The 2019 Acton Lecture Series wrapped up last week Thursday with a lecture by David Hebert, assistant professor of economics and director of the Center for Markets, Ethics, and Entrepreneurship at Aquinas College. Hebert told the story of Frederick Tudor, a Boston entrepreneur who in the early 1800s set about finding a way to transport ice to Cuba, believing that given the opportunity, Cubans would pay handsomely for the resource. It wasn’t easy, but in the end he was right, and eventually expanded his business to the other side of the globe, shipping ice from a pond in Massachusetts all the way to Bombay, India.
It’s a fascinating story of entrepreneurial instinct and technological innovation, and shows how important private property and the rule of law are for creating and smooth operation of markets. There’s even a little bit of cronyism thrown in for good measure (unfortunately).
You can watch the event below; we’ve posted the transcript after the jump.
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[00:00:00] Patrick Oetting: [00:00:00] Hello and welcome to today’s Acton Lecture Series event. It’s a pleasure to have you here. My name is Patrick Oetting, and I’m the alumni relations director here at Acton Institute, where we work to promote a free and virtuous society, characterized by individual liberty and sustained by religious principles.
[00:00:20] Essentially, we’re working to connect, uh, good intentions to sound economic thinking – so it’s great to have an economist with us here today. So before introducing today’s speaker, I want to give a brief overview of today’s format and then one comment. Uh, so today the format will consist of a 30 minute lecture followed by 30 minutes of Q and A.
[00:00:41] At the conclusion of the lecture, if you have a question, please raise your hand. One of my colleagues at either end will bring you the microphone. Um, I’d also like to give a quick shout out to a group of students that are turning in, tuning in from Hillsdale college, uh, in Dr. Charles Steele’s class. So if we could welcome [00:01:00] them, uh, who are tuning in on live stream.
[00:01:05] So it’s an honor to introduce today’s speaker who made the long trip through the bitter cold from Aquinas college. Dr. David Heber currently serves as the director for the Center of Markets, Ethics and Entrepreneurship at Aquinas College. Um, Dr. Hebert attended Hillsdale college – which explains why so many students are tuning in today – for his undergraduate degree degree, where he discovered a love for economics.
[00:01:32] Um, he subsequently enrolled at George Mason University, uh, for a graduate degree in economics. And so now, Dr. Hebert, uh, holds a PhD from George Mason University, where he studied under world renowned economists, including Peter Boettke and many others. He has published in a variety of journals, books, and popular popular outlets on the topics of public choice and public finance.
[00:01:57] His current research interests have led him to [00:02:00] study why the US tax code grows longer, more complicated, and includes more loopholes each and every year, despite the overwhelming majority of Americans wanting a shorter, simpler tax code with fewer loopholes. I think you and I both are hoping that he figures this problem out quickly.
[00:02:19] Um, but most importantly, Dr. Hebert is the new father to his adorable son, Wesley, who’s just a few months old now-and I’ve been told he is also an aspiring economist. So please join me in welcoming Dr. David Hebert to the Acton Lecture Series stage.
[00:02:40] David Hebert: [00:02:40] Thank you. All right. Well, thank you guys so much for having me, and thank you Patrick for that wonderful introduction. Uh, what we’re going to do today is talk about one of my favorite areas of research that I’ve ever been involved in, uh, which is on the Boston ice trade. And I’m going to approach this topic from an economic perspective, which might seem a little bit [00:03:00] strange. Uh, but I am an economist. I do firmly believe in economic imperialism, which basically says that economics is the best subject for understanding these things.
[00:03:09] Now, Victor Claar, for those of you that were here last month, uh, Victor gave us a great segue into today’s topic. So at the end of his talk, he mentioned that economics is so much more than just talking about unemployment rates, profitability, you know, being a good steward of resources, et cetera, et cetera. What economics really is, is it’s the science of life. It’s the science and the subject of understanding the actions of people, the interactions of people, and the consequences of those interactions. Okay?
[00:03:41] So in other words, in the words of Peter Boettke, one of my mentors, economics is like the golden key: it unlocks the secrets of the universe. And the great thing about economics is you don’t have to be stingy with this key. The more people you share it with, the more secrets of the universe you can unlock. It’s not [00:04:00] necessarily about boring subjects, but instead about the mystery of the mundane and being an economic detective. So in a lot of ways, economists are actually a lot like Batman. We solve mysteries and we catch the bad guys.
[00:04:13] So within this framework, within this mystery of the mundane, I thought to myself, what could possibly be more mundane than ice? Right? If you think about it, we’ve all interacted with ice at one point or another. In fact, there are buckets of it available for free back there. Okay? So what I want to do is, is set the stage for a little bit of storytelling. Imagine that the year is 1837 and that we’re in Calcutta, India. Some man with a thick Boston accent, which I won’t try to imitate. It comes up to you and offers you some ice cream.
[00:04:48] You’ve never heard of this before. How did it get there? And what in the world is that mysterious rock that looks kind of like a diamond, but is getting smaller over time [00:05:00] and seems to be sweating. And when you touch it, it’s actually cold. Keep in mind that at the time there was no refrigeration as we typically think of it today; there was no electricity really, and really insulation was in its infancy.
[00:05:17] So one problem that you need to solve if you’re going to have ice in India is the problems of storing the ice. Now, for a long time, ice was stored in underground ice houses. Uh, this one here is actually a picture of the ice house that was built in 1802 at the White House for Thomas Jefferson when we moved the capital from Philadelphia down to Washington D.C.
[00:05:41] Underground ice houses worked, but they had some problems. You know, sure, they kept the, uh, the ice out of the sun, which would limit some melting. And the dirt provided some, you know, means of insulation, but not particularly great.
[00:05:59] One [00:06:00] problem with the ice houses in particular is that the underground ice houses were actually very expensive. Now, ideally an underground ice house will be constructed in the side of like a dirt hill where, you know, you could bury the ice essentially.
[00:06:15] Now in the Boston area, there weren’t that many Hills and those that were around weren’t all that big. And so because of their small size, the ice houses that were constructed there didn’t really, what we say hold the cold all that well, and the ice would melt actually pretty quickly. Even the biggest and best ice houses in Boston at the time would have no ice in them by mid July at the absolute latest.
[00:06:43] So if you think about it, the only time that ice is really available is at the times when you kind of don’t really want it. It’s available only when it’s actually cold outside. How many of you would feel like walking around outside today with a glass of ice water? [00:07:00] Like thank God for this, right? Okay. You want it when it’s hot.
