In 1920 a constitutional amendment was passed that outlawed the production, sale, purchase, and consumption of alcoholic beverages. "Prohibition" encouraged bootlegging and black markets for whiskey, wine, and beer

The amendment was eventually repealed in 1933. In 1920, what alternative economic policy was available to the government as a means of reducing alcohol consumption nationwide?


The government could have kept alcoholic beverages legal and then placed a heavy tax on them. This policy would have shifted the supply curve leftward, increased the (legal) price, and decreased the (legal) quantity. Unfortunately, the higher the tax, the more likely it would have been that black markets would have developed (as with outright prohibition) to avoid the tax.

Economics

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