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


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.

"Give me half your fish," the farmer demanded.

"Why?" 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.

"Listen," 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."

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

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

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."

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

"Well," 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 produced.

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 farmer.

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

"It's 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?"

"Because 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.

December 31, 2008