.

Maybe it won't hurt them, but it will hurt others. Maybe those others deserve to be wiped out, but let's not pretend it won't.

Did I wander into socialism by mistake? Free trade allows the poor to find an outlet for their skills.

Yes, sometimes it does that. But I think it also has those other effects I mentioned.

I am an undying enemy of socialism. But I do sometimes blame rigid libertarian ideology for its progress. Karl Marx had some perceptive observations about what industrialization was doing to society. We would be as foolish to be blind to those forces as we would be to adopt his diabolical prescriptions for change.

(Reply to this) (Parent)(Thread)

ilcylic
2004-12-14 09:00 pm UTC (link)

I am assuming it has decreased the number of people who make a living doing music, and has greatly increased the gap between rich and poor.

I don't have any hard data, but the number of people I know who make a profit distributing their own music goes up each year as the cost of distribution falls. So, given that there are a lot more people who go from $0 to $Some income level, I would have to guess that you presume incorrectly.

Now, I'd certainly agree if you said it was likely that a lot of really big stars make less money, but a lower concentration of funds in the hands of a few people is pretty much the opposite of your postulate.

Maybe it won't hurt them, but it will hurt others. Maybe those others deserve to be wiped out, but let's not pretend it won't.

You assume that only the people who stop buying local wines are the entire market for local wineries. It goes both ways though. The same people in foreign markets who were restricted to buying their local wines now also have the option to range their purchases further abroad. And in fact, now that the selection has increased, you might (and it seems likely to me) actually get a greater number of people purchasing wine, in toto. That is, the people who are buying wine now are unlikely to stop if the selection gets wider. But the people who aren't buying wine now might start, if they have more wines to choose from.

Free trade allows the poor to find an outlet for their skills.

Yes, sometimes it does that. But I think it also has those other effects I mentioned.

I don't. Rather, I think the effects you are describing are incorrect. I don't suppose there's really any way to concretely demonstrate otherwise, without performing the experiment.

I am an undying enemy of socialism. But I do sometimes blame rigid libertarian ideology for its progress.

Since we've never had a good solid example of it, I don't see how that's possible. Certainly, if you blamed the problem of advancing socialism on mercantilism, I'd agree, but that's not rigid libertarian ideology.

-Ogre

(Reply to this) (Parent)

	hiriledhel 2004-12-13 08:40 pm UTC (link)
	A few weeks ago, one of my dad's co-workers asked him to take an order of wine for her, because of the laws in Maryland (I live in WV). The cool part is that the guy who delivered it to my house let my fifteen year-old brother sign for it. (Reply to this)

gunslnger
2004-12-13 10:20 pm UTC (link)

Some wineries will do more business, but a lot of small ones will also go out of business because they can't compete. When you take down the admittedly artificial trade barriers, we'll have more of a winner-take-all situation.

I disagree with this statement. I think it's possible that it may be true for certain industries, but the wine business isn't one of them. Allowing wineries to ship anywhere in the country would improve their ability to compete, not reduce it. People prize individuality in wines more than almost any other product. They don't want the cheap $2 box of wine that you can get anywhere, they want the unique one they tried on their vacation and really liked and want to show off to their friends.

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johngorentz
2004-12-13 10:42 pm UTC (link)

You could be right. But we don't know that it will work that way. we're just guessing. I'm judging by what has actually happened in other industries, but it could be that the wine industry is a different case.

But you'd think variety would be craved in other industries, too, but it has actually been driven out. How many restaurants actually have a chef to prepare unique dishes these days? Very, very few. Yes, there are restaurants with chefs, but they serve a smaller clientele than they used to. Economies of scale have largely driven them out. And it is amazing what a determined, well-capitalized marketer can do to promote a brand. Think Starbucks. There exists a great variety of Arabica coffee beans, but very few are actually readily available to the consumer, no thanks to marketing giants like Starbucks who sell an inferior product and make it harder for the local roasters to survive.

And since I'm a newbie here I'm going to make another generalization which I hope will be provocative :-) : The way of the libertarians and socialists is to deduce these things from first principles. When the data don't match the theory they cling to the theory, data be damned. The way of conservatives is to use the inductive method. If bad things happen, they adjust. They adjust their worldview to fit what actually happens.

