Why We Control Alcohol the Way We Do

I'm doing a project for my game theory class, and a small case study i'm working on is on the wine industry, and the role of regulations as a competitive advantage for distributors. In my research, I came across a few articles that try and explain why such a system exists.

We read an overview of it for our two cases in this class, mentioning prohibition etc, but I was still lost on why such a system existed in the first place - I thought I'd share some of my findings below:

The majority of states have modeled their method of controlling the sale of alcoholic beverages on licensing private enterprise within a “three-tiered system,” which divides the industry into the supplier, wholesaler, and retailer levels through statutes and regulations. The logic of the three-tiered system is that, by keeping the distribution levels separate and independent, the forces that promote intemperance in alcohol consumption will be tamed as the incentives to excesses are minimized.

“three-tiered system,” interposing a wholesaler level between the supplier and retailer, as the best method of correcting past abuses, establishing an orderly system of distribution and control of alcoholic beverages and preventing the evil of the “tied house.”

Thus, the rationale for imposing such as system is to prevent direct access to consumers - and by extension to prevent profiting from promoting excessive consumption via the idea of the tied house. It is a weird way of controlling alcohol consumption - imposing regulations to limit growth in an inherently capitalistic system and fighting the drive toward increased profit and growth.

By now, we have realized, too late, that this regulation is severely flawed. Social, economic, and technological advancements have taken advantage of its original purpose, and rendered it an archaic, value-eroding regulation. Public attitudes towards temperance has shifted substantially, consolidation has happened at many levels (going against the goal of fragmented weak players!), and logistics has improved drastically since the 1930s. As the chapter succinctly ends:

In order to have effective alcohol control in the 21st century, we must reevaluate what is meant by the goal of temperance and fashion a regulatory scheme that is directly tailored to accomplishing it while
withstanding constitutional scrutiny.


Source: Social and Economic Control of Alcohol: The 21st Amendment in the 21st Century (Public Administration and Public Policy), by Carole L. Jurkiewicz and Murphy J. Painter