Craft Beer and the Human Economy

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Tom Philpott observes that not all alcohol regulations need necessarily be a bad thing:

It’s true that Carter’s move on behalf of home brewers helped push along the craft-brew revolution, as did the state-by-state unwinding of rules preventing the opening of brew pubs, which largely happened in the 1980s and ’90s. But in both cases, the regulations in question were clearly misguided in the first place—they were remnants of Prohibition, designed to keep people from drinking at all. I join my libertarian friends in opposing clearly misguided, archaic regulations.

But even archaic regulations have their place. The most famous beer regulation of all is Germany’s illustrious Reinheitsgebot, or Purity Law, which governed that country’s beer production from 1516 until a slightly more expansive version came into effect in 1993. The Reinheitsgebot decreed that products marketed as beer could contain only the following ingredients: water, malted barley and hops. (Yeast was originally omitted, because in the 16th century, the role of microbiota in the fermentation process wasn’t understood.)

Granted, the Reinheitsgebot was always problematic. It prevented German beer makers from engaging in the kind of experimentation that took place in Belgium, home of delightful fruit-flavored beers that would have run afoul of the purity law.

But it saved German drinkers from the truly bad beer that plagues most of the globe. A 2006BBC story listed additives typically found in corporate beer, none of which you’ll find in the stuff brewed in Germany: betaglucanase, ammonia caramel, rhoiso-alpha acids, sulphur dioxide, protease, amyloglucosidase, propylene glycol alginate, and silicone. Nor will German beers ever be dumbed down with cheap filler grains like corn and rice, which are part of the reason American brews like Bud and Miller taste so insipid.

Tom has written more about this here (where he links to an old Balloon Juice post of mine) and here (where I got that nifty graph up above…).

When we talk about regulation, I think it’s important to dissect the nature of the regulation itself. A regulation that simply requires beer to adhere to specific quality standards is pretty benign. Regulations that grant monopoly distribution rights, prohibit grocery stores from selling alcohol, and make it impossible for new entrants to make and/or sell their beer are harmful and stupid. Just saying regulation good! or regulation bad! won’t do. You have to explain why a regulation is useful, or why it causes harm.

Tom also comments on Yglesias’s piece on the union aspect of the big brewers versus the craft brewers. I think he misses the point Matt’s trying to make a bit. I don’t think Matt is cheering on the craft brewers because they don’t have unions. Rather he’s pointing out that unions are not necessarily an opposing force to big corporations, and supporting corporations just because they have a unionized labor force is not an inherently progressive thing to do. I would add to that point simply that small brewers tend to provide more options for workers in a more human, less industrialized setting. If workers at craft breweries wanted or needed to organize, more power to them.

Speaking of the “more human” aspect, I wrote yesterday at Forbes about something I’m tentatively calling the ‘Human Economy’. Here’s what I said:

Jobs are great, but welfare should be used to thwart the inherent economic uncertainty of a capitalistic, global society. People should not lose their insurance just because they’ve lost their job. Universal healthcare would go a long way toward allowing people to be more independent, more entrepreneurial, and less risk-averse in their private ambitions. I think that in the emerging service economy – with more and more people working outside of the normal constraints of office and industry jobs, as freelancers and contractors – this will become even more important. Far from discouraging work, the right kind of welfare can do just the opposite.

I’ll call it the Human Economy for lack of a better term, but I envision a world where the old status quo relationship between boss and worker is largely a thing of the past, where free markets and smart welfare programs and a green infrastructure combined with personal technology and peer-to-peer interactions create a truly vibrant, innovative economic future.

Yes, I use the term ‘free markets’ here loosely, and perhaps I should just say ‘markets’ so that I don’t have to hear about how they’re not really free if the government gives someone free healthcare. But I digress. I think there’s a tension and a compatibility in this sentiment between the economic vision I’m describing and organized labor. I haven’t quite put my finger on it yet, but I’m working on it.

John Quiggin has an interesting post up on ‘feasible Utopias’ and he uses socialized healthcare as an example of such:

The big question is whether this model can be replicated more broadly. Health care has the special characteristics that, on the one hand, there isn’t a big issue of consumer preferences (mostly, people want the treatment that has the best chance of a cure, though there is sometimes a risk-return trade-off) and, on the other hand, markets perform very badly.

The public provision model wouldn’t work for, say, motor cars. Still, it seems that it ought to be possible to limit the domain of inequality in such a way that no one was left without the basic requirements for a decent life and social participation while, at the same time, those who chose to work harder, or worked more productively, could still enjoy higher consumption of discretionary items like expensive cars and granite benchtops.

