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A Tale of Two States

04/21/2016

Once upon a time, there were two countries who were adjacent to each other. Libertania was the state to the north and Regulatoria was to the south. Both were bisected by a great river that ran north and south. The river was too wide to cross with a bridge. The people of that day did not have the technology to build it. Persons who wished to cross the river had to travel long distances in order to cross at a ford, where the river was shallow.

One day, an enterprising young man decided to build a ferry. He saved his money for years from working very hard and bought a tract of land on opposite sides of the great river. The land was located in Regulatoria, where he was a citizen.

He toiled for years, moving dirt in order to make a gentle sloping road to the dock, which he also built. Several times, the mighty river rose and carried away his work, but he started over, learning from his mistakes. He traveled long distances to see how other ferries had solved the problems he faced and he incorporated their ideas into his plan. He had many, many setbacks and worked many long hours. He spent all that he had in order to complete his work. Many times, he was frustrated and tempted to give up, but he never did.

Finally, the ferry was completed. There was a big party and people from all around came to his ferry. People were glad to have a ferry, so that they could avoid the long and perilous trip to the ford. The ferryman charged each person a dollar and each wagon 3 dollars. This was a lot of money in those days, but people were happy to pay it to be able to cross the great river without traveling all the way to the ford.

But over the years, people forgot how inconvenient it was to travel to the ford and to wait until the river was low enough to cross. They began to complain about the cost. They wrote their rulers and complained: “He is taking advantage of us. He knows that there is no other crossing and he is cheating us out of our money.‘

Finally, the rulers took action. They were tired of hearing all of the complaints. They passed a law that prohibited ‘Price Gouging.‘ In particular, it limited the price that ferrymen could charge to cross the great river. Of course, he was the only ferry and the only person to whom the law applied. At first, he was angry, but after a while, he learned to live with the law. The rates were not so low that he could not continue . . . as long as he did not spend as much money on repairs and improvements. Now that the traffic was increasing, he‘d get by.

One benefit to the regulation, he thought, was that no one else wanted to invest all of the work and money into building another ferry, because the rates were so low. His position was secure.

After a few years, however, the increased traffic and lack of repairs begin to take their toll. The ferryman could not afford to maintain the ferry at the current rates. He appealed to their rulers, but was denied. They didn‘t want to hear the people‘s complaints.

The council was suspicious that the ferryman might try to charge some people higher rates than they allowed, so they hired an overseer to make sure that the rates were not exceeded. The people were happy because they knew that the law was being obeyed and the rates were ‘reasonable‘ and they had no idea that they were really paying more, because the overseer‘s salary was paid by an increase in the national tax. They had the illusion of cheap rates, but in the end, they paid more than the amounts that the ferryman wanted to charge.

The ferryman finally decided to sell the ferry to a man who was the son-in-law of one of the national rulers. He took his money and moved to Libertania. Once again, he bought land on both sides of the great river and built a new ferry. It wasn‘t long before business was booming. The new ferry was safer and more reliable than the one he sold in Regulatoria. More and more people from Regulatoria began to use the new ferry and the old ferry in Regulatoria grew worse and worse.

The people of Libertania also complained about the cost of the ferry, but the rulers would not interfere. Eventually, some of the Libertanians decided to build their own ferries. They saw how much the ferryman was making and thought that they could make a better ferry in a more convenient place. It wasn‘t long until the little ferryman had plenty of competition. As a result, he made improvements that the other ferries did not have and lowered his prices.

In the end, the people of Libertania had a number of safe, inexpensive options and were very happy. The people of Regulatoria, however, had only one broken down ferry . . . that is, until it was washed away by a flood. Then they had none.

How foolish the Regulatorians were. They saw the ferryman making money and were jealous. They wanted to force him to lower his rates. But if people are free and see someone making money, some will venture to start their own businesses in the hope of profit. This results in competition that keeps the profits within the limits that are appropriate for the risk and work involved. Regulations appear to work for a while, but in the end the people end up paying more and getting less.



William M. Bell, Jr.