Tag Archives: Microeconomics

A short lesson on consumers, producers, and trade

A quick Econ lesson from Don Boudreaux, short enough for an elevator ride

Consider the following example: you fly to New York City.  You get a cab at LaGuardia Airport and ask the driver to take you to Times Square in Manhattan – which is west of LaGuardia.  Soon, though, you notice your cab headed east.

“Where are you going?” you inquire.

“To Times Square, but via Montauk,” the driver responds.

“Montauk!  That’s a hundred miles east of here, and Times Square is west of here!  What the heck are doing?!”

Your driver informs you that the taxicab business isn’t just for riders; its for drivers, too.  Drivers need incomes, and his income of late has been too low to enable him to pay his bills.  “So,” your driver announces, “by first going out to Montauk before heading to Times Square, I’ll make a lot more money off of you than I would if I drove you directly to Times Square.  You’ll get there, but just not as quickly or as inexpensively as you would if I drove you their directly.  Relax and enjoy the view.”

The above little tale sounds nuts.  No taxi driver would do such a thing and justify his actions in that way.

But what the fictional driver in my little story does differs in no fundamental way from what producers everywhere do when they succeed in getting government to protect them from competition – for all such protection involves government preventing consumers from striking the best deals they can find.

Remember the Louisiana Florist license?  Same idea.  Central planners simply can not know enough to make better choices than all individuals.

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