[00:07:05] The second problem is that there was no real way to insulate the ice during transit. Hey, so you got to get the ice to somewhere in order to have it actually available there. And so, because there was no way to insulate the ice during transit, a lot of the ice would actually just be lost.
[00:07:25] The only people, therefore, who could have the ice were the people that lived close by to where it actually occurred naturally. But if you think about it, these are the people that have sort of the lowest demand for ice. You would want ice to be somewhere where it’s always hot. Perhaps the tropics.
[00:07:44] Okay. So the man who quite literally changed the world was a man named Frederick Tudor. Now, this person later on in life and after his death for several generations, was known throughout the world as the quintessential Yankee. And I’ll [00:08:00] come back and tell you why, uh, why he was known so, so far and wide.
[00:08:04] Frederick was the son of a wealthy Boston lawyer. He attended Harvard at the age of 13, but decided that it was boring and entirely esoteric, something that’s probably true still today, and instead of going to school, decided that he wanted to go into business. Now due to some family circumstances, uh, he, his, he and his brothers got to take a trip down to Havana, Cuba for an entire summer. Talk about a rough life.
[00:08:30] And while they were down there, they dabbled in some business. So their father sent them down there with $1,000 in cash, and their goal was basically to survive the entire summer trading in, you know, coffee and molasses and all sorts of things like that. Now on Frederick’s home property in Boston, they actually did have a very large ice house, and so Frederick and his brothers and sisters could enjoy ice cream all the way into May, June, perhaps even early July.
[00:08:59] And so he was [00:09:00] familiar with these things. And he reasoned that if he could find a way to get that ice all the way down to Cuba, well, those people would pay very handsomely. And so he reasoned that the best way for him to make as much money as possible would’ve been to ship ice from Boston down to Cuba. After all, it’s hot there. These people would welcome a short, you know, even brief relief from some of the heat.
[00:09:31] Now, this is a picture of Tudor’s ice diary. Frederick was actually meticulous in the amount of notes that he took, and he kept diaries for different things, aspects of his life. So he had an ice diary, he had a personal diary, uh, store – the legend goes that he had a personal like dating diary, but I’ve never been able to find any records of it other than a footnote in one of the, the few books on the subject.
[00:09:54] On the cover has what I think is just the greatest quote that really summarizes his [00:10:00] personality. And I don’t blame you if you can’t read it. It’s in his spidery handwriting. So what it says, uh, it says “he who gives back at the first repulse and without striking the second below despairs of success has never been, is not, and never will be a hero in war, love or business.”
[00:10:20] So this sets the stage for the type of person that Frederick was. Anytime someone told him that he couldn’t do something, he doubled down and tried even harder. He never gave up. Okay? And so he would take all these ideas, and while he was a young man in his late teens and early twenties, he started to experiment and try to figure out, you know, how can I get ice down to the Caribbean?
[00:10:44] On the left up here, uh, what you see as a cutaway of the first sort of drawing for Frederick’s above-ground ice houses. Okay. So what he would do is he would build a building within a building, and then line the gap between the [00:11:00] two with some sort of an insulating material. Now he experimented with a lot of different types of material; he tried, uh, dirt; he tried sawdust; moss; rabbit fur at one point, uh, all kinds of stuff. And what he found was that sawdust was actually really effective.
[00:11:17] So what he did is he built, you know, an outer shell of a building and then an inner shell, and lined the gap between the two with about a foot and a half of sawdust. And this provided some much needed insulation from the heat outside. Okay.
[00:11:32] What you see on the right is actually a really clever way to convey the ice up to the top of the ice houses. So what you have is a horse-drawn elevator system where the horse could walk back and forth each way, and regardless of which direction the horse was moving, it would actually lift a block of ice up to the top.
[00:11:53] Now I don’t need to get into physics with you all, but you are surely aware that heat tends to rise and cold tends to sink. [00:12:00] And so the reason why you want him to load the ice from the top of the building instead of loading it from the bottom is so that you could actually seal up the bottom of the building much more tightly, right, and thereby keep the cold inside much better. Okay. So. What you have is, is this double-hulled construction.
[00:12:19] Now, have any of you ever used perhaps a travel cup for coffee or maybe a Tervis cop or anything of the sort? That is something that is exactly like what Frederick Tudor came up with. So if you’ve ever used any of these things, congratulations. You are using something that derives from Frederick Tudor.
[00:12:40] What we have here is a picture of an above ground ice house in 1903. So you can see the men here were using some farm implements to kind of convey the ice, uh, up to a ramp. You can’t see it in this picture, but off to the left is actually a horse that would be drawing the ice block up the ramp there with a [00:13:00] man’s kind of standing on there, guiding it to make sure it didn’t fall off.
[00:13:03] Okay. Now. Frederick had, by and large, solved the storing of the ice problem. So now he has to solve sort of the shipping of the ice problem. He’s got to find a way to get the ice from Boston down to the Caribbean, and it turns out that ships are relatively expensive, and so he wanted to hire someone.
[00:13:27] The problem with this is ice tends to melt, and it turns into water when it does. Now what happens to a ship that fills with water? Well, it tends to sink. Okay? And so, no captains in Boston were really willing to take on this cargo of ice, reasoning, not unfairly, that the ice would just melt, turn into water in their hull and sink the ship. Okay? And if it didn’t sink the ship, the water itself would cause so much damage that the cost of [00:14:00] repairing the ship would be so high that no amount that Frederick would pay would actually be worth the expense. Okay?
[00:14:07] So he eventually settles on, in 1805, he just bought his own ship, said, you know what, I can’t find a captain that’s willing to do it. In fact, he was mocked mercilessly. Even in the press. There was a, uh, a brief snippet in the Boston Gazette, uh, that said, “no joke: man wishes, man seeks captain to convey ice to Calcut- to Martinique. Let’s hope this doesn’t prove to be a slippery situation.” Okay? And so he was mocked mercilessly for just the idea of putting ice in a boat.
[00:14:40] And so he had to buy his own. So he buys his own brig, calls it the Favorite, constructs it in just the same way as the above ground ice houses that he’d built, with a double hulled construction lined with about a foot and a half of sawdust, okay. And in January of 1806, he sends his older brother, [00:15:00] William, down to Martinique, which is in the Caribbean, to build an ice house with the idea that in February, Frederick will start on his first voyage down there to stock the ice house.
