National prohibition of alcohol (1920-33)--the "noble experiment"--was undertaken to reduce crime and corruption, solve social problems, reduce the tax burden created by prisons and poorhouses, and improve health and hygiene in America. The results of that experiment clearly indicate that it was a miserable failure on all counts. The evidence affirms sound economic theory, which predicts that prohibition of mutually beneficial exchanges is doomed to failure.The lessons of Prohibition remain important today. They apply not only to the debate over the war on drugs but also to the mounting efforts to drastically reduce access to alcohol and tobacco and to such issues as censorship and bans on insider trading, abortion, and gambling.
Although consumption of alcohol fell at the beginning of Prohibition, it subsequently increased. Alcohol became more dangerous to consume; crime increased and became "organized"; the court and prison systems were stretched to the breaking point; and corruption of public officials was rampant. No measurable gains were made in productivity or reduced absenteeism. Prohibition removed a significant source of tax revenue and greatly increased government spending. It led many drinkers to switch to opium, marijuana, patent medicines, cocaine, and other dangerous substances that they would have been unlikely to encounter in the absence of Prohibition.
The decrease in quantity consumed needs at least four qualifications--qualifications that undermine any value that a prohibitionist might claim for reduced consumption. First, the decrease was not very significant. Warburton found that the quantity of alcohol purchased may have fallen 20 percent between the prewar years 1911-14 and 1927-30. Prohibition fell far short of eliminating the consumption of alcohol.
Second, consumption of alcohol actually rose steadily after an initial drop. Annual per capita consumption had been declining since 1910, reached an all-time low during the depression of 1921, and then began to increase in 1922. Consumption would probably have surpassed pre-Prohibition levels even if Prohibition had not been repealed in 1933. Illicit production and distribution continued to expand throughout Prohibition despite ever-increasing resources devoted to enforcement. That pattern of consumption, shown in Figure 1, is to be expected after an entire industry is banned: new entrepreneurs in the underground economy improve techniques and expand output, while consumers begin to realize the folly of the ban.
Third, the resources devoted to enforcement of Prohibition increased along with consumption. Heightened enforcement did not curtail consumption. The annual budget of the Bureau of Prohibition went from $4.4 million to $13.4 milion during the 1920s, while Coast Guard spending on Prohibition averaged over $13 million per year. To those amounts should be added the expenditures of state and local governments.
Statistics indicate that for a long time Americans spent a falling share of income on alcoholic beverages. They also purchased higher quality brands and weaker types of alcoholic beverages. Before Prohibition, Americans spent roughly equal amounts on beer and spirits. However, during Prohibition virtually all production, and therefore consumption, was of distilled spirits and fortified wines. Beer became relatively more expensive because of its bulk, and it might have disappeared altogether except for homemade beer and near beer, which could be converted into real beer.
Fisher used retail alcohol prices to demonstrate that Prohibition was working by raising the price and decreasing the quantity produced. However, his price quotations also revealed that the Iron Law of Prohibition was at work. The price of beer increased by more than 700 percent, and that of brandies increased by 433 percent, but spirit prices in creased by only 270 percent, which led to an absolute in crease in the consumption of spirits over pre-Prohibition levels.
According to Thomas Coffey, "the death rate from poisoned liquor was appallingly high throughout the country. In 1925 the national toll was 4,154 as compared to 1,064 in 1920. And the increasing number of deaths created a public relations problem for . . . the drys because they weren't exactly accidental." Will Rogers remarked that "governments used to murder by the bullet only. Now it's by the quart."
America had experienced a gradual decline in the rate of serious crimes over much of the 19th and early 20th centuries. That trend was unintentionally reversed by the efforts of the Prohibition movement. The homicide rate in large cities increased from 5.6 per 100,000 population during the first decade of the century to 8.4 during the second decade when the Harrison Narcotics Act, a wave of state alcohol prohibitions, and World War I alcohol restrictions were enacted. The homicide rate increased to 10 per 100,000 population during the 1920s, a 78 percent increase over the pre-Prohibition period.
The Volstead Act, passed to enforce the Eighteenth Amendment, had an immediate impact on crime. According to a study of 30 major U.S. cities, the number of crimes increased 24 percent between 1920 and 1921. The study revealed that during that period more money was spent on po- lice (11.4+ percent) and more people were arrested for violating Prohibition laws (102+ percent). But increased law enforcement efforts did not appear to reduce drinking: arrests for drunkenness and disorderly conduct increased 41 percent, and arrests of drunken drivers increased 81 percent. Among crimes with victims, thefts and burglaries increased 9 percent, while homicides and incidents of assault and battery increased 13 percent. More crimes were committed because prohibition destroys legal jobs, creates black-market violence, diverts resources from enforcement of other laws, and greatly increases the prices people have to pay for the prohibited goods.
Before Prohibition and the Harrison Narcotics Act (1914), there had been 4,000 federal convicts, fewer than 3,000 of whom were housed in federal prisons. By 1932 the number of federal convicts had increased 561 percent, to 26,589, and the federal prison population had increased 366 percent. Much of the increase was due to violations of the Volstead Act and other Prohibition laws. The number of people convicted of Prohibition violations increased 1,000 percent between 1925 and 1930, and fully half of all prisoners received in 1930 had been convicted of such violations. Two-thirds of all prisoners received in 1930 had been convicted of alcohol and drug offenses, and that figure rises to 75 percent of violators if other commercial prohibitions are included.
The explosion in the prison population greatly increased spending on prisons and led to severe overcrowding. Total federal expenditures on penal institutions increased more than 1,000 percent between 1915 and 1932. Despite those expenditures and new prison space, prisons were severely overcrowded. In 1929 the normal capacity of Atlanta Penitentiary and Leavenworth Prison was approximately 1,500 each, but their actual population exceeded 3,700 each.Prohibition not only created the Bureau of Prohibition, it gave rise to a dramatic increase in the size and power of other government agencies as well. Between 1920 and 1930 employment at the Customs Service increased 45 percent, and the service's annual budget increased 123 percent. Personnel of the Coast Guard increased 188 percent during the 1920s, and its budget increased more than 500 percent between 1915 and 1932. Those increases were primarily due to the Coast Guard's and the Customs Service's role in enforcing Prohibition.