Straight Whiskey and Dirty Politics

The early 20th century in America was characterized by transformative Progressive Era reforms aimed at addressing the excesses spawned by industrialization. A pivotal moment was the enactment of the Pure Food and Drugs Act in 1906, regarded as a triumph for consumer protection. This legislation prohibited harmful substances in food and beverages, mandated accurate labeling, and took aim at imitations in the market. But in the realm of whiskey, was it truly about safeguarding the public from hazardous additives? Or was it rather an instance of political maneuvering, where influential interests harnessed government authority to undermine their rivals?

The origins of regulation have been a subject of debate among economists, often framed through two different theories: public interest theory and public choice theory. Proponents of public interest theory view regulation as a selfless remedy for market failures, such as asymmetric information, where consumers lack the knowledge to identify hidden threats. Conversely, public choice theory, advanced by thinkers like James Buchanan and Gordon Tullock, suggests that regulations frequently arise from rent-seeking behavior, where powerful industry groups advocate for regulations that enhance their profitability at the expense of consumers and competitors. Rent seeking tends to thrive when there is a façade of public interest to support the justification for the regulation, appealing to those attempt to influence it.

In a recent paper published in Public Choice, co-authored with Macy Scheck titled “Examining the Public Interest Rationale for Regulating Whiskey with the Pure Food and Drugs Act,” we delve into a case where historical evidence significantly favors the interpretation provided by public choice theory. Distillers of straight whiskey, who age their products in barrels for enhanced flavor, advocated for regulations against “rectifiers,” who created flavored neutral spirits to imitate aged whiskey at a lower cost. The rectifiers were accused of enhancing their products with harmful substances like arsenic, strychnine, and wood alcohol. If these allegations were accurate, the regulation would have been a protective measure. But was it valid?

During the decades preceding 1906, whiskey consumption surged without federal oversight. Estimates suggested that rectified whiskey comprised 50–90% of the market. Between 1886 and 1913, the consumption of U.S. spirits (predominantly whiskey) steadily increased, with only a slight decline during the 1893–1897 depression. If rectifiers were dangerously poisoning consumers, one would expect a market collapse as negative information spread, illustrating Akerlof’s “market for lemons” in action. Such a collapse did not happen.

Chemical analyses from that period present a similar perspective. A thorough review of historical newspapers revealed 25 tests of whiskey samples conducted between 1850 and 1906, uncovering poisons sporadically. Some alarming results surfaced from questionable sources, such as temperance advocates. One chemist, Hiram Cox, a lecturer proponent of prohibition, claimed to have discovered significant amounts of strychnine and arsenic; however, his methodologies were criticized by contemporaries for being flawed and biased.

Recipe books for rectifiers provided even less evidence of malpractice. These manuals, intended for professionals in spirit blending, seldom mentioned toxic substances. When poisons did appear, they were typically aligned with the scientific and medical understanding of the time. Many authors explicitly refrained from using known toxins, recognizing that it was more economically viable to keep customers safe and returning for more.

We also analyzed home recipe collections for food and medicine. The handful of hazardous ingredients found in whiskey recipes were often concurrently suggested in home remedies for issues ranging from toothaches to blood ailments, indicating a lack of awareness regarding their dangers by both the general populace and regulators.

Strychnine resurfaced in niche black-market venues, where a select few thrill-seekers sought its stimulant effects, or in prohibition-era states where bootleggers lacked alternatives. Rectifiers largely steered clear of strychnine due to its high cost and unpleasant taste.

What about the documented cases of fatalities and poisonings? This aspect serves as our final point of investigation. Newspapers of the period thrived on sensational narratives involving murders or suicides. A keyword search for whiskey-related deaths between 1850 and 1906 revealed low numbers outside of intentional actions or mishaps related to bootlegging. Wood alcohol, which wasn’t listed in any recipes, was linked to the majority of incidents, generally occurring in outlier cases, such as a 1900 tragedy in a New York saloon where 22 individuals succumbed to mislabeling.

In summary, adulterated whiskey did not pose a significant safety hazard.

Harvey Wiley, the USDA chemist who championed the Pure Food and Drugs Act, acknowledged under questioning that the ingredients used in rectified whiskey were not inherently harmful—they were simply not “natural.” His true intent? Protecting the market position of straight whiskey, which served as a cheaper alternative for consumers. Wiley’s correspondence, uncovered by historians Jack High and Clayton Coppin, indicated that straight whiskey distillers engaged in intensive lobbying, framing this regulation as a moral imperative while pursuing greater market control. In a 1909 compromise, President Taft permitted “blended whiskey” labels while reserving “straight” exclusively for premium, aged varieties—a victory for entrenched producers.

The takeaway? Regulations are seldom born from pure altruism. As Bruce Yandle’s “Bootleggers and Baptists” model illustrates, moral advocates (like temperance supporters highlighting poison risks) join forces with economic interests (such as straight whiskey distillers advocating for barriers to market entry) to implement laws that appear virtuous yet serve specific agendas. The Pure Food and Drugs Act might have addressed some genuine abuses elsewhere, but in the realm of whiskey, its intent leaned more towards protecting producers than consumers. Should we toast to that? Not exactly.

Daniel J. Smith serves as the Director of the Political Economy Research Institute and is a Professor of Economics at the Jones College of Business at Middle Tennessee State University. He is also the North American Co-Editor of The Review of Austrian Economics and serves as the Senior Fellow for Fiscal and Regulatory Policy at the Beacon Center of Tennessee.

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