[00:15:11] So William, uh, had been, you know, a quiet supporter, a halfhearted supporter of this ice idea. He certainly didn’t think that it was going to work. Uh, he was lukewarm on the idea at best. And so when he arrives in Martinique, William actually just kind of takes the money and doesn’t do anything with it. Okay? So Frederick, because you know, communication is slow at the time, doesn’t know this. And so Frederick leaves Boston in February of 1806 and heads down to Martinique fully anticipating that he’s going to be able to store his ice in a new ice house and sell it from there and everything’s going to be great.
[00:15:53] He arrives in Calc- um, sorry, in Martinique with his ice cargo, finds his [00:16:00] brother and says, Hey, where’s the ice house? And it’s like, yeah, about that. Uh, I’ve got some places in mind. And he’s like in mind, what are you doing? So Frederick ends up having to sell the ice directly off the boat. He ends up making about $400, and that’s it. So he lost a tremendous amount of money, uh, doing this, this venture. But he had done an important thing. He had proven that you could get ice from Boston all the way down to the Caribbean.
[00:16:34] The other important aspect of this is that you could do it without damaging the ship. So the ship, the Favorite, came back to port in Boston with basically no damage; in fact, less damage than it came back with normal cargo. Okay. So really, Frederick had done an incredible service: even though he lost a tremendous amount of money, he had proven to other captains in the [00:17:00] area that this could be done. OK, uh, like I said, very little damage to the ship.
[00:17:05] The third part of this is that it actually was helpful for the environment. Okay? So ships, as I’m sure you all know, are designed to be sailed with some amount of cargo in them. They’re not designed to be sailed, you know, completely empty.
[00:17:19] When they’re empty, they ride much higher in the water. And a high, a ship that’s riding high in the water is actually a lot more unstable. Okay. So what. commercial ship owners would do in Boston in the winter – you know, things would still be coming into the city of Boston, but very few things would be shipped out in the winter time, because Boston was primarily an agricultural area at the time.
[00:17:43] Okay. So very few things are coming out of port in Boston, but lots of things are coming in. What the ship owners would do is they would dredge the harbor in the Boston Harbor, fill their ships with rocks, and set sail for the next port. Then they would [00:18:00] dump those rocks and pick up their next cargo.
[00:18:02] So this had a serious effect on the Boston ecosystem, but it also had a serious effect on the ports where they dropped the rocks as well. Not only did it affect those ecosystems directly, but later on, those ports would also have to dredge those rocks back out. Okay. So by having this cargo called ice that you could ship in the winter time, you saved the far – the, the ship owners from having to actually dredge the bottom of the rock, from having to destroy the environment there and having to dump rocks and other places as well. So it ends up being tremendously valuable for the environment.
[00:18:40] Now, the third problem in Boston is that there were lots of people with not a lot to do. So I’m going to skip over some of the details here because there were periods where Frederick lost tons of money and period where Frederick, what, made tons of money as well. He went up and down, you know, throughout the 18-eens and the [00:19:00] 1820s by about 1825 though he was pretty consistently profitable. So he was making a lot of money at this.
[00:19:07] So in the Boston area in the winter, there were a lot of people sitting around with not a whole lot to do. It was cold, couldn’t farm at the time, and they had lots of farm implements. And so what this did is it attracted a lot of new entrants into the ice industry. By about 1830 there were over 20 ice harvesting companies in Cambridge, Massachusetts alone. Okay. And so what these farmers would do is they would use their idle farm equipment. To try to harvest ice and sell it to these shipping companies.
[00:19:41] One of my favorite examples comes from a guy named Nathaniel Wyeth who lived on Fresh Pond, uh, which was sort of the epicenter of all of this activity, which was in Cambridge, Massachusetts. Wyeth, uh, as we found, or as Frederick Tudor would find, is Wyeth had these blocks that were always like [00:20:00] regularly sized, they had right angles everywhere, they were rectangular – basically the same size for every single block. And the wonderful thing about that is that you can position them next to each other and they won’t slide and knock into each other during transit. Okay?
[00:20:16] So one important thing to keep in mind is that ice melts in proportion to the amount of surface area there is, all right? So this is why if you go to the freezer and you want your drink to be chilled fastest, you should actually get the crushed ice. It has the most surface area. It’s also why, at those fancy bars that have like the, the round spheres of ice, and you say, Oh, what a, what a wonderful thing.
[00:20:41] Our ice is super cold and that’s why it melts slowly. No, it’s not because of that – it’s because they have less surface area when it’s a sphere. Okay? So it’s just physics. Okay. So. What you want to have are large blocks of ice that have as little surface area as you can because those will [00:21:00] melt the slowest. Wyeth was able to cut his blocks into basically perfect rectangles in very large size, whereas everyone else was cutting theirs by hand. Okay. And so the hand cut ones would slide around in transit, knock into each other, break into little pieces, melt a lot faster. Wyeth’s blocks didn’t.
[00:21:21] So what Wyeth was doing was actually using some of these farm implements to score the ice into like a grid, like fashion. And then he would hit it with a really heavy rod and break it into basically perfect rectangles. It was genius, okay. And it ends up actually becoming a part of U.S. patent law and setting the stage for a whole bunch of stuff that went forward. But we can time permitting, get into that in the Q. And A. Okay.
[00:21:48] So the fourth problem here is that there were no property rights. Okay, so what property rights do is they help us solve what we call “the tragedy of the commons.” The tragedy of the commons is basically a [00:22:00] story where a valuable resource, because it isn’t owned by any one person, ends up being used by every person to a degree that is perhaps above sort of a sustainable level. So it’s the story of why the American Buffalo is virtually extinct, whereas cows are so abundant that we’re actually concerned about their flatulence and causing global warming. There were stories of elephants in Africa, you know, being over harvested for the ivory in their tusk, and that being solved with privatizing the ownership of the herds. It’s why clear-cutting forest lands happens in the rainforest. Basically, it’s a story of a lack of property rights. And what property rights allow you to do is not only user resource, but exclude other people from using that resource.
