The Kings Loaf: What would happen if we charged for bread the same way as we charge for roads

Many years ago in the small kingdom of Rhodes, the King declared that henceforth everyone was to have free access to freshly baked bread. It became known as the “King’s Loaf” and the provision of free bread became part of the island’s tradition.

Over the years, various rules developed. For example, to qualify as fresh the bread had to have been baked within two hours of sale. Fresh bread had to be available 24 hours a day, although the most popular times for collecting the bread were early morning, in time for breakfast, and early evening, when the workers came home for their supper. This created production problems. Large ovens were installed to cope with the morning and evening peak requirements, and these were only lightly used at other times. Despite investment in bigger and bigger ovens, there were always queues at peak times.

The cost of providing the bread came out of the government coffers, and it was substantial. In fact the government always had a problem finding the money. So it introduced a tax on butter. People complained, as they do for any tax, but it was generally accepted as being a fair way of “raising the dough”. Arguments still arose. Some people felt that a greater proportion of the butter tax should be spent on providing additional ovens, while some economists argued that introducing a charge for bread at peak times would reduce the queues. Politicians knew that such a charge would be very unpopular so the idea never caught on. Anyway it was thought too difficult to charge for the peak-even the economists disagreed amongst themselves on how to calculate the socially optimal peak charge. Many felt that the idea would only be accepted if he peak charge was used for building more ovens and subsidising dry biscuits.

The government did what it could. A hypothecated fund was established under the control of a Bread Board to clarify the relationship between the butter tax and the provision of new ovens. A subsidy was introduced for dry biscuits to encourage people to buy those instead of taking free bread at peak times. The Bread Board developed funding criteria for alternatives to bread. Government legislated for flexible working hours so that some people might get their bread earlier or later in the day. And it allowed some bakers to sell hot bread at a higher price so people buying hot bread didn’t have to queue. Yet, demand for more peak bread-making capacity still grew.

Economists calculated that the economic burden of having people queuing for hours for their bread cost the country millions a year. In some places the queues took hours to clear, and everyone agreed that it was a serious problem. But suggestions to charge for peak bread were still dismissed as unworkable. Instead proposals were developed for building more dry biscuit factories in the hope that bread eaters could be tempted away from their loaf.

Then somebody said “we must stop talking about charging extra for peak bread”. No one wants an extra tax, but no extra taxes are needed. What we must do is abolish the butter tax, and let the bakers sell bread at the market price.

So that was done. It still took a fight because the idea of the King’s Loaf was so ingrained. But there was already a precedent. The government had already sold the bus company and the phone company. So the butter tax was abolished and the price of bread was set by the bakers. No one had to calculate the socially optimum price as the prices were set by supply and demand, just like bus tickets and phone calls. When the price of bread rose, bakers invested in new ovens. People couldn’t imagine why they hadn’t thought of it before.