I think some form of single-payer healthcare would go a long way toward freeing employees from the boss/worker relationship we now have, but it would also mean unions could focus more directly on wages and working conditions instead of bartering over benefits. Since health benefits are so expensive, this would lower the overall cost of running a union shop, making unions more viable in small outfits like craft brewers, but also less necessary. Maybe the unions wouldn’t do as much, but they could at least give those workers some agency and voice they might not otherwise have.

Which finally brings me to this comment that Benjamin Daniels left to a recent post of mine. Benjamin wrote:

Views like yours (which are quite close to mine) are what I like to describe as ‘market socialist’, the key features being:

1) Market mechanisms as effective allocation calculators, _if_ distortions and failures are removed. (Pigouvian neoliberalism when taken alone.)

2) Social/collective preferences as the highest goal of policy, _given_ that individual ‘revealed’ preferences are often incompatible with collective preferences. (ie, many of us would prefer not to have health insurance, but we are collectively better off if we all do – so a reduction in freedom on one hand increases freedom greatly on the other). This point also means that questions of distribution are at least equal to questions of total output; that employment is at least equal to profit, and other social preferences that are not reflected in market mechanisms are often more important than those that are.

Altogether the philosophical flow is the opposite of neoliberalism. There, what the market produces is proper _because it is said to reveal our preferences_; here, we reject that assumption, state our preferences first, and use markets to acquire the necessary information and enact those preferences.

Personally I have found that Post-Keynesian economics makes good use of these foundations – it has built a number of models where the key outputs are distribution and employment (instead of output and profit), and so illustrates how we can make the market mechanism produce the outputs we truly desire.

This ties in nicely to Henry Farrell’s piece (also in response to a Yglesias post!) on neo-liberalism from yesterday, which I won’t get into right now, but which you should read.
 
I wasn’t sure what to think of Benjamin’s comment at first, but it really does resonate with me. Markets are often spoken about in right-wing terms, or libertarian terms, and many on the left view them with suspicion. But when we craft policy we inevitably do so with the whole of society in mind, even if we think that markets should be used to achieve specific societal and economic goals. The reduction of freedom that is the price-tag for single-payer healthcare on the one hand is a great expansion of freedom for many Americans on the other. Markets coupled with a welfare state make sense, and not just in pragmatic terms.
 
If you state a goal such as “I envision a world where the old status quo relationship between boss and worker is largely a thing of the past, where free markets and smart welfare programs and a green infrastructure combined with personal technology and peer-to-peer interactions create a truly vibrant, innovative economic future” then you’re sort of inevitably adopting a less anarchistic or libertarian model, and taking on a more socialistic stance even if that stance is market-oriented.
 
How does this tie into craft beer?
 
I suppose I see a less conglomerated market that produces products people actually want rather than products based on years of bad government policy and rigged distribution systems as essentially more human and more organic. With beer, there’s anti-trust laws. InBev is huge. It’s a Belgian brewery that bought up Anheuser-Busch, the biggest American beer maker. Maybe beer isn’t important enough to target, but the same thinking applies to banking, and in banking we probably should do something about these huge corporate too-big-too-fail banks.
 
In any case, lots of scattered thoughts on all of this as I try to mould them into something more coherent.
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51 thoughts on “Craft Beer and the Human Economy

  1. “Yes, I use the term ‘free markets’ here loosely, and perhaps I should just say ‘markets’ so that I don’t have to hear about how they’re not really free if the government gives someone free healthcare.”

    I think just ‘markets’ is definitely proper, because it is a rhetoric that internalizes the philosophical reversal I mentioned in the quoted comment (thanks for the nod, by the way) – that markets cannot be ‘free’; they are always and everywhere a deliberate tool of policy, not the ‘default’ or ‘natural’ position – BUT they are a supremely useful tool when we face the calculation problem that topples traditional/orthodox socialism.

    So if we approach, say, libertarians from that position – if it is made clear that a progressive policy does not mean command-and-control, but market mechanisms meant to achieve explicit social goals – what would they say?

    Can anyone offer a response from a libertarian/classical-liberal perspective?

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  2. Wow, that second-to-last paragraph sure turned a corner into somewhere different…

    While I’m thinking about that, I’d like to pick a nit with your claim that “Markets are often spoken about in right-wing terms, or libertarian terms, and many on the left view them with suspicion.”

    I don’t think it’s fair to say that many on the left view markets with suspicion; real Marxism (as opposed to anyone-who-disagrees-with-Grover-Norquist-is-a-Marxist Marxism) is largely inoperable now. The old chestnut about everyone on the left hating capitalism and private enterprise was never really true, and certainly isn’t accurate today.

    Instead, I’d re-cast that as “many on the left are suspicious of right-wing references to markets as potential stalking horses for reverse-Robin-Hood privatization schemes or state-sponsored robber baronies.”

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  3. Let’s get this straight, Kain:
    The biggest problem with the idiotic Reinheitsgebot was the necessity of an acid rest.
    The brewers were stuck with what water they had on hand, and couldn’t make adjustments.
    There are a wide variety of food-grade acids to affect pH directly.
    They couldn’t use any of them.