[00:22:48] So for example, this is my laptop. You can’t use it unless I say so. The cell phone in your pocket is your cell phone. If I walked up and took it and tried to use it, you would [00:23:00] be rightfully upset. Contrast that to perhaps a payphone, right? Which typically, yes, it’s owned by someone, but how many of you have seen, well, one, how many have you seen a pay phone lately, right?. So that’s not perhaps the best example, especially for college students watching, cause they’re like what the heck is a pay phone. Right? Right. So maybe not the best example, but they were always kind of like dirty, dingy, somewhat destroyed. Right. Why? Well, common pool resource. Okay. So there was no property rights to the ice, meaning that anyone could come on the ice at any time and harvest it.
[00:23:36] So if that’s the case, if ice is now a valuable resource and anyone can come to the ice at any time, when do you go harvest it? Do you go harvest it when the ice has freezed thick enough to be safe and to maximize its volume? Or do you get it sooner even though it will be thinner? Well, if it’s first come first serve, you go sooner.
[00:23:58] Now, have any of you ever [00:24:00] walked out on a pond or a Lake in the winter time and you were like the first one to do it, how did you feel? Are you a little nervous? Right? Why were you nervous? Well, you might fall through. And why might you fall through? Because the ice was too thin.
[00:24:16] Okay, so in a world where there’s no private property to ice, and people can’t afford to wait, people took risks. They went onto the ice when it was perhaps too thin and they fell through. In fact, hundreds of people lost their lives in this exact fashion. Horses fell through the pond. People fell through the pond. Today, we still dredge, you know, the bottom of Fresh Pond every now and then, and we find farm implements from the 1800s, okay.
[00:24:45] So what do we need? Well, we need private property governing the ice, and when do we need it? Well, around 1837, OK? So property rights aren’t some like magical thing you can just smear onto a salut- or a problem and have a solution. They’re [00:25:00] costly to define. They’re costly to monitor. And they’re costly to enforce. And so the only time you actually have property rights over a resource is when it’s valuable enough for that property rights system to exist. And this happened around 1837.
[00:25:15] Ice had started to become super valuable, okay. And so what’s going on in the 1820s and the 1830s is more and more people are starting to sell ice domestically, and the price or the profitability of selling ice domestically is starting to plummet. So Frederick and eventually his business partner, Nathaniel Wyeth, started to sell ice as far away as, as London, and eventually started to look even into selling ice in India, okay.
[00:25:44] Now to get ice all the way to India, you want to have it be thick. You want to let the ice freeze on the pond thick enough that it will survive the journey. The problem is that thick ice is more valuable because there’s more of it. And someone else [00:26:00] could come and take it. So you need to have some means of excluding people from harvesting the ice that you left on the pond.
[00:26:08] So here’s a crude map of the world to kind of show you the trip that Frederick was taking with his ice. So he would leave Boston, Massachusetts, he would have to sail around the Southern tip of Africa, and then all the way back up through the Indian ocean to arrive in Calcutta. Now, those of you who are geography experts, how many times would he have to cross the equator?
[00:26:32] Twice. Okay. So each way that the ice went meant that the ice would be crossing the equator twice. This is a world without refrigeration, right? Where you just had to put the ice in a ship and fingers crossed, hope for the best. Okay. And so he really needed to have those thick blocks of ice because they were the only blocks that could actually survive this journey.
[00:26:56] The problem was that there was this thing called the “colonial ordinance of [00:27:00] 1647”. So back in the early days of the first settlers, they settled on this idea that it would be not permissible to restrict people from accessing what were called great ponds. So any pond that was bigger than 10 acres in size, you were not allowed to restrict anyone’s access to it. And this law was so strongly enforced that people could actually violate other people’s private property rights to get to the ice. So if you built a fence around a great pond or around a section of a great pond, or perhaps you had an apple orchard or something, someone was allowed, if they needed to get to that pond or wanted to get to that pond, they were allowed to go right through your Apple orchard, take down the fence, and you would have no legal right to recompense.
[00:27:50] Think about that for a second. You are not allowed to restrict anyone’s access to the pond. Now, Frederick Tudor himself was guilty of this. He wanted some ice from Walden pond – [00:28:00] anyone read Henry David Thoreau? He’s here – the passage about the ice man in there? That was Frederick Tudor.
[00:28:07] Okay, so someone had put a fence around Walden pond. Frederick took it down. Okay? There was actually a, he had to use some dynamite to blow up a rock that was in the way, and so he did it. Now for that, you know, the dynamite, he actually did compensate the landowner with a couple of dollars because it turns out Frederick did this at about three o’clock in the morning when everybody was asleep, and he reasoned, you know, hey, I probably scared you half to death. Here’s a couple of bucks to make you feel better, okay. But he didn’t have to. He just did that because he felt like it. Okay.
[00:28:42] So there was this colonial ordinance in 1647 that basically precluded property rights from existing. So. How do we get it? This is where a man named Simon Greenleaf comes in. Now, Simon Greenleaf was a law professor at Harvard Law School, just down the street from Fresh Pond, and he came up [00:29:00] with two of the greatest arguments that I think a lawyer has ever come up with, and they’re arguments that only lawyers could ever come up with.
[00:29:07] The first one is that the colonial ordinance specified only fishing and fowling, okay. So the idea was if you lived around a great pond, you needed to have access to it so that you could catch fish and live. His second argument, and this is the one that I think is the greatest argument ever, is that ice is just temporary land, okay? So he says, hey, when upon freezes over, it’s basically land, right? And you can own land. Therefore people should be allowed to own the ice on the pond because it’s just land. What a weird argument, but it worked.
[00:29:43] Okay, so he filed an indenture against the townsfolk of Cambridge on October 4th, 1840 which the Middlesex County registrar granted, and this gave the people around the pond the right to prevent or preclude other people from walking out onto the ice.
[00:29:59] Okay. [00:30:00] Now, what you needed to do was divide the pond in some way. So I apologize that the lines are, are not perfectly visible here. Uh, but if you look really closely, you can see sort of lines drawn on this map. So this is a map of fresh pond just outside of Cambridge, Massachusetts, and what they reasoned was that they were going to assign property rights to the ice in proportion to the shoreline that was owned. So if you own, say, 25% of the shoreline, congratulations, you own 25% of the ice. And they came up with this spider-webby design of how to proportion out the ice.
[00:30:37] Now it’s important to point out that this map was not drawn by Simon Greenleaf. It was not drawn by any government officials. This map was settled on by the people around the pond themselves. They got together, they establish these rules privately, and then submitted them to the registrar’s office for approval, [00:31:00] which the registrar’s office granted on November 18th of 1841, making this map essentially the law of the land.
