Beware of "Filtered" Vodka

One of the things Pete Boettke discussed yesterday was the idea that rules or culture act as “filters” for human behavior. At one end of the spectrum people are generally self-interested and want to achieve what is best for themselves and their families. On the other end are people's goals. The rules (or filters) are in the middle and affect how self-interested people go about achieving their ends. Since these ends usually involve achieving some sort of comfortable lifestyle, then we should hardly be surprised that earning a living is often the goal on the other side of the filter.

I was reading a story about an illegal vodka factory operating in Wales that sold stuff so stiff that it could cause blindness. I got to thinking, “what kind of filter would cause a self-interested person out to make a living, to make and sell vodka so potent that it could cause blindness?” I found my answer at the bottom of the article where it mentioned that Her Majesty’s Customs estimated that the operation had enough vodka on hand to cost the government some £500,000 in revenue. Aha! So there’s the filter. While most vodka makers are undoubtedly upstanding (unless they’ve been hitting their product), a small minority will react to high duties on spirits with illicit works and smuggling.

Unfortunately, we are stuck with a certain pool of human behavior, so we should not be surprised when the high “sin” tax filter causes people to start selling booze so potent that it can cause blindness. Of course, filters exist in the workplace, too. They may take the form of formal rules, but they can also be a product of company culture. The end of free-market capitalism and Market-Based Management is ensuring that the filters in place encourage people to meet their own goals (earning a living) by helping others (creating goods and services valued by customers and society). It might be worth taking a look at the “filters” at work in your company – do they encourage your employees to create value for customers or sell them blinding hooch?

Comments

[Jerry Ellig]

Since I occasionally buy grain alcohol at the liquor store (200 proof or close to it), I was puzzled by this report of vodka so strong it can cause blindness. The article clears up the mystery: it contained methanol ("rubbing alcohol"), which is poisonous. Presumably the makers used this because it was a lot cheaper.

There's an interesting lesson here for business. If employees are allowed/
encouraged to ignore laws or regulations they don't think are in the public interest (the equivalent of bootlegging to produce tax-free alcohol for sale), then they'll also end up tempted to do much more harmful things (like using methanol to cut costs).