Blood and Expectations: The Case of the American Liquor Industry
By Bryan Caplan
Suppose you had a meeting with Al Capone in 1923. He tells you, “The Irish are giving us trouble with their cut-rate beer, so we’re gonna rub ’em out.” You’d probably feel a chill run down your spine. You certainly wouldn’t laugh. No one would.
Now imagine a similar meeting in 2013. Instead of talking to Capone, though, you’re meeting with the CEO of Heineken. He tells you, “The Coors brothers are giving us trouble with their cut-rate beer, so we’re gonna rub ’em out.” How would you react? Not with a chill down your spine, I’ll warrant. If you’re anything like me, you’d laugh in his face.
What’s the difference? Murdering your rivals was just as illegal in 1923 as it is today. More illegal really, given the prevalence of the death penalty. True, the expected marginal cost of murder was probably lower for Capone because of (a) corruption of the legal system, and (b) the fact that he was already suspected of many other capital crimes. But can that explain your utterly divergent reactions to these two hypotheticals?
I think not. What makes Capone’s plan so chilling, and Heineken’s so risible, is expectations. Capone operated in a niche where people expected murder. When he proposed murder, his underlings took him seriously. Since they took him seriously, his murderous intent quickly blossomed into murderous action.
Heineken, in contrast, is part of civilized society. No one expects Heineken to rub anyone out. So if Heineken’s CEO proposed murder, his underlings would laugh. Since they wouldn’t take such a proposal seriously, the CEO’s words would not lead to murder even if he meant them. Indeed, if he kept pushing the issue, the probable result is that the crazy CEO of Heineken would be fired.
How could expectations change so radically in eighty years? The repeal of Prohibition obviously had a lot to do with it. But the main reason probably wasn’t the de jure change in the marginal cost of murdering the competition. The main reason, rather, was that the legalization of alcohol put civilized men back in charge of the industry. And for civilized men, advocating violence against your business rivals is a sign of dementia, not determination.