[00:31:09] Now, some of the local effects this had, okay. So Tudor could freeze his ice thicker for the longer journeys ahead. So what he uh, could actually start doing is sliding ice underneath the other ice and freezing it even thicker than could occur naturally. So some people were able to freeze ice as thick as 8, maybe 10 inches. Frederick was able to get his ice blocks to be about 38 inches thick by repeatedly sliding ice underneath the other ice and letting it freeze together.
[00:31:41] Uh, here we have a table of the tons of ice that were shipped to Calcutta from Boston by year. So in 1833 was the first year that he decided that he wanted to try this. Uh, his business partner, Samuel Austin, uh, violated some of the terms of their contracts that year. And so in 1834, Frederick sent [00:32:00] no ice whatsoever to punish him, uh, and then replaced them. In 1835. You’ll see a, a big spike in 1839. Uh, what happened there is Frederick decided to dabble in, uh, exotic fruit and spice importation. And so he sent a very large cargo of ice to India reasoning or with the idea that he could send uh, some of that ice back and use it to refrigerate fruits and spices on the journey back.
[00:32:28] Okay. So, uh, this venture was not very successful. As it turned out, the people of Boston did not care for exotic fruits and spices, and so he never really tried that one again. Uh, and then the spike in 1844, where he sent twice as much ice that year as the year before, that was because ice had become so amazingly popular there that the people of Calcutta actually built him a gigantic stone ice house, just for his ice. And so he [00:33:00] sent extra ice in 1844 to stockpile that, that building. Okay. And so what you see here is this is a rapid expansion of the amount of ice that was being able to be sold all the way in India. And I should also point out that by this time, his ability to insulate the ice from the heat was so good that ice in Calcutta could be as old as five years.
[00:33:27] Okay. So for five years you could keep the same block of ice in an ice house in Calcutta, India, and you could still have it, okay. That’s how good he got at insulating the ice.
[00:33:39] Small land owners around the pond could lease their ice rights. And so what you saw is in places where, you know, you owned a very small sliver of the ice, you could actually lease it out to someone else instead and let them harvest the ice for you, uh, and perhaps pay you royalties for the ice. Or they just leased the ice and say, here’s a, uh, sum.
[00:33:59] Property [00:34:00] values around the pond skyrocketed. So prior to 1840, uh, land, there was about $130 an acre. By 1848 people were turning down $2,000 an acre, OK? This reflects the value of the ice on the pond.
[00:34:16] Some of the global effects people all around the world had access to refreshing beverages and ice cream. Now, this sounds somewhat trivial, but here’s kind of the thing: ice cream at the time was a luxury that was only available to the upper class people, only during the certain parts of the year, and only in certain parts of the world. By 1845, ice cream was available so regularly and so cheaply that even the upper, lower class people in India could afford to buy ice cream for their family once or twice week. So think about how much that price must have fallen. Okay?
[00:34:58] Fresh food [00:35:00] became more readily available. So the design of the above ground ice house was perfectly suited to railroad cars, which were starting to come about. Uh, this allowed us to keep food fresher for longer, meaning farms could grow more food and take advantage of economies of scale to sell to a wider customer base. So hunger rates around the world dropped precipitously.
[00:35:21] There are also medical advancements. So ice became so cheap, basically everywhere in the world, that we could start experimenting with it. So if you had a fever, or if you were overheating, or just in general not feeling well, we could actually feed you ice chips and try to bring your temperature down. So hundreds of thousands, if not millions of lives all around the world were saved because of this.
[00:35:45] Uh, there was a, an article in Hunt’s magazine in 1858, uh, time permitting. If you guys want, I can put this back up during the Q and A. Uh, we’re going to skip over it due to time constraints.
[00:35:56] Okay. So in conclusion. The ice industry [00:36:00] spread all over the Northeast of the U S and the world. In fact, Maine, Cleveland, Detroit, Port Huron Michigan, Chicago, even Alaska got in on it, sending ice all the way to Australia in 1905. All of this was made possible because of private property rights.
[00:36:16] These property rights were established at the local level by people who are actually affected by the institutions that governed the ice. In other words, by people who knew what would and would not work, and what would and would not be acceptable. Local knowledge, in other words, is key. This insight is something that Elinor Ostrom, who up until very recently, was the only woman to win the Nobel prize in economics – the second one being this year with us, Esther Duflo – Eelinor Ostrom won her Nobel prize for her insights here, that the local knowledge governing common pool resources is the key to having successful governance structures. With that, I want to thank you guys and open up for [00:37:00] Q and A.
[00:37:08] Moderator: [00:37:08] Thank you so much. That was fascinating. That’s great. Um, we’ve got about half an hour for questions. If people could just raise your hand and wait to ask your question until you have the microphone so everyone can hear.
[00:37:23]Questioner: [00:37:23] So how long did it take to get from Boston to Calcutta, and how long from Boston to Martinique? And what, what year did he start doing the Martinique?
[00:37:32] David Hebert: [00:37:32] So Martin’s, yeah, so the Martinique runs started about 1806 and continued kind of for, for his entire tenure. So that was his, his bread and butter, you know, one that he was known for.
[00:37:44] Now I should mention, so I’ve, I’ve made Frederick Tudor out to be like an American entrepreneurial hero. Um, he did succumb to some of the crony capitalism things that, that we’re all concerned about.
[00:37:56] Uh, he secured, uh, basically [00:38:00] monopoly privileges in Martinique, which is why he continuously sold ice there. He could basically, he was the only person allowed to sell ice there. And he would pay people off with hundred pound blocks of ice to do it. So he, I don’t want to glorify him entirely, or, you know, he did have some issues.
[00:38:19] Uh, so to get from Boston to Martinique, uh, took him three to four weeks. And to get from Boston to India at the time would take roughly two months. So two months of, of ice being at sea, crossing the equator, you know, in warm water, right, is kind of impressive.
[00:38:48]Questioner: [00:38:48] Why could this not take place under socialism?
[00:38:54]David Hebert: [00:38:54] Yeah, great question. So the issue with, with socialism [00:39:00] is, is that a lot of it is a top down command and control. Okay? So you have a bureaucrat in some far away land who is going to, who, who has the audacity, in my opinion, to declare that they are the expert in that they are going to tell everyone how they are going to live and how we are going to solve these problems.
