Strengthening Constitutional Self-Government

No Left Turns

Milton Friedman meets Adnan

Amman, Jordan--Today I purchased my ticket from Amman to Baghdad. The Jordanian JETT bus line previously made regular trips, however I was informed that they stopped service sometime after the war. Small private enterprise has jumped in to pick up the void, offering what the locals call GMC service--although they nearly always pronounce it GMZeee service. Essentially, it is a GMC shuttle to take you and at most a few other passengers to Baghdad.

These local drivers already understand a fair amount about capitalism. For starters, the rate that they are charging contains (although they do not say this) a risk premium--that is, they charge more because the endeavor is risky for them, both in terms of their own safety and in terms of their property.

The travel agency I went through was a small shop across from the sprawling King Abdullah Mosque. My taxi driver, Adnan, served as my interpreter for the transaction. Once I purchased the ticket, the travel agent ordered one of his assistants to fetch tea for me and the driver, as well as a small cup of extra virgin olive oil, which we were to taste on our fingers with the tea. It was at this time that I learned that the man with the GMC line was not the only one who understood a thing or two about capitalism.

Upon tasting the olive oil, Adnan explained that prior to purchasing his taxi, he used to own a restaurant. Among his specialties was a dish served with a generous amount of high quality olive oil. But then, Adnan explained, the Ministry of Price Controls issued a decree stating that you could not sell olive oil at such and such an amount for more than 200 fils (or about 28 cents in U.S. dollars). The problem was that it cost Adnan more than 200 fils to purchase the quality olive oil for the dish! Some of the other restaurants figured out a way around it: use cheaper oils, and add material to color it so that it looks like quality olive oil. There were other price controls that hit Adnan hard, including a price on lamb. He was thus faced with a choice: reduce quality to continue making some profit, or go out of business. Already tired of the long hours of managing a restaurant, Adnan headed for the door. I delivered a few words to the effect that this is but one reason that price controls don’t work. I was preaching to the choir.

There you have it. A little lesson on the problems of price controls, offered by a taxi driver over tea in Amman.

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