December 7, 2013

"Hamilton wrote in Federalist 12 that a tax on whiskey 'should tend to diminish the consumption of it'..."

"... and that 'such an effect would be equally favorable to the agriculture, to the economy, to the morals, and to the health of the society. There is, perhaps, nothing so much a subject of national extravagance as these spirits.'"

From Clay Risen's "How America Learned to Love Whiskey, Attempts to control the fermentation and sale of alcohol are older than the republic itself."

"Control" is harsh. Isn't the right word "nudge"?


Hammond X Gritzkofe said...

No, "control' is the correct word.

Prohibition was an attempt at total control. Hamilton - who did have some good ideas, and was the right man for the job in some ways - was a statist and a control freak.

Pre-Revolutionary actions may have been "nudges", but the effort and intent to "control" was there.

(Thanks, Prof. A.; always enjoy reading about A.Hamilton.)

rehajm said...

Intent is what matters- Hamilton wants the tax to influence behavior so 'control' is absolutely the correct word, though you could make a case for the 'gentle' nature of the sin tax as alcohol is relatively price inelastic compared to other, non addictive consumer goods...

...such an effect would be equally favorable to the agriculture...

What does this statement mean? Are the furrows straighter because farmers are a bit less tipsy?

Larry Nelson said...

I'm sure this has been posted before, but this calls for it again:

"If you mean whiskey, the devil's brew, the poison scourge, the bloody monster that defiles innocence, dethrones reason, destroys the home, creates misery and poverty, yea, literally takes the bread from the mouths of little children; if you mean that evil drink that topples Christian men and women from the pinnacles of righteous and gracious living into the bottomless pit of degradation, shame, despair, helplessness, and hopelessness, then, my friend, I am opposed to it with every fiber of my being.

However, if by whiskey you mean the lubricant of conversation, the philosophic juice, the elixir of life, the liquid that is consumed when good fellows get together, that puts a song in their hearts and the warm glow of contentment in their eyes; if you mean Christmas cheer, the stimulating sip that puts a little spring in the step of an elderly gentleman on a frosty morning; if you mean that drink that enables man to magnify his joy, and to forget life's great tragedies and heartbreaks and sorrow; if you mean that drink the sale of which pours into Texas treasuries untold millions of dollars each year, that provides tender care for our little crippled children, our blind, our deaf, our dumb, our pitifully aged and infirm, to build the finest highways, hospitals, universities, and community colleges in this nation, then my friend, I am absolutely, unequivocally in favor of it.

Armon M. Sweat, Jr., 1952, Texas House of Representatives.

virgil xenophon said...

@Larry Nelson

LOL, I had thought of that quote before I even clicked on the comments section; then see you anticipated me!

Rocco said...

We should call people in favor of nudging "Nudge Freaks".

EDH said...

"Control" is harsh. Isn't the right word "nudge"?

Pigouvian Tax, actually.

A Pigouvian tax (also spelled Pigovian tax) is a tax applied to a market activity that is generating negative externalities (costs for somebody else). The tax is intended to correct an inefficient market outcome, and does so by being set equal to the negative externalities. In the presence of negative externalities, the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product.

In 1920, British economist Arthur C. Pigou wrote The Economics of Welfare.[5] In it, Pigou argues that industrialists seek their own marginal private interest. When the marginal social interest diverges from the marginal private interest, the industrialist has no incentive to internalize the cost of the marginal social cost...

To deal with over-production, Pigou recommends a tax placed on the offending producer. If the government can accurately gauge the social cost, the tax could equalize the marginal private cost and the marginal social cost. In more specific terms, the producer would have to pay for the non-pecuniary externality that it created. This would effectively reduce the quantity of the product produced, moving the economy back to a healthy equilibrium.

Rusty said...

"Control" is harsh. Isn't the right word "nudge"?

If they wanted to nudge there wouldn't be a fine and a prison term for making your own.

MadisonMan said...

Very nice article at the link, thanks.

Makes we want to have a little nip on this ice-cold morning, but I'm driving to Illinois in a bit.

David said...

And this was before Wisconsin existed! Amazing.

Mark O said...

"Isn't the right word 'nudge'?"

Only if you are attempting to defraud me.

Mitch H. said...

It was a perfectly fine article, until he over-sold his conclusion by claiming that temperance activists didn't attempt to use "government power" to control or limit liquor consumption between the Whiskey Rebellion and the post-ACW push for prohibition. This is not true - there was a significant movement for prohibition at the state level throughout New England, usually but not always associated with the Whig Party. It was an important fissure in states like Vermont and Maine, in the 1840s, for instance.

Also, the federal government relied heavily on liquor excise taxes throughout the period in question, to the point that Prohibition blew a mighty hole through federal finances, and was a big part of why the income tax became so important. FDR, for instance, campaigned on a tax-cutting platform which relied on the reintroduction of the liquor excise after repeal.