[00:39:20] The issue is that the 535 people in Washington, DC and, in our case, probably aren’t world renowned experts on ice and transportation technologies. So the idea that they are going to come up with a solution that might make sense or that might be successful is nonsense on stilts. You know, there are some things that I’m sure they are experts at.
[00:39:47] Uh, but probably not an expert at everything. So the reason why this can’t work under, under socialism is, is really two fold, right? One is the command and control, the lack of the knowledge on the part of [00:40:00] the bureaucrat. But the second part is, you know, the definition of socialism is the abolition of private property, right?
[00:40:06] That is what it means. It doesn’t mean, you know, giving out welfare payments or taxing rich people or anything like that. It’s the abolition of private property. All of this is contingent on the existence of private property. If I can’t preclude someone from harvesting specific ice, then I can’t ship that ice to India. So socialism and getting ice cream in India are completely antithetical. They can’t possibly coexist.
[00:40:39] Questioner: [00:40:39] So you mentioned the environmental impact, a positive impact in terms of the shipping side of things. What was the environmental impact of literally moving water from one place in the world to another place in the world?
[00:40:51]David Hebert: [00:40:51] Yeah. So fortunately, the volume of water that we’re talking about here was not terribly large relative to the amount of [00:41:00] water in the pond itself. So we didn’t see, you know, water levels decline. Uh, we didn’t see, you know, too much going on there. Uh, really all we saw was a vast improvement in the lives of people in Boston from the ability to sell this ice, and a vast improvement of the people in the, in India who were able to consume the ice.
[00:41:20] And really, you know, all around the world, wherever this ice went was just met with massive improvements. You know, this was a, this ice was, was heralded as, as a magical substance. Uh, it was preindustrial revolution, so you could have a block of ice that was about two feet thick, and it was crystal clear.
[00:41:40] So in the shop windows in London, actually, they would have a fish behind two feet of ice, and you could count the scales. It was how clear it was. You know, today, uh, we can’t quite pull that off with, with the ice from our ice makers. Um, but that’s, you know, another interesting story about the rise of artificial ice.
[00:42:07] [00:42:00] Questioner: [00:42:07] Um, I thought it was really interesting when you were talking about the owning different parts of the pond, when they talk about how you could own the ice. I know there are ways that you can own or, now I think, um, you own the property underneath, like the land underneath.
[00:42:22]David Hebert: [00:42:22] Yeah.
[00:42:22]Questioner: [00:42:22] When did that kinda change from owning the ice to owning like the land underneath the pond?
[00:42:28] David Hebert: [00:42:28] Yeah. Water, property rights are a really interesting and, and big puzzle. Okay. So they’re, they’re known as riparian rights, and basically the property rights structure really depends on what the use of the water is going to be. So in the case of Fresh Pond, originally it was a place where fishing and fowling happened.
[00:42:49] And so, you know, there’s tons and tons of fish there, you know, tons and tons of birds. The resources weren’t necessarily scarce in sort of an economic sense. Uh, [00:43:00] and so you don’t need property rights to govern a non scarce resource. And so there, you know, the, the colonial ordinance saying, yeah, I couldn’t restrict anyone – totally innocuous, you know, let everyone have their stuff.
[00:43:14] For navigable water, it’s typically held Ras Omnium, which means you cannot actually own the water. It means it’s held in common to all people. For bodies of water, like perhaps Reeds Lake, uh, it gets a little dicey because it really depends on how the local community wants to allocate the property rights. So a lot of times he might own, let’s say, 20 feet out into the water and that’s it. And then beyond that would be water or land held res omnia. What’s interesting now is with the shorelines over in like Muskegon, for example, uh, eroding, people’s properties actually shrinking,and it’s [00:44:00] unclear what will happen if the water ever recedes. You know, do people get that land back? It’s like, I don’t know.
[00:44:06] Um, when that actually started to change, I don’t know that there is a specific time when, you know, the law of the land became, you know, here you own some land underneath it. I think it really just reflects the underlying. Economic conditions of each community. So I do know that the property rights structure adopted here was copied all over the country in different lakes and even rivers, uh, to an extent, which is a whole new issue because flowing water is a lot harder to manage than stationary water. Um, and so really it depends on the local conditions about when the property rights structure will change and what specifically it will look like.
[00:44:51] Questioner: [00:44:51] Thank you so much for your presentation. I’m, I’m, I’m imagining that this. Pretty much transformed the economy around Boston, in and around [00:45:00] Boston, and I imagined similarly that when refrigeration technology is introduced, there’s dramatic changes in property values and all, all of that sort of stuff.
[00:45:09] David Hebert: [00:45:09] Yeah.
[00:45:09]Questioner: [00:45:09] Could you discuss what that, what that transition was looked like from, from free ice to refrigeration?
[00:45:18]David Hebert: [00:45:18] Yeah. So the, the story in, in the history books for this stuff is, is a story of, of the natural ice industry, and then the artificial ice industry, with artificial ice industry being, you know, refrigeration or freezers, okay? And so the first artificial ice machines were actually made around like 1835, 1840. And they used, um, oh, I forgot it. They use some gas, and I’ve, I’ve, drawing a total blank on it. They used the gas, they would compress it, and then they would release that pressure and that releasing of the pressure would drop the temperature and cause the water to freeze.
[00:46:00] [00:46:00] And so – Oh, ammonia. That’s what it was. Okay. So it was, ammonia. They used the ammonia and this is why it becomes relevant. So sometimes the plant, because of the high pressure that they use, would actually explode. Okay? Beause it was, you know, way back in the day, technology and safety, you know, kind of by the wayside there.
[00:46:19] And so when artificial ice is first invented, obviously Frederick Tudor and the people of Boston are a little bit nervous because, you know, if you can just make ice on demand, you don’t need to harvest ice from a pond. Okay? And so Frederick, uh, in another – I hate to do this cause I love the man to, well, to death, but, um, but he, he did a couple of things that I just look at and you’re like, why did you do that buddy?
[00:46:44] Okay. And so this one, he, um – you guys ever looked at an ice cube? Is it clear? Okay, it’s not clear. Why is it not clear? Okay, so the answer is actually physics again. Ice cubes in your freezer actually freeze from the outside in. Okay? So [00:47:00] the outlet outer layer freezes first and the inside center of it will freeze last, okay. And ice has this wonderful property where, when it freezes, it expands. It’s why ice floats, right? If ice didn’t float, it would sink to the bottom. It would crush all the fish. Winter would be a disaster, okay. So thank God for this, right? And so when the ice freezes on the outside, well, it kind of like locks in the size that that ice cube is going to be. But then the inner water freezes and tries to expand, and that creates cracks, little tiny fissures, and that’s what causes the cloudiness in your ice cubes. Okay. So it’s nothing about impurities, you know, people will say, if you boil the water, it’ll be clearer – yeah, a little bit, but not really. Okay. The real way to do it is through directional freezing, and that’s a whole separate thing.
