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Updated: 2018-01-17T02:15:03.686+05:30


Karthik, thanks. You will find exactly similar p...


Karthik, thanks.

You will find exactly similar points to quote in exactly the opposite direction in the paper linked here (as well as the graphic)

Btw, this is what I am increasingly finding out in such complex problems - for every evidence data point in one direction, there is another in the opposite direction!

But that is not the point I am making.

Consider this. We already have too many vehicles in our roads - maybe 2-3 times the number in peak times in the larger cities (and growing very fast). The primary objective of public policy (or any market innovation) should be to get a significant number of vehicles off the road by inducing people to use public transport (assuming complementary investments in public transport) or shift their travels to off-peak times. Btw in most cities, congestion has become so excruciating that increasingly off-peak times are only when we are all asleep!

For Uber to be doing this, it would have to induce people who were using private cars to either shift their travel times to off-peak hours or use pooled Uber. And this would have to be done in very large numbers to at the least off-set the natural rate of increase in private cars entering the roads each year. We also know about the lack of success with dynamic toll-pricing and HOV lines in changing travel behaviours (by shifting travel times and using pooled vehicles) and thereby lowering congestion in several cities.

Besides, it would also have to ensure two things - one, as I mentioned in the linked post (and the paper referenced), that the middle-class who have recently gravitated from cars and motor-cycles to the new Metro rail will have to stay on with the rail; and two, those who (not rich enough to own a car, but not poor too) otherwise would not have used cars or would have used the auto (say) or a bike would now not shift to the greater personal comfort of a Uber. We can safely say that both these will happen in large numbers.

I could actually list out several more factors (that drive private vehicle use and reluctance to ) that Uber will have to offset. Not to mention evidence from places like London where private cars have actually decreased since 2012, while Uber vehicles have more than made up the decline, leaving London ever more congested in every passing year since (also due to increased delivery vehicles).

The counterfactual (in my judgement) is orders of magnitude off, for me to be even taking the paper you mentioned seriously...

The point is this - we need public policy and market innovation that gets vehicles off the road. I don't believe you can do that by getting more vehicles on to the road.

Gulzar, The paper compares "congestion befor...



The paper compares "congestion before Uber" v. "congestion after Uber put cars on road". It finds that congestion decreases after Uber puts cars on roads, as compared to the case without Uber.

From the paper -

"....after entering an urban area, ride-sharing services such as Uber significantly decrease traffic congestion time, congestion costs, and excessive fuel consumption. "

"...difference-in-differences framework to examine the difference in congestion before and after Uber entry across multiple areas"

Intuitively, it seems that Uber puts more cars on road and hence it should lead to congestion. But what these results suggest is that the other effects are significant enough to counter the effect of "putting more uber cars on road. The countering effects being the removal of personal cars from the road, disincentivizing people to use roads during peak time, better utilization of car seating capacity, and so on.

Thanks for the comment. I am inclined to agree wit...


Thanks for the comment. I am inclined to agree with you about the perils of including economic growth... Health, education, infrastructure and jobs are a good set of priorities...

Karthik. Thanks. 1. The point I am making is that...


Karthik. Thanks.

1. The point I am making is that just getting Uber into the roads (more vehicles on road) is itself contributing to congestion. Then managing the larger pool of vehicles with price signals is only salvaging the situation which is already more congested than would have been the case without Uber (with only private cars and taxis).

2. On your Sl No 3, it is precisely such efficiency gains that can be reaped by having existing taxis move into aggregator platforms through some business model.

The central point is that Uber/Ola etc are innovations that bring in more vehicles into already congested roads. We need to control them. Alternatively, every private car (personal cars, Uber, taxi etc) ride inflicts a social cost. Further, given the traffic levels in our cities, the incremental cost is even more.

The analogy you had drawn about United Nations han...


The analogy you had drawn about United Nations handing down goals for sovereigns is rather apt. That immediately makes it clear to the reader the sub-optimal situation prevailing in the Districts.

It is desirable that priorities are tailored to the conditions and the context of the District. If I were to draw up priorities for district administrators, I would say it is health, education, infrastructure and jobs. For Municipalities, it can be transport, traffic, sanitation, drainage, street lights, etc.

However, there may be some Districts and Municipalities with some unique issues or challenges or priorities that do not fall under the above. In such cases, their objectives can be modified suitably or be different.

Locating big industrial plants in Districts will be the responsibility of the Union and/or State governments with the District administration playing a facilitating role.

