Friday, August 06, 2010

How Tom Bates Saved Beer

The last day or two there's been a story going around about how Jimmy Carter saved beer. Chait's citing to a post by E. D. Kain, the new guy at Balloon Juice, who in turn points to a post (from March) by Rob Carlson. Carlson includes an impressive graph (which Kain reposts) showing the explosive growth in the number of breweries in the US after 1979. The cause of that growth:

In 1979, Carter deregulated the beer industry, opening the market back up to craft brewers.
Which makes a pretty convincing case for Carter. There's just one problem: it didn't happen.


The bill in question (passed in 1978, taking effect in 1979) legalized homebrewing "for personal or family use and not for sale". There was no deregulation of the beer industry. The 'deregulation' applied to personal, not commercial behavior.

Now, legalizing homebrew was certainly a good thing, and it was certainly a factor in the development of the craft beer industry. This piece by Greg Beato (in Reason), arguing that it was a primary cause, quotes Charlie Papazian as saying that "over 90 percent of small brewers I talk to today have roots in home brewing"--so, fair to say it was a significant factor. Carter deserves credit (along with Senator Cranston, who pushed the bill in the Senate).

Still, the Beato piece reads a little like
  1. Legalize homebrewing
  2. ???
  3. Craft beer explosion!
The intermediate step, which goes unnoted by Carlson ("as far as I can tell nothing else substantive changed about the market") and thus by Kain and Chait, is the legalization of brewpubs in individual states. Washington passed its law in 1982, and that same year Bert Grant opened his brewpub in Yakima--the first brewpub in the US since Prohibition. California's brewpub law also passed in 1982 (sponsored by Assemblyman Tom Bates), and Oregon's passed in 1983. Over the course of the 1980s, various other states followed suit.

This removed huge barriers to entry for small brewers in those states. Brewers could be viable with smaller volumes than would be necessary to make bottling and distribution profitable; they could also avoid the complex, nonsensical, and often corrupt system of beer distribution in their state. Brewpubs could also experiment with very small seasonal or specialty batches--thus, over time, building a market for much more diversity. The impact of brewpub legalization can be seen if you track where the craft brew market developed when (Washington, Oregon, and California were much more diverse much earlier than the rest of the country), and is summed up in one figure: of 1,500 breweries in the United States today, 2/3 are brewpubs.

So, in fact, Kain's broader conclusion (that smart, limited, targeted deregulation of a market can lead to much greater diversity) is supported by the history. It's the specifics of that history that needed correction.