[00:47:47] So Frederick realized that his ice was clear because it would freeze, you know, in a specific direction, actually from the top down. But anyway, so [00:48:00] his ice was clear; artificial ice was cloudy, and artificial ice used ammonia. And so what did he do? He told everyone that that cloudiness was ammonia, and that ammonia is poisonous. And then if you use artificial ice, you might die. Right? And so everyone looked at this and said, my God, I don’t want to die. I’d better buy this all natural free range ice, right, instead of this artificial nonsense that so-and-so is trying to peddle on me. Okay?
[00:48:34] So, he lied, right? He was a little bit of a crony. I don’t want to, again, it’s the thing. So artificial ice, you know, had a rough start all because of tutor, frankly. Uh, but eventually, you know, we get really good at the technology. And another pesky thing called, like, the industrial revolution happens, and so water becomes somewhat polluted.
[00:48:59] And so now [00:49:00] natural ice is made on rivers and ponds that had pollution in them. Artificial ice – we kind of figured out that it wasn’t ammonia. And you know, the price of it starts to come down. You could start building artificial ice factories all over the world. And so the natural ice industry died a slow, drawn out death around the 1880s to 19oos.
[00:49:24] Uh, but in some parts of the world that persisted until about 1915. Oh yeah. So the people of Boston were not particularly happy about that.
[00:49:35] Questioner: [00:49:35] Actually, that was the thunder of my question. Essentially that is, you know, every industry has the buggy whip, uh, phenomenon, and that’s… Now obviously, a guy named Ken Moore came along and invented something…
[00:49:48] David Hebert: [00:49:48] Right; now we all…
[00:49:49] Questioner: [00:49:49] … pretty amazing,
[00:49:50]David Hebert: [00:49:50] You know…
[00:49:50]Questioner: [00:49:50] But yeah, and I think Kenmore actually invented the first icebox that needed exterior ice to do it, didn’t he?
[00:49:57]David Hebert: [00:49:57] Uh, I don’t know if it was Kenmore. [00:50:00] The first one was around the 18, like 1815, was the very, very first one. It was a big wooden box and you would just put ice in it, had some tin in there to keep things cold.
[00:50:10] Questioner: [00:50:10] Right. I think that’s what I was trying to figure. I mean, obviously we see the symbolism of ice cream, but I think a lot of the royalty, whatever you use that for the icebox, the themselves, right?
[00:50:21]David Hebert: [00:50:21] Yeah. That was the big, the complimentary thing that was necessary as the ice box.
[00:50:25]Questioner: [00:50:25] Which then goes to my next question is, did he get, you know, how General Motors likes to build the car, then we’ll build the tire. Then we’ll…
[00:50:32]David Hebert: [00:50:32] Yeah…
[00:50:34]Questioner: [00:50:34] Did he get anywhere into the other industries of, of cold?
[00:50:39]David Hebert: [00:50:39] Yeah. So he actually didn’t, he focused almost exclusively on ice. He dabbled a little bit into coffee and molasses trading on the side. Uh, so really, you know, what he kind of focused on was getting ice to and from various places, and then he would use the ice to insulate or refrigerate, you know, food from other [00:51:00] places.
[00:51:00] So, coconuts and bananas started to show up in Boston in the 1820s and 1830s. And that was because of Frederick. All right. So he never really got into like the personal, um, like household ice industry. He just kind of was the guy who brought ice to the place, and he let other people kind of figure out, you know, how to do that part.
[00:51:32] Questioner: [00:51:32] What is the status of private property rights, at present, in your opinion?
[00:51:38]David Hebert: [00:51:38] Ooh, uh, I think that they are being severely encroached upon. You know, it’s, it’s, um, one of those areas where we’ve, we’ve sort of lost sight of how wealth in society is, is generated. You know, we had Elizabeth Warren recently come out and say, [00:52:00] you know, you, you drove on the roads, therefore, anything that you built is, is partly ours, right? And it’s like, well, you know, I paid my taxes to build the roads, so haven’t I paid my, my fee to build those things?
[00:52:12] Um, so I think we’re in a, a world where property rights in general are being encroached upon, being diminished severely. And I think they’re in general misunderstood. So property rights, you know, yes, they delineate who owns a resource and who can use the resource. But they also put restrictions on, you know, what you can do with the resource. So I like to think about property rights instead of as being held in the object itself, it’s really a bundle of things that I’m allowed to do with the thing.
[00:52:48] So, you know, this is my laptop. That’s true. I’m allowed to use it to, you know, make presentations, you know, to surf the internet, to take notes and et cetera, et cetera. I’m not allowed to [00:53:00] use it to like, throw at you. All right? So I don’t have that property right.
[00:53:04] So property rights properly understood aren’t just restrictions on what other people can do with the resource. They’re also restrictions on what I can do with the resource. And so I think there’s a big misunderstanding of, of what they are, and a vilification of them to say – to a point where we say, you know, let’s, let’s move towards socialism. Let’s move toward communism, and abolish these things called private property, and therefore everyone can have whatever they need.
[00:53:31] It’s like, that doesn’t seem true. You know, we tied a system of not having property rights; it was called the dark ages, not exactly a fun time. So I hope that we can return to understanding what they are. Um, I’m not optimistic about it happening anytime soon though.
[00:53:57] Questioner: [00:53:57] That colonial act mentioned fish and [00:54:00] fowling.
[00:54:00]David Hebert: [00:54:00] Yeah.
[00:54:01]Questioner: [00:54:01] Did anyone ice fish then? And how did that, did anyone raise that point, of ice fishing?
[00:54:07]David Hebert: [00:54:07] Yeah, so ice fishing, uh, was a big contentious thing. Uh, the basic idea was once there was ice on the pond – so once the first freeze happened – that pond would be considered land until, you know, there was not going to be a refreezing. So even if someone, you know, cut a hole in the ice and you could see water, right, that wasn’t legally defined as water until the big thaw, until there was basically no ice on the pond whatsoever. And so that was the one, you know, hiccup area where a lot of people were a little worried about it. Uh, but they kind of were able to solve it through, uh, transfer payments from you know the, the people around the pond to the people of the, of Boston. So basically you [00:55:00] paid extra, essentially taxes for owning the pond.