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      • Not really.
        The English had just as many styles, and better beer.
        It was Gabriel Sedlmayr that brought the use of the thermometer and hydrometer to Munich after touring several British breweries in the early 1800’s.

        I don’t remember the British ever brewing anything as foul as a Dortmunder export.

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        • I suppose that’s a fair point if you look at the entire time frame of the Reinheitsgebot back to the early 16th century; Britain was a culinary world leader for a long time prior to the 20th century, after all.

          I do think my major point that the Reinheitsgebot didn’t prevent the Germans from making many very nice beers for nearly 500 years is still valid, though. (And yes, there are British beers I’d compare disfavorably with a Dortmunder, but that’s also beside the point — this isn’t about comparing countries’ worst beers, it’s about comparing their best).

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          • there are British beers I’d compare disfavorably with a Dortmunder

            I had forgotten about the IPA, though McEwan’s makes a nice one.
            Now, while the purity laws didn’t prevent them from making a few decent beers, it certainly didn’t help much.
            Guinness is recognized as a producer of stout not because it is a tasty beer, but rather because the brewery was quick to introduce innovations throughout its history.
            The typical German decoction mash included an acid rest and/or the use of acidulated malt, which translates into time and money. A touch of phosphoric acid, or the old distillers’ trick of adding half a lemon, was out of the question.

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        • Beer trivia.

          Some fundamental statistics (stuff you learned if you took Stat 101) was invented by a guy named William Sealy Gosset, who worked for the Guinness company. His goal was to minimize the amount of sampling required to verify the quality of the beer.

          Guinness considered this a trade secret and forbade Gosset from publishing his results under his own name, so he used a pseudonym. If you’ve ever applied Student’s T-Test, now you know why it’s called that.

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  4. A 2006BBC story listed additives typically found in corporate beer, none of which you’ll find in the stuff brewed in Germany: betaglucanase, ammonia caramel, rhoiso-alpha acids, sulphur dioxide, protease, amyloglucosidase, propylene glycol alginate, and silicone. Nor will German beers ever be dumbed down with cheap filler grains like corn and rice, which are part of the reason American brews like Bud and Miller taste so insipid.

    I’m having trouble not reading this as “Stupid rednecks who can’t tell a good beer from donkey piss chose to support companies which produce cheap beer that I don’t like over more expensive beer that I do like.”

    The real problem, it should be obvious in retrospect, isn’t that mass-market breweries were allowed to produce products that Tom Philpott doesn’t like—it’s that niche breweries weren’t allowed to produce products he does like.

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      • When I worked at the restaurant, I worked for someone who had been a pastry chef at Epcot France. One of her cakes was the “Triple Chocolate Cake”. This was an understatement. There were, like, lots more things going on than just that… but the name was catchy and probably moved more pieces of cake than a more accurate name would have.

        One night, after dessert, a customer pushed his empty plate away and said “My god. There are people out there who cannot tell the difference between that and a Snickers bar.”

        On one level, he’s right. There was a lot more nuance and stuff working together in that cake than would be going on in a Snickers.

        On another, part of his pleasure from eating the cake seemed to come from knowing how much pleasure he took from eating the cake.

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      • Also:

        “I see a less conglomerated market that produces products people actually want…”

        People really, really want Bud Light. We know this because of the fact that when given a choice between Bud Light and a fine mon-brewed Belgian who-er-whatsit, they overwhelmingly choose Bud Light.

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          • Simple seems to be the watchword here. First we get, “A regulation that simply requires beer to adhere to specific quality standards is pretty benign.” Simply? That’s an interesting turn of phrase. It’s simple if the regulation requires quality standards you like, or doesn’t prohibit something you want to sell or your customers want to buy.

            Then there’s “I would add to that point simply that small brewers tend to provide more options for workers in a more human, less industrialized setting.” Well… not simple at all. Do they tend to offer a more human setting? Says who? Are corporate union jobs inhuman? I am not even sure what that means.

            But the idea that beers you like are the beers “people actually want” really takes the cake. I get it. You like craft beer. You hate Budweiser. That’s fine. Don’t buy it. But trust me here. Really, really trust me. Lots and lots of people want to buy Miller Lite. Lots and lots of peope have tried craft brews and stopped trying them because they don’t like them.

            Maybe these people are wrong. Maybe they are dullards. Maybe they have been conned by the bajillion dollar advertising budgets. But nine of that takes away from the fact that they do want to buy beers you don’t like.

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        • “[W]hen given a choice between Bud Light and a fine mon-brewed Belgian who-er-whatsit, they overwhelmingly choose Bud Light.”

