Few remember Enron for more than its scandalous bankruptcy in 2001. But a few years earlier, the firm was also busy practicing the art of crony capitalism cloaked in “do-gooder” environmentalism. Seeing an opportunity to profit from cap-and-trade markets for carbon credits, Enron CEO Kenneth Lay joined environmentalists to tout the 1998 Kyoto Protocol and related renewable energy subsidies. Like bootleggers who joined Baptist teetotalers to promote the prohibition of alcohol in the 1920s, Lay was motivated more by self interest than social conscience.
The "Bootleggers and Baptists" theory of regulation was first described by Bruce Yandle in a 1983 essay in Regulation Magazine, and is now the subject of a new book, "Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics." Yandle co-authored the book with his grandson, Adam C. Smith, joins the show to discuss the latest applications of the theory. He explains how secular dogmas like environmentalism are providing moral cover for new special interests and cartels that would make the bootleggers of old envious.