How Looser Regulation Gave D.C. Great Specialty Bars

A blog about business and economics.
Sept. 19 2013 1:16 PM

How Looser Regulation Gave D.C. Great Specialty Bars

ALAMEDA, CA - DECEMBER 21: Well, do you?

Photo by Justin Sullivan/Getty Images

Washington, D.C. isn't particularly known for good government practices or a commitment to free markets but one area where the city has things right is the world of wholesale alcohol distribution. The vast majority of jurisdictions in the United States saddle retailers with the elaborate three-tier alcohol distribution system whereby a bar may not buy product directly from a producer. Exceptions are frequently made for brewpubs selling their own wares, but if you want to sell a bottle of liquor or a keg of beer from some other state, then you have to find a middleman who wants to sell it to you.

That greatly reduces the range of products that are available, and can raise prices by limiting competition and inserting extra layers of profit-taking. As Jessica Sidman explains in the City Paper, D.C.'s lack of such a system is helping to spur the rise of niche bars that go deep with a very long list of some particular spirit. She cites absinthe-focused Libertine, tequila-focused El Centro, rum-focused Hogo, whiskey-focused Jack Rose, sherry-focused Mockingbird Hill, etc.:

Part of what allows D.C. bars to build such large inventories are its unique alcohol import laws, which make it possible to obtain bottles directly or from outside distributors if they aren’t available from D.C.-licensed distributors. That’s not possible for bars in Maryland, Virginia, and elsewhere in the country.

An important point about this, it seems to me, is that when you make it logistically easier for bars to stock obscure products you create opportunities to increase the skill profile of the bartending occupation:

In addition to flights ($12 to $25) to show off a spectrum of different styles of rum, [Tom] Brown relies on bartenders to guide drinkers toward brands that are better than their Bacardi standby but have the same price tag. The same is true at El Centro, where bartenders must go through a two-week training, at the end of which they’re tested about the products, the production process of tequila and mezcal, and the regions where the spirits are made. In addition, all the bar managers will soon take a tequila sommelier class.

As I've said before, policymakers need to start taking food service seriously as a sector of the economy in which large numbers of people work. Creating more opportunities for differentiation, competition, and upskilling is part of the path to more jobs and more opportunities. The three-tier system originally came about as a consequence of prohibition. But if policymakers want to curtail problem drinking (which they should) the reasonable course of action is higher alcohol taxes. That targets the issue much better, and instead of generating rents for booze distributors generates useful revenue.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.


War Stories

The Right Target

Why Obama’s airstrikes against ISIS may be more effective than people expect.

The NFL Has No Business Punishing Players for Off-Field Conduct. Leave That to the Teams.

Meet the Allies the U.S. Won’t Admit It Needs in Its Fight Against ISIS

I Stand With Emma Watson on Women’s Rights

Even though I know I’m going to get flak for it.

Should You Recline Your Seat? Two Economists Weigh In.

Medical Examiner

How to Stop Ebola

Survivors might be immune. Let’s recruit them to care for the infected.


America in Africa

The tragic, misunderstood history of Liberia—and why the United States has a special obligation to help it fight the Ebola epidemic.

New GOP Claim: Hillary Clinton’s Wealth and Celebrity Are Tricks to Disguise Her Socialism

Why the Byzantine Hiring Process at Universities Drives Academics Batty

Sept. 23 2014 3:29 PM The Fascinating Origins of Savannah, Georgia’s Distinctive Typeface
  News & Politics
Sept. 23 2014 11:45 PM America in Africa The tragic, misunderstood history of Liberia—and why the United States has a special obligation to help it fight the Ebola epidemic.
Sept. 23 2014 2:08 PM Home Depot’s Former Lead Security Engineer Had a Legacy of Sabotage
Sept. 23 2014 11:45 PM Why Your Cousin With a Ph.D. Is a Basket Case  Understanding the Byzantine hiring process that drives academics up the wall.
  Double X
The XX Factor
Sept. 23 2014 2:32 PM Politico Asks: Why Is Gabby Giffords So “Ruthless” on Gun Control?
  Slate Plus
Political Gabfest
Sept. 23 2014 3:04 PM Chicago Gabfest How to get your tickets before anyone else.
Brow Beat
Sept. 23 2014 8:38 PM “No One in This World” Is One of Kutiman’s Best, Most Impressive Songs
Future Tense
Sept. 23 2014 5:36 PM This Climate Change Poem Moved World Leaders to Tears Today
  Health & Science
Medical Examiner
Sept. 23 2014 11:37 PM How to Stop Ebola Could survivors safely care for the infected?
Sports Nut
Sept. 23 2014 7:27 PM You’re Fired, Roger Goodell If the commissioner gets the ax, the NFL would still need a better justice system. What would that look like?