          Well, when the (insert class-war adjectives) beer is $3.50 for a pint and Bud Light is $4.00 for a pitcher, simple economics drives to you Bud Light, at least if you’re just looking for something to drink socially and in quantity.

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          • But the quality laws quash that kind of variety, don’t they? Let’s get out of beer and get into cars. I don’t care much about mine. I just want it to go. Now, a car guy is going to want massive, four-barrel Weber carbs, independent suspension and all that stuff. These are all great things if you give a crap about cars. They ultimately come down to quality. Ferrari has these things! Of course, Ferrari’s are really expensive. So a car “purity law” that forces all car makers and all car buyers to build to Ferrari’s specifications will in fact raise quality. Hooray!

            Only I don’t care about the Weber carbs. I don’t care about the independent suspension. So I get screwed, and forced to pay for a bunch of crap that I don’t care about.

            Because at the end of a day, a key component of a consumer product is its price. Yes, a pitcher of Milwaukee’s Best costs as much as a thimbleful of some fine Belgian whatever. And that’s part of the draw. If I am not going to enjoy the triple-hopped thrill of an IPA, why should I pay for it?

            But the other key component is that, despite the aficianado’s views, some people really don’t like the Ferrari better. Some people really want a Camry or a minivan. Because they need what it offers, or don’t care about world-class performance and would rather save the money.

            And some people really, really don’t care if their beer is dumbed down with rice. In fact, many people WANT beer dumbed down with rice. I know people who have Budweiser tattoos. Because of the three tier distribution system? No. Because they really like Budweiser.

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    • I really don’t think it’s necessarily a fair statement that current U.S. beer sales reveal true market preferences in a context where federal and state/local regulations of that market have ranged from a low end of fairly extreme to Prohibition.
      Or are you suggesting that heavy government regulation doesn’t actually interfere in markets?

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  5. Much of the success of a mega beer like Budweiser comes from the nature of supermarkets. Most people think Safeway buys all this product and stocks their shelves and marks it up for a profit. In reality Safeway /leases/ their shelf space to companies who manage everything, including the sales price. Anheuser Busch can afford to (and I’ve personally witnessed this) BUY every beer in their way so they have more room for their own product on the shelves. They don’t play this game with Miller of course, but I’ve seen them knock small players right out of the game. They might have great sales for a month and then wonder why Safeway stopped taking their product (leasing them space).

    In Texas Hold-em this is called “big stacking” the opposition.

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    • They might have great sales for a month and then wonder why Safeway stopped taking their product (leasing them space).

      Yes, but obviously many beer drinkers are satisfied enough with Bud that they’re not willing to make an extra stop to get that other beer. In other words, their marginal valuation of that craft beer is very low.

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          • The three-tier system is the problem, not the ability of the big boys to buy shelf space. That’s actually how pretty much all grocery and a lot of consumable mass market retail works and yet small companies can emerge and get their products to customers and, if successful, become big and mainstream.

            The issue is the three tier system where states give out monopolies on beer distribution to a very small number of players who are protected from competition. It is illegal in most places for a brewer to sell their products to retail customers, bars/restaurants or through retail stores directly. They must convince one the monopoly holders to buy their product, then that monopoly holder may sell it to retailers who may then sell it to individuals at retail or to bars and restaurants.
            So, it doesn’t matter if a customer wants to buy a particular beer. It actually doesn’t even matter if a retailer wants to buy a beer. Even giant retailers do not get to pick what beverages they may carry, they’re stuck with choosing from among whatever the holder of the local monopoly wants to sell.

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            • This is certainly true. In Pennsylvania they have only just recently (as in, less than two years ago) allowed a single building to house sales operations for both food and alcohol–which are still required to be separate operations. The local equivalent of Whole Foods near my parents’ house has wooden railings between the part of the store that sells beer and has a sandwich counter, the part that sells wine and liquor, and the part that sells food. And you aren’t allowed to carry goods from one part to another unless you’ve paid for them. And you aren’t allowed to buy more than two six-packs of beer at any one time (apparently that part of the store is legally defined as a “carry out bar”–that’s why the sandwich counter is there.)

              If you want a case you have to go to a state-licensed beer distributor shop–and you can ONLY buy cases there, no six-packs.

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        • Mike,

          wardsmith’s argument assumed the craft beer had sold a lot before they got moved out, so by his argument, to which I was responding, it’s wrong to say they had never tried the beer. If they in fact have tried it, and then can’t be bothered to go out of their way to buy it, then they can’t have liked it that much.

          I’m fortunate, I have to pass a liquor store to get to the grocery store, but I would go some distance out of my way for good beer.

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    • I don’t quite get how this works. If you’re selling 100% of your stock every month then…isn’t that great? Even if it’s being dumped in a ditch behind the local InBev distributor plant.

      And if Bud is taking up more shelf space than they paid for, wouldn’t Safeway have something to say about that?

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