Prohibition

One major attempt to remake the American lifestyle failed. Calls to prohibit the consumption of alcohol date from the nineteenth century. The Prohibition Party, in particular, although never large, waged a long and militant campaign. But it was not until 1917 that legislation was finally passed at the national level to prohibit consumption of alcohol. This was a wartime measure. Giving up alcohol was seen as a temporary sacrifice that would free resources in the brewing and distilling industries and keep workers at

PROHIBITION

What happens when a society outlaws drugs such as marijuana, cocaine, heroin, and anabolic steroids? The Noble Experiment can tell us a good deal about the potential costs and benefits of this action. As a result of prohibition, consumption of alcohol fell, although perhaps not as much as its advocates had hoped. Prohibition reduced supply because producers faced the risk of legal prosecution. Prohibition probably reduced demand because of respect for the law, although there is some uncertainty about this because demand might have been increased as a result of the “forbidden fruit” effect.

Statistics on alcohol production are incomplete, of course, because so much was produced illegally. Economists such as Clark Warburton (1932) and Jeffrey Miron and Jeffrey Zwiebel (1995) use related variables, such as deaths from cirrhosis of the liver, to infer consumption. According to their work, consumption of alcohol fell drastically at first but then rose to 60 or 70 percent of its preprohibition level. With both supply and demand falling, it is not clear what the impact on

The price would be. Evidence on prices is extremely sketchy but suggests that prices rose, although not a great deal.

Crime increased. Participants in the “black market” could not use the legal system to settle disputes between buyers and sellers or among competing sellers. Hence, sellers turned to crime, sometimes violent crime, to protect their property. Because their business was already illegal, the marginal costs of violence aimed at potential competitors was lower than they otherwise would have been. The homicide rate rose during this era by an amount that cannot be explained by other factors.

Deaths from overdose and accidental poisoning increased. Producers tended to make highly concentrated alcoholic beverages in order to better conceal their product from authorities. This increased the risk of accidental overdoses. Quality, moreover, tended to vary widely because producers could not establish and protect brand names and therefore had little incentive to maintain the quality of their product. In one case, an adulterant used to disguise alcohol as medicine led to thousands of poisonings.

Peak efficiency. Enforcement of the law was tightened in the Volstead Act of 1919, and prohibition was made permanent, or as permanent as such things can be, in 1920 when the Eighteenth Amendment to the Constitution was ratified.

Initially, prohibition had wide middle-class support. This included one of the leading economists of the era, Irving Fisher, who believed that prohibition had increased the savings of the working class and had raised industrial productivity. As is well known, however, opinions changed when crime soared despite an increase in the amount spent on enforcement from $6.3 million in 1921 to $13.4 million in 1930. Bootlegging became a major industry, and gangsters such as Al Capone and Legs Diamond became household names. Spectacular stories could be backed up with cold statistics: The homicide rate rose, and prohibition cases swamped the federal courts. By the time the Twenty-First Amendment to the Constitution ending prohibition was ratified in 1933, a majority of Americans had become disillusioned with the results of the “Noble Experiment.” The economics of prohibition is discussed further in New View 22.1 (see above).