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johngorentz
2004-12-13 10:48 pm UTC (link)

One other point. You said people want to show off the unique wine they tried on vacation. But if the barriers to interstate sales come down, it is no longer a unique wine they got on vacation. It is a wine you can buy anywhere. There is no longer anything special about it. There is no longer a story to tell about how you found this great wine in a small, out of the way town and jettisoned some other family belongings so you could find room in the vehicle to bring some back to share with friends.

Not that we'd want to base an economy on trade barriers, of course.

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diabhol
2004-12-14 05:47 am UTC (link)

I think you're underestimating the process of discovery. Just because it's available anywhere doesn't mean you know where to look without advertising, word of mouth, or just stumbling across it while on vacation.

The ability to buy it online and have it shipped to you means that the small-time wine producer will probably make more money from the out-of-state vacationers you mention. The more places you can get your product, the bigger your cutomer pool is and the more money you can make.

(Reply to this) (Parent)

thechuck_2112
2004-12-13 11:49 pm UTC (link)

I think the benefits in this case far outweigh the problems. Instead of being forced to market only in Ohio, Heineman can do mail-order to the whole country. I doubt their in-state market will suffer at all, since the only people who buy their wines are people making a conscious decision to do so, not simply going out to get wine.

My best road trip story actually centers on wine. The summer after my sophomore year of college, my parents had their 32nd anniversary. Having been married that long, my dad had no idea what to get my mom that she didn't already have. As it happened, I bought a copy of the New York Times at work one day, and a wine merchant had an ad within. My dad saw it laying around at home and noticed that they were selling an Alsatian Edelzwicker (a nondescripy table wine that no one outside of Alsace ever sees, usually) for $9 a bottle. When he and my mom lived in Europe, they drank that variety a lot, so it had sentimental value. Thanks to the interstate wine laws, though, he couldn't have it shipped from the store in New Jersey. Undaunted, he took a Friday off of work, loaded my brother and me into the car, and started an 8-hour road trip from Ohio to New Jersey whose goal was simply to spend a half hour in a wine store getting two cases of a wine no one drinks anyway.

Moral of the story? Few people are as dedicated to something like that as my dad was that weekend. If these silly restrictions are done away with, wine shops like that one in Jersey can get their wares anyhere in the country and pick up some niche market money they wouldn't otherwise get.

(Reply to this)

Whoa Nelly

full_of_wind
2004-12-14 02:26 am UTC (link)

Lot's of problems with your economics in this post. First a "winner take all" equilibrium is a very rare event and not appropriate for the wine market. Below is an explanation that is okay and sufficient for my time frame.

http://ingrimayne.saintjoe.edu/econ/resouceProblems/WinnerTakeIt.html

There are many producers of wine, many varieties, and many levels of quality. Some of this is determined but production technique but a large portion is conditioned on geography -- try some Florida wine. Large producers cannot always ramp up to capture larger and larger shares of the market. This is not even close to the conditions necessary for a winner take all situation.

"It's kind of a paradox. Frictionless, free trade will result in growing disparity between rich and poor, which will result in resentments on the part of the poor and corruption of the powerfully wealthy, which will result in a tearing down of the free society that made it possible."

Where did that come from? Free trade leads to disparity and lead ultimately to the destruction of free society? Why? This is one hell of an overly dramatic assumption. Increases in trade lead to wealth creation and specialization of labor. These things tend to make people happy. Just a short empirical point: Can you provide an example where a civilization has been destroyed because of its openness to trade?

Releasing state restriction on wine sales will increase demand for all wines. That is econ 101. You say that getting rid of these restrictions is tantamount to improvement in transportation. It's not. Think about it. It is a reduction in price. And for normal goods, a reduction in price means an increase in demand.

Just a couple more empirical rather than theoretical problems with you analysis:

Wal-Mart runs some small businesses out of business in some small towns because the people who live there shop at Wal-Mart. So what?

There are more restaurants with chefs then ever. There are more restaurants that cook per order than ever. The entire "meals out" market has grown along with wealth. Hmmm, sounds like another normal good situation in a highly competitive market.

We could go on and on. Sorry to be such a hammer here but you are way over the top in your use of faulty assumptions and far off in your analysis.

(Reply to this)

	perich 2004-12-14 07:13 am UTC (link)
	Not only are we better with an economic environment that's friendly to small businesses Why? (Reply to this)

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