The Fisherman, the Farmer, and the Shepherd: An Economic Parable

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There was once
an island where three people lived. The fisherman lived on the coast,
where he caught fish every day. The farmer lived on a flat part
of the island and grew wheat. The shepherd lived on the mountain
and produced wool from his sheep.

For a long
time they lived in peace. The fisherman traded his fish for wheat
and wool, while the farmer and shepherd traded wheat and wool with
each other.

One day the
farmer decided he was tired of farming. "It's hard work, dawn
to dusk," he complained to himself. "There must be an
easier way of making a living."

Instead of
working in his field, he took his harvesting scythe and went down
to the coast. When the fisherman arrived at the end of the day,
the farmer threatened him with the scythe.

me half your fish," the farmer demanded.

the fisherman asked.

"If you
don't, I'll cut you with this blade," the farmer said. The
fisherman was scared, and gave half his fish to the farmer. The
farmer then left with the fish, providing the fisherman no wheat
in return.

The fisherman
then went to see the shepherd.

"I can
only give you a couple of fish today," the fisherman said.

The shepherd
normally traded him a pound of wool for five fish. Today, he offered
a smaller portion of wool in exchange for the two fish, and the
fisherman accepted. The shepherd received fewer fish than usual,
and the fisherman received less wool than usual.

"Why do
you have so few fish?" the shepherd asked.

The fisherman
told him of the farmer's robbery. Shocked, the shepherd went to
see the farmer, to make their usual trade of wool for wheat.

"I have
no wheat today," the farmer said. "Can I interest you
in a few fish instead?"

"I have
to ask," the shepherd said, "Is it true you robbed the
fisherman of half his fish?"

The question
scared the farmer. If the shepherd and the fisherman worked together,
they could stop the farmer from robbing either of them. Then the
farmer would have to go back to growing wheat.

the farmer said. "I'll give you one fish every day, if you
promise not to make a big deal out of this whole robbery thing."

the shepherd asked. "I get one free fish a day?"

"But you
have to defend my right to tax the fisherman," the farmer told

The shepherd
thought it over, then agreed to the arrangement. He liked the idea
of getting a free fish every day.

The next day,
the farmer again robbed the fisherman of half his catch. The fisherman
again complained to the shepherd. He was shocked to find the shepherd's
attitude had completely changed.

"We ought
to pay taxes to the farmer," the shepherd said. "For the
common good."

common good?" the fisherman asked. "I'm losing half my
income here!"

the shepherd said. "The farmer can now spend more time protecting
the island. Remember how hard he fought against those pirates that
attacked us last year?"

"But all
three of us worked together to fight off the pirates," the
fisherman said. "It wasn't just the farmer. Defending the island
is everybody's responsibility. He couldn't do it alone if he tried."

But no matter
what the fisherman said, the shepherd insisted it was a good idea
for the farmer to collect half the fisherman's catch every day.
(The fisherman did not know that the shepherd was also getting one
of the stolen fish every day.)

The farmer
enjoyed his new work very much. He would steal half the fisherman's
catch, then trade some of the fish to the shepherd for wool. He
only had to work an hour or so each day, and it was much easier
work than farming. He also found that he enjoyed feeling powerful
over the fisherman.

The shepherd
also enjoyed the new arrangement. He received a free fish a day.
Also, he found that the farmer was willing to pay more fish for
wool than the fisherman paid. Since the fish represented little
work on the farmer's part, the farmer was happy to pay six or seven
fish for a pound of wool. The fisherman only paid five fish per
pound of wool. The shepherd now defended the fish-tax system even
more than he had before.

The fisherman
found his situation much worse. Not only did he lose half his catch,
but the price of wool had gone up. Now that he had to surrender
every second fish to the farmer, each fish he was allowed to keep
represented twice as much work as it had before. As a result, he
was only able to pay three or four fish for a pound of wool. He
could no longer afford to pay five fish, much less the new, higher
price of six or seven fish. And there was no wheat available at
any price.

The fisherman
decided he would work harder and catch more fish, so that he could
afford the higher price of wool. He spent longer hours on the ocean,
and doubled the amount of fish he caught. Of course, this meant
he paid the farmer twice as much fish at the end of each day.

The fisherman
returned to the shepherd, ready to pay seven fish for a pound of
wool. The shepherd refused this price, though. The farmer was now
paying him ten fish for a pound of wool, and the shepherd just didn't
need any more fish.

The fisherman
saw that, no matter how hard he worked, or how many fish he caught,
he would always be paying more and more to the farmer. The farmer,
eager to maintain his alliance with the shepherd, would then pay
more and more fish to the shepherd. The harder the fisherman worked,
the higher the price of wool would climb.

The shepherd
rarely visited the fisherman anymore, since the farmer was willing
to pay him more fish for his wool. The shepherd saw that he could
cut back his production of wool, since he only needed to provide
enough for himself and the farmer, now that the fisherman couldn't
afford it. He let some of his herd run wild, leaving them vulnerable
to predators. With the sheep he kept, he didn't clip nearly so much
wool. Why bother with the extra work, when there was nothing else
for which he could exchange it?

The fisherman,
too, cut back on his production. He decided he could get by on three
fish a day. He didn't need to catch any fish for trading, since
there was no longer anything for which he could trade them. That
meant he had to catch six a day, in order to pay the farmer three
and keep three for himself.

The farmer
was alarmed when his income from the fisherman dropped to three
fish a day. He still had to pay one to the shepherd, leaving hmself
with only two fish per day. This left him with almost nothing to
trade to the shepherd for wool.

The farmer
tried increasing the tax rate, claiming first 60% of the fisherman's
catch, then 70%. But the more the farmer took, the less the fisherman

The shepherd
found that neither the fisherman nor the farmer could afford to
pay him much for the wool anymore, so he cut his production until
he was only making enough wool for himself. There was no point in
working so hard to clip all those sheep, only to get one measly
fish in return. Besides, he already got a free fish a day from the

Then the farmer
told the shepherd that there might be no more free fish.

that lazy fisherman's fault," the farmer explained. "He
just isn't catching as much as he used to."

The shepherd
agreed that the fisherman had gotten quite lazy, and on top of that
hadn't offered a decent price for the shepherd's wool in some time.

"I bet
he's eating some of the fish before he comes back to shore,"
the farmer said. "I'll keep a closer watch on him."

The farmer
began sailing out with the fisherman every morning. All day, he
would stand with his blade at the fisherman's back, and count each
fish over the fisherman's shoulder.

"Why are
you just standing around all day?" the fisherman finally asked
him. "Things used to be so much better. There was plenty of
wheat, fish and wool for everyone. Why don't you go back and work
on your farm?"

I'm king of the island now," the farmer proclaimed. "Kings
don't work in the dirt."

Then a storm
rose, and they sailed into choppy waters. The farmer lost his balance,
so the fisherman pushed him over the side, and the farmer was lost
at sea.

The fisherman
went back to catching all the fish he could. There was, once again,
plenty of extra fish to trade to the shepherd. The shepherd started
working harder to produce extra wool to trade to the fisherman.
The shepherd also apologized for collaborating with the farmer.

"It just
seemed like such a good deal," the shepherd explained to the
fisherman. "Free fish every day, and a higher price for my
wool. I didn't realize how hard it made life for you."

From then on,
they referred to the farmer's reign of terror as "the bad times,"
and vowed never to let anything like it happen again.

31, 2008

L. Bryan
[send him mail] is a freelance

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