Because this didn't exist in the 20's, the government started adding poison to alcohol not intended for drinking -- because people were drinking it, predictably, and bootleggers were reselling it to be consumed -- and killed thousands of people in the process.
Denatured alcohol still does nasty things to people who are ignorant and/or desperate enough to try not-for-consumption alcohol... fortunately it's not so deadly nowadays (I think?).
Obviously the people drinking alcohol in liquids not meant for consumption aren't in normal rational states of mind; but yes, they're doing something really stupid. But suppose when you're "denaturing" the alcohol in your product, you have the choice to use a substance that will make it taste very bad and cause vomiting; or a substance that will make people die, or at least go blind. Which should you choose?
Next, suppose that the alcohol was stolen and resold by a bootlegger and thus has no warning (beyond the government's warnings that buying illegal alcohol is dangerous, which had already been going on for some time).