[00:55:09] Questioner: [00:55:09] So ice harvesting, it seems like a seasonal job. So did he store it and ship it all summer, or what did he…
[00:55:17]David Hebert: [00:55:17] Yeah, yeah, yeah. So his, uh, so he was so good at storing the ice, I mean, he kept it year round. You know, even, uh, so I mentioned that in Calcutta they had ice that would be five years old. And so in Boston where he was harvesting the ice, yeah, he kept it, you know, in basically in perpetuity. You know, the ice would melt a little bit during the non winter months, uh, but it would last, essentially. And so every single day there was a shipment of ice leaving Boston year round.
[00:55:50] So by, and that happened by about 1822 or 1823 is, is literally every single day a ship would leave Boston’s port carrying ice [00:56:00] going somewhere. So yes, a seasonal business, but year-round activity.
[00:56:07]Questioner: [00:56:07] If people would like to learn more about either ice harvesting and Frederick Tudor or private property rights, are there any books that you would recommend?
[00:56:15] David Hebert: [00:56:15] Yes, absolutely. So if you want to learn more about the Boston ice trade, uh, the single best book is by a guy named Gavin Wakeman. It’s called The Frozen Water Trade. I forget what year it was published, but it’s available on Amazon for like $7. If you want to learn more about private property rights and governing the commons, Elinor Ostrom’s book, uh, Governing the Commons, uh, which is the book that she ultimately won the Nobel prize for, uh, that’s also available on Amazon.
[00:56:43] And actually, if you look hard enough, there is a PDF of it available for free. Uh, and it’s open access. So I’m not telling you anything illegal. And so don’t worry. Uh, so you can read that book as well. Um, and if you want to read more about this, uh, my [00:57:00] paper on this was published in the 2013 edition of the Journal of Private Enterprise.
[00:57:11] Questioner: [00:57:11] To also remind you that probably, between five and 10% of all active litigated cases, and probably 20% of all tried cases involve property rights, typically riparian, and typically between owners. So, uh, for example, the Michigan Supreme court just recently enacted several, obviously, changes about how you, whether you can walk across lake property or not walk across lake property.
[00:57:38] David Hebert: [00:57:38] Yeah.
[00:57:39]Questioner: [00:57:39] Various types of properties you can walk across in that. So. The ever moving goalposts to property rights going both ways, and the pendulum happens daily in the courtroom.
[00:57:51]David Hebert: [00:57:51] Yeah, absolutely. I mean, property rights are constantly in flux. You know, we, we like to pretend that, you assign property rights, and then the problem is [00:58:00] just solved.
[00:58:01] Uh, but here’s kind of the rub of it is, is today, Fresh Pond, uh – which was the pond with all the, the lines marking, you know, demarking private property and everything – it’s held res omnia again, right? So we abolished the property rights system there because it wasn’t valuable anymore. And so, you know, I, I look at, you know, these, these rules about walking across ponds and yes, they are property rights issues, to be sure.
[00:58:27] One aspect that comes up a lot though is, is the enforceability of this. So I’m sure we all know that jaywalking, for example, is illegal. And I’m sure that everyone in this room has at one point or another jaywalked. And so, you know, we’ve done this. Um, I also know that in a part of Washington state, it is illegal to throw snowballs, because they are considered to be weapons of the same class as missiles. And so if you throw a snowball, you could be fined – I think the fine is like [00:59:00] $500 right? So like, God forbid. Right? And so, you know, we have litigation and legislators, you know, passing all of these, in my opinion, boneheaded rules.
[00:59:12] But at the end of the day, we live in a common law system where you can, as a police officer, as a judge, you actually can say, you know, we’re not gonna enforce the law there, right? It’s called jury nullification. I probably could go to jail for telling you about it. I’m not really sure. The law is very unclear on that one.
[00:59:34] Uh, but you know, if you ever want to do that, if you ever get summoned for jury duty and you want to get out of it, you know, really easy way is to say, I believe very firmly in jury nullification, the prosecution will say, “dismissed”, and you can go home. Right? So, you know, I’m just saying, if you don’t want to do your civic duty, easy way to get out of it. Not that I’ve done it before. Okay. So…
[00:59:54]Moderator: [00:59:54] We have time for one last question. If anyone’s got one last [01:00:00] burning question, pun intended.
[01:00:02]David Hebert: [01:00:02] Ooh, there you go.
[01:00:05]Questioner: [01:00:05] Just curious about the, um, Fresh Pond. I mean, were there not, are there not like 50 ponds within two miles? And I mean, there’s plenty of ponds here in Michigan. There’s plenty in most States. Is there a reason that this pond was THE one?
[01:00:21]David Hebert: [01:00:21] Yeah. Yeah. So the reason is – so this is strike three against Freddy T here. Uh, so the reason is, you know, Frederick was, was very good at marketing and at salesmanship in general, and he happened to live on Fresh Pond; his family happened to own a very large amount of the shoreline for fresh pond. So, you know, the, the rule that shoreline ownership would be, you know, what determined the amount of ice you own and yeah, it might’ve benefited Frederick quite considerably. Right? Um, and so Frederick would travel around the world and [01:01:00] talk about how clean and how pure and how, you know, clear the water of Fresh Pond was, okay?
[01:01:07] So, and he was so good at this that even the people in London would buy the ice from him rather than buy it from Norway at a much lower price. Okay. So they were like, no, we don’t – we don’t want that Norwegian ice. We want the good American ice from Fresh Pond. Right? And so that is like, basically what happened is he was just so good at convincing people that, that what he was selling was the greatest thing since sliced bread, which might not have been around then, but yeah. So, it was the greatest thing, right? So, uh, so he just was that good at it. I mean, I hate to say that that’s the reason, but he was able to convince everyone that Fresh Pond was just the greatest water that had ever existed. And everyone believed him.
[01:01:54] [inaudible]
[01:01:56] The pond itself – so the question was how big was Fresh Pond? Fresh Pond was about [01:02:00] 17 acres in size, and it was actually considerably deep, uh, which was kind of wild. So it was, uh, it was, by all accounts, a great pond.
[01:02:10] All right. Well, thank you guys so much. It’s been a pleasure.
