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Those who
mistrust economic freedom seem to see market failure lurking
around every corner. It is commonly assumed, for instance, that
if left to their own devices, markets will do a poor job of
setting standards. States must therefore step in and impose, say,
the metric system, or a single voltage for electrical devices,
or one specific design for attaching infant car seats.
This is admittedly a
large and complex topic, but to take just one striking counter-example,
the history of time zones in the United States and Canada belies
the belief that governments must set standards. In a 2005 paper
entitled "The
Economics of Time Zones," National Bureau of Economic
Research (NBER) Faculty Research Fellow Matthew W. White
demonstrates that contrary to the popular misconception, time
zones in North America were not set up by political, legal means.
Rather, they were established by private agents coordinating
their actions voluntarily for their own—and society's—benefit.
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The Land Before Time Zones |
A mere one hundred and fifty years ago, each American and
Canadian town or city had its own local time, displayed by a
central clock tower set to noon when the sun was directly
overhead. An 1857 Comparative Time-Table reproduced by White
illustrates the local time standards in dozens of cities. When
it was noon in Washington, D.C., it was 11:18 in Chicago, 11:51
in Toronto, 12:12 in New York, N.Y., and 12:23 in Quebec City.
This system, with literally thousands of different time
standards across the continent, functioned adequately when
people, goods, and news travelled at the speed of horse and
boat. But it became increasingly problematic as technological
progress accelerated, with trains and telegraphs literally
transforming the world. Adopting a simpler system of broad time
zones would greatly reduce coordination problems for freight
transfers in inter-regional commerce. It would reduce confusion
and inconvenience for the average train traveller as well.
Though the need was clear,
many city residents were wedded to the custom of true local
time, and so were opposed to change. The federal government was
aware of the issue, and certainly not against imposing a
solution "for the greater good," but there was conflict there,
as well. Two different federal agencies, the Signal Service
Bureau and the Naval Observatory, had different visions of what
kind of standard to establish. As White puts it, "their
protracted dispute set the stage for the unilateral action of
the railroads, who determined the time zone system that
ultimately prevailed."
With rate wars raging in the late 1800s, the managers of the
various railroad companies were not exactly in the mood to
cooperate on standardization issues, but their strong mutual
interest persuaded them to override their reciprocal antagonism.
They came up with a plan that stipulated five time zones, not
equally spaced but rather modified to take into account then-current
divisions between independent railway lines.
But agreeing among
themselves was only the beginning of the coordination problem.
The railroad managers still needed to sell their plan to a whole
lot of town and city officials responsible for setting the local
clock towers every day. The problem, as White points out, is
that the cost of changing to the new system "would be incurred
by a city's residents and businesses, but the benefit would
arise only if other locales changed as well." (Emphasis
in original.) In fact, even many railroad managers agreed to
adopt the new plan only if the cities they served could be
expected to follow it.
The solution they hit
upon was to elicit public announcements from city officials
detailing their intention to adopt the plan and their rationale
for doing so. Though non-binding, these announcements were far
from meaningless. A city that announced it was going to switch
to a regional time zone and then did not follow through would
experience confusion and disarray. The announcements also had
the effect of making it more likely for other cities to jump
onboard the bandwagon.
Unlikely as it may seem, the plan worked, and on Sunday,
November 18, 1883, towns and cities across the continent
smoothly transitioned to Standard Railway Time. Crowds gathered
in New York City to witness the marking of noon twice, "once at
the local time noon, then again four minutes later on the new
Eastern Standard Time" on what became known as "the day of two
noons."
Why did the first cities
to publicize their intentions agree to make their costly
announcements and get the bandwagon going in the first place?
White says that "the historical record is suggestive but
incomplete." He points out that some cities clearly viewed the
plan as being advantageous, especially those served by several
railways that then used conflicting time standards.
He also notes, however,
that the railroads appear to have lobbied other key cities by
using personal connections and influence, "and the occasional
strong-arm tactic." Does this latter method condemn the whole
private alternative to public standard setting? Hardly. We would
do well to remember that everything governments do
is a strong-arm tactic backed by the threat of force. The
history of time zones is one more example of just how much good
can be accomplished through largely voluntary means. |
