Question: does the consumer benefit from government choosing 'winners', or when the free market identifies same?
1. The epic battles between government economics and free enterprise go back as far as America's earliest times....but Cornelius Vanderbilt plays an important role. So does Robert Fulton. First of all, Fulton's "Clermont" was not the first steamboat....
....was the first commercially successful one.
Why?
2. The main reason for his success was the money and influence behind him: wealthy investor and politician Robert Livingston, and Livingston got Fulton a monopoly from the New York State legislature, he was to carry all steamboat traffic in New York for thirty years.
Maurice Baxter, "The Steamboat Monopoly: Gibbons v. Ogden, 1824," p.3-25.
3. The special efforts of government on his behalf identifies Fulton as a "political entrepreneurs, using taxpayer money rather than risking his own." Due to his monopoly, other steamboat operators could not sail in New York waters, and, guess what effect a monopoly had on ticket prices.
4. "...on November 24, 1817, a ferry entrepreneur named Thomas Gibbons asked Vanderbilt to captain his steamboat between New Jerseyand New York." Cornelius Vanderbilt - Wikipedia the free encyclopedia
This meant breaking the Fulton monopoly!
First thing he did was lower the fares.
a. Gibbons brought the landmark case, (Gibbons v. Ogden), settled in 1824, with Chief Justice Marshall ruling that only the federal government could regulate interstate commerce.
5. "The triumph of free markets in steamboating led to improvements in technology....Once boatbuilders were freed from the Fulton-Livingston interests, they were quick to develop new ideas that before, had no encouragement from capital."
Folsom and Folsom, "Uncle Sam Can't Count," p. 36.
6. The immediate result of freeing the industry from government interference was a drop in the cost of traveling from NYC to Albany from $7 to $3. While Fulton's group went bankrupt, Gibbons and Vanderbilt adopted new technology, cut costs, and earned $40,000 profit each year during the late 1820's.
Wheaton Lane, "Commodore Vanderbilt: An Epic of the Steam Age," p. 43-49
7. Vanderbilt went on to branch out on his own, establishing trade routes all over the Northeast. And to the benefit of the customer: on the NY to Philadelphia route, he cut fares from $3 to $1; New Brunswick to NYC, he charged six cents and provided free meals.
a. In NY, the Hudson River Steamboat Association had 10 ships, the largest line at the time (1830). They fixed prices: Vanderbilt came in and cut the rate to Albany from $3 to $1, and then to ten cents...and finally....to free! He figured out it cost him $200/day to operate his ship, he could fill it with 100 passengers, and calculated that they would eat over $2 each of food and drink. Legend has it that Vanderbilt was involved in the invention of the potato chip! (Potato Chips History
b. The Steamboat Association made a deal with Vanderbilt: they gave him $100,000, plus $5,000/year for ten years, if he would stay out of the Hudson River for the next ten years. He agreed, and the Association promptly raised the fare back to $3. Seeing what Vanderbilt has accomplished, at least five other steamboat operators moved in- until they, too, were bought off. Lane, Op. Cit., p.56-62.
Of course, this was before the Sherman Antitrust Act....because, you know, only government can act in restraint of trade.
1. The epic battles between government economics and free enterprise go back as far as America's earliest times....but Cornelius Vanderbilt plays an important role. So does Robert Fulton. First of all, Fulton's "Clermont" was not the first steamboat....
....was the first commercially successful one.
Why?
2. The main reason for his success was the money and influence behind him: wealthy investor and politician Robert Livingston, and Livingston got Fulton a monopoly from the New York State legislature, he was to carry all steamboat traffic in New York for thirty years.
Maurice Baxter, "The Steamboat Monopoly: Gibbons v. Ogden, 1824," p.3-25.
3. The special efforts of government on his behalf identifies Fulton as a "political entrepreneurs, using taxpayer money rather than risking his own." Due to his monopoly, other steamboat operators could not sail in New York waters, and, guess what effect a monopoly had on ticket prices.
4. "...on November 24, 1817, a ferry entrepreneur named Thomas Gibbons asked Vanderbilt to captain his steamboat between New Jerseyand New York." Cornelius Vanderbilt - Wikipedia the free encyclopedia
This meant breaking the Fulton monopoly!
First thing he did was lower the fares.
a. Gibbons brought the landmark case, (Gibbons v. Ogden), settled in 1824, with Chief Justice Marshall ruling that only the federal government could regulate interstate commerce.
5. "The triumph of free markets in steamboating led to improvements in technology....Once boatbuilders were freed from the Fulton-Livingston interests, they were quick to develop new ideas that before, had no encouragement from capital."
Folsom and Folsom, "Uncle Sam Can't Count," p. 36.
6. The immediate result of freeing the industry from government interference was a drop in the cost of traveling from NYC to Albany from $7 to $3. While Fulton's group went bankrupt, Gibbons and Vanderbilt adopted new technology, cut costs, and earned $40,000 profit each year during the late 1820's.
Wheaton Lane, "Commodore Vanderbilt: An Epic of the Steam Age," p. 43-49
7. Vanderbilt went on to branch out on his own, establishing trade routes all over the Northeast. And to the benefit of the customer: on the NY to Philadelphia route, he cut fares from $3 to $1; New Brunswick to NYC, he charged six cents and provided free meals.
a. In NY, the Hudson River Steamboat Association had 10 ships, the largest line at the time (1830). They fixed prices: Vanderbilt came in and cut the rate to Albany from $3 to $1, and then to ten cents...and finally....to free! He figured out it cost him $200/day to operate his ship, he could fill it with 100 passengers, and calculated that they would eat over $2 each of food and drink. Legend has it that Vanderbilt was involved in the invention of the potato chip! (Potato Chips History
b. The Steamboat Association made a deal with Vanderbilt: they gave him $100,000, plus $5,000/year for ten years, if he would stay out of the Hudson River for the next ten years. He agreed, and the Association promptly raised the fare back to $3. Seeing what Vanderbilt has accomplished, at least five other steamboat operators moved in- until they, too, were bought off. Lane, Op. Cit., p.56-62.
Of course, this was before the Sherman Antitrust Act....because, you know, only government can act in restraint of trade.