Ann Althouse said...

"Nudge" is the name of a book by Cass Sunstein and a concept that is used by the Obama administration. There's a tag for it that can be clicked on if you want to get a better sense of my reason for using it here.

Bob Loblaw said...

I wouldn't necessarily say "nudge" in the most direct sense, as the state is not necessarily controlling how much one drinks, but by making it more expensive they are essentially diminishing the cap that one may spend on whiskey.

Where the control comes in is when these sin taxes play out over a few years. Maybe the tax weeds out some who don't have much of a taste for whiskey anyways, but over time a group emerges that values whiskey enough to pay almost any price for it.

The state then becomes dependent on the tax revenue from the whiskey as well. Over time, if the number of users shrink, the state simply increases the amount of the whiskey tax. Publicly, most people, for moral or practical purposes, don't strenuously object to raising sin taxes. It's much harder for the state to raise sales and income taxes regularly, so they raise sin taxes, add more lottery choices, and try to raise gas taxes.

Only the most die-hard central planners think raising taxes will eliminate a supposedly-unwanted behavior. People who study human behavior know that there are two things throughout history that people like to do: drink alcohol and have sex. Whenever punitive measures have been taken to eliminate them, they have merely driven these behaviors underground. Raise taxes on whiskey, suddenly more people are making their own moonshine. Now another government group sprouts up to corral those pesky moonshiners.

And that is how a seemingly innocuous whiskey tax leads to increasing attempts by government to control its populace. The harder you try to grip the fish, though, the more likely it is to slip through your grasp.

uffda said...

Is that a nudge the tyrannical majority is delivering by taxing cigarettes to $7.50+ per pack? Funny how it feels just like a forcefully delivered jackboot to the nether regions.

n.n said...

With credit or subsidies offered to every Tom, Nancy, and their dog, a nudge will be inconsequential. The penalty has to be intrusive. For example: Obamacare.

geokstr said...

"Nudge" is the name of a book by Cass Sunstein and a concept that is used by the Obama administration.

"Nudge" is just the first attempt to control behavior by a government that is divided and lacks total power. When it is applied in innocuous manners to trivial things it can have some effect because no one really cares enough to "nudge" back. They just go along.

However, once a government begins to gain more power, and wishes to effect more "fundamental transformation", now it needs to change human nature. Then it will begin to affect more people in ways they do not like. With each more radical step, the resistance grows. Then the "nudge" becomes a "push", then a "shove", then a "punishment", then a "gulag" and finally, the "final solution".

This has been a pattern with no exceptions in statist governments since leftism was invented. A hundred million poor dead bastards would attest to that, if they could.

Obama is becoming filled with hubris and arrogance since he knows he has no effective check on his power to stop him. He is in the "shove" stage now with the IRS, EPA, ObamaCare and other attacks on his enemies, with some policies in the "punish" stage already.

Note that his approval ratings are beginning to tank even among his demos that overwhelmingly voted him in. He doesn't care as he doesn't need their votes anymore.

Professor Jonathan Turley, a normally solid Obama drone, just said in Congressional testimony: "The danger is quite severe. The problem with what the president is doing is that he's not simply posing a danger to the constitutional system. He's becoming the very danger the Constitution was designed to avoid."
Real Clear Politics

This will not end happily, nor peacefully.

Orwell got only two things wrong: the year and the melanin content of Big Bro'.

Hammond X Gritzkofe said...

ufda @10:57: "...taxing cigarettes to $7.50+ per pack?"

Holy Smoke - literally! I remember Dad stopping in front of the town drug store, maybe 1950: "Here's a quarter Son, run in and get me a pack of Pall Malls."

Sam L. said...

It's easy enough to DIY.

Perhaps Hamilton hated corn itsownself?

And by "nudge", what they mean is a righteous hit by a 400# linebacker. Or an equal body check in hockey.

uffda said...

Holy Smoke - literally! I remember Dad stopping in front of the town drug store, maybe 1950: "Here's a quarter Son, run in and get me a pack of Pall Malls."

As late as 1969 packs were 35 cents. The first time I paid more was July of that year while on R&R from Vietnam in Hawaii. Fifty cents and I was outraged. In-country the Army let us have cartons @ $1.10!

YoungHegelian said...


Cigarettes are now $12.50 a pack in New York.

There are now very active cigarette bootlegging rings in the US & Canada.

Paul said...

Tax power is what liberals use to control people. If they don't like what they do, then they want to tax it as a way to limit it.

But what goes around comes around liberals. On day you will face the taxing of your favorite activities. Would love to close those limousine liberal loop-holds.

Paul Zrimsek said...

In Sunstein and Thaler's original conception, what separated a nudge from non-"libertarian" forms of paternalism was that you could ignore it if you wanted to. The whiskey tax is a lot more typical of the sort of nudges we'd actually get if we were unwary enough to take them up on the idea.