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The laws forcing Castle Danger to lay off staff are there for the benefit of retailers, not consumers

Today, the Castle Danger brewery in Two Harbors loses their legal right to sell growlers. Established in 2011, the brewery has grown impressively. But the state government is now penalizing that success. Castle Danger has passed the state legislated limit of 20,000 barrels produced annually above which a brewery cannot sell growlers.

As the Pioneer Press reported in July,

The loss of growlers for Castle Danger will impact them fiscally, and they’ll have to make “some pretty tough decisions,” said Maddy Stewart, marketing and events manager for Castle Danger.

Growlers make up around 30 percent of all taproom sales, she said. To account for the lost sales, the company will eliminate a handful of part-time positions, as well as one full-time position, she said.

Lauren Bennett McGinty, executive director of Minnesota Craft Brewers Guild, said she’s heard that businesses’ lost revenue can near $300,000.

“A lot of our breweries do their best to prepare for (hitting the cap). … We know that Castle Danger has done their best to do that,” she said. “But it’s still a huge loss.”

Castle Danger is the first in a “wave” of breweries that are going to lose their growler-selling ability, Stewart said.

Bent Paddle Brewing, Lift Bridge Brewing Company and Indeed Brewing Company are also “quickly approaching” the 20,000 mark, Bennett McGinty said.

Cui buono – who benefits?

Who supports such a rotten law? Well, cui buono – who benefits?

This law exists to maintain the ‘three tier system’. This, according to the Minnesota Beer Wholesalers Association (MBWA), “divide[s] the industry into a brewer tier, a distributor tier, and a retailer tier and restricts each tier to its own function”.

If Castle Danger both brews and sells its own beer, it blurs the line between the brewer tier and the retailer tier. But what is wrong with that? Plenty, if you’re a retailer. And that is who the MBWA is looking out for. Not the consumer, but its members. They may try to cloak this with some waffle about the ‘public interest’, but, ultimately, this is about naked self interest.

Self interest through the market vs self interest through the government

Why should an economist complain about naked self interest? Isn’t Adam Smith’s Invisible Hand an explanation of how self interest works for the greater good?

Indeed it was. But Smith was talking about self interest in reasonably free market where, if they want the money to spend on things they want, individuals have to supply a good or service someone is willing to pay them for. As Smith put it, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

The MBWA’s members could compete with brewers like Castle Danger by making a more attractive retail offer to consumers. That would be the free market way. This would make consumers better off.

But, if the MBWA’s members cannot make a more attractive retail offer, they should not be able to use the coercive power of the state government – backed by force, remember – to stop their competitors from doing so. There is nothing ‘free market’ about that and it reduces consumer welfare.

Almost all government regulations are sold as being in the public interest. Very few of them actually are. Always ask yourself, ‘cui buono?’

John Phelan is an economist at the Center of the American Experiment. 

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