There has been some odd resistance to my humble proposal that craft brewers might consider taking steps to control their owns means of cost input production in the face of sharp input inflation which, the more I think about it, the more it strikes me as fundamentally anti-capitalistic. So, in that second last recourse of a lazy blogger (after blogging about another blogger), I thought I would expand and turn this comment of mine into my sermonette for the day which you should feel free to kick around at your leisure.

Interestingly, I was also reminded of this tendency to interject non-capitalist thinking into the beer trade when I read this passage from the introductory sections of my edition of Michael Jackson's Great Beers of Belgium:

It wins me no bouquets from consumers when I say that "fine beer" should be more expensive, and brewers are reluctant to grasp that nettle. Like fine wine, these products offer an infinite variety, interest and pleasure. There is a growing demand for them, especially in the United States. If this opportunity is to be enjoyed, quality must satisfy a demanding consumer, and the price must be profitable to the brewer. If he tones down his beers in an attempt to be more "accessible", he will lost existing customers without gaining new ones for whom there are already bland beers a plenty. If he tries to compete with international giants, his demise will at least be mercifully quick. What can he offer to compete with their economies of scale and marketing power.

Michael Jackson may have been a lot of things but he is clearly not a strong economist. As much as beer writers hate to admit it, much of craft beer while not a bulk commodity is still a fungible. For the most part consumers can replace product X with product Y and have a similar enjoyment. That makes for downward price pressure as the consumer am going to buy to maximize in the same way that the brewer is going to sell to maximize. As a result, you have and will always have good brewers seeking price point that receives consumer loyalty and provides a fair return. To seek a price point above that requires anti-competitive collusion and is to invite short term gain for long term pain. Selling a ten buck six pack when your neighbour's sells for nine is a plan for disaster.

Beyond that, it also seems to smack of the "deserving oligopolist" - like restrictive medieval state licensing of trades or in the status based rotten borough economies that we see depicted, for example, in the novel The Mayor of Casterbridge under which those that have the means of production simply deserve to have control of the market. This is fundamentally anti-capitalistic for as prices rise (especially where they are speculative rather than cost based price rises) new players will come into the market to take advantage of their new increase in product profit. The expansion of supply will also create downward pressure on prices. Beer is itself an agricultural product as are many of the cost inputs that go into it. Hops need time, seeds, land, rain and sun just as any other crop does. Institutions like agricultural research departments will arise to support hops production diversification and the forward thinking brewer can participate in that expansion and the oligopolist's grip. Heck, even the economic historians can support the effort. The patient and canny craft brewer or brewers who can imagine in terms of vertical integration may be able to both push back and profit.

Also, there is a measure of conflict of interest in such a passage. No one does well as the world expert in an undervalued product. When I started this blog, there was a website covered I think on NPR or CBC radio on which frozen dinners were rated. It didn't last. The more precious and timely the subject matter, the more prestigious and profitable is the expertise in that subject matter. By advocating price rises which are not based on basic market forces, Jackson was also advocating for the increase in his own valuation, whether he was aware of that or not. This is also advocating, perhaps in part due to that conflict, for a dangerous market bubble in which prices could collapse by future consumer rejection or undermining competitive innovation. All for the fantasy of rarity and prestige rather than the dull reality of actual inputs and certain sales.

Finally, if there is actually a shift in growing areas due to climate change, this is a perfect opportunity to take advantage of those marginal production regions which may now become viable and even profitable - and not to be green but to get the green. Why would brewers not return to those areas of former production and seek to return to being masters of their own production to a greater degree? After all, cost control is just another part of the profitability equation. Frankly, those who see no opportunity are just those who will not take advantage of it. And, as always, a comforting myth of impossibility will later develop to give comfort to those who did not take the intelligent risk.

It behooves us all to examine our assumptions when we consider economics. It is related to the adage that one should not try to make a business of one's hobby. You can make a go of it but you also have to take into account that the market rarely takes your passion into account to provide the premium on price that you may feel you deserve - any more than it will not take into account a failure to control costs. "Passion" is one of those Web 2.0 sort of concepts that only later turns out to be the foundation of only a bubble economy. It speaks to much to hope and not enough to conviction and, as Grannie always said, handsome is only as handsome does. Not as handsome wishes.