District collectors can be given six months to draw up their priorities, upon taking office. Then, they can be evaluated on that basis and even offered financial incentives if they exceed goals set or if they do better than their peer group.

I will avoid economic growth altogether. Indeed, I would be hesitant to give that as a goal for even Union and State governments. Economic growth, in my view, is a residual or a natural outcome of getting the ingredients and getting the plumbing of economics right.

Far too many factors influence economic growth. Failure to achieve it brings pressure on governments to go for temporary fixes which could be harmful in the long run. Second, there is the risk of numbers being cooked up.

In China, many cities are now admitting to overstating their growth numbers by about 20%. Christopher Balding questions if the government in Beijing is not doing so. In that case, he is wondering if China's true gross debt (public and private) debt ratio is not 375% instead of 300%. Similar issues will arise in India too.

So, let us stay clear of economic growth as a goal for district administrators.

Some studies find "decrease in congestion&quo...


Some studies find "decrease in congestion" due to Uber. They explore three possible mechanisms driving the result.

1. Uber's surge price is essentially a "congestion tax". Surge prices disincentivize people to travel during peak traffic times, thereby reducing congestion.
2. Higher utilization due to sharing (1.8 per car in Uber v. 1.1 for private car)
3. Due to better technology in Uber, it's easier for Uber drivers to find customers, as opposed to private taxis. It reduces wandering of taxi drivers in search of passengers, which in turn reduces congestion.

There are other studies too, finding "increase in congestion". But I find the 1st mechanism of "Uber's surge price acting as congestion tax" interesting. Maybe it has more impact than what we think of.

Your point made the cover of the Asian edition of ...


Your point made the cover of the Asian edition of the Economist. I found your blog while searching for it. I intend to stick around and read more.

I have a chapter about this in my recent book on m...


I have a chapter about this in my recent book on markets:

I recorded a podcast episode for the Seen and Unseen podcast on this topic:

Thanks Amol!


Thanks Amol!

Thanks sir for the comment. I'm updating the m...


Thanks sir for the comment. I'm updating the main post. There may be a subtle difference between the two.

Gulzar, Govt action does make a difference. An exa...


Govt action does make a difference. An example is the effort of GoAP in
moderating the extent of cotton crop sown this year.

Based on assessment that Cotton is not likely to do well this year,
the Agri Dept took up information campaign to dissuade farmers
from taking up the crop excessively.

The effort was successful, as numbers prove.
I think a proactive approach by Govts would help.
(Details can be obtained from Mr B Rajsekhar, Principal Secretary Agriculture, AP.

Same to you Gulzar. Keeo blogging and educating us...


Same to you Gulzar. Keeo blogging and educating us...

Thanks Anon for the very interesting thoughts. I...


Thanks Anon for the very interesting thoughts.

In all such situations there are likely at least two dimensions of analysis. One, the specific regulation/requirement itself. Two, its compliance.

On the latter, my view is that enforcement works only at the margins - if 80% of people comply, then it is possible to meaningfully seek to enforce the law, if not enforcement fails. I do not see such situations as examples of governance deficit. They are examples of civic capital deficit.

This makes the initial likelihood of compliance critical. In cases where the civil society is doing one thing (here informality which is completely unregulated), introducing regulations which present a disruptive break from the past (suddenly being asked to pay taxes) can be expected to face pushback in the form of skirting around compliance.

Our informal sector is massive, when compared to any other large developing country. And taxing the informal sector leaves it uncompetitive. As Shleifer and La Porta show informal sector rarely shrinks or becomes formal, but formal sector grows. So gaming is natural. The likelihood of the initial conditions being favourable for compliance is very low in such cases.

In contrast, I would say that the tax evasion among even the formal sector corporates, itself rampant, is more a reflection of governance deficit - weak state capacity has internalised the belief that you can get away by evading.

Look at things like littering, standing in a queue, coming to office on time etc. How much of it is a problem of governance deficit as against civic capital? I am inclined more to the latter.

On a more broader scale, I was wondering - how muc...


On a more broader scale, I was wondering - how much of our governance deficit is due to the bureaucracy's institutional factors and how much of it is due to the culture/mindset of the society that makes it difficult to regulate behaviour or provide services?

I was initially of the opinion that the causes are probably a combination of both institutional and societal factors - the problem should be addressed beginning from the end of institutional factors, as people's current behaviour is only due to prolonged exposure to certain forms of governance. Once institutional constraints are addressed, people's behaviour adjusts accordingly.

But, lately, I am beginning