Sunday, January 05, 2003

The Origin of Theses

In the process of researching the alcohol industry, I unexpectedly ran across the origin of the economics profession's favorite proverb, "There's no such thing as a free lunch." It began in the pre-Prohibition days, when manufacturers of alcohol could, and often did, sell their wares directly to customers. This practice is now forbidden by post-Prohibition federal and state laws that effectively mandate a three-tier alcohol industry in which distributors must stand between manufacturers and retailers. According to a 1997 story (not available online without payment) from the Orange County Register,
The purpose of these laws was to eliminate predatory turn-of-the-century marketing such as that practiced by "tied houses" - distiller-owned taverns that offered salt pork or free sandwiches to induce working men to visit and drink. The sobriety and wages lost to this "tied-house evil" spawned the phrase, "There's no such thing as a free lunch. "
An interesting story, despite the highly questionable use of the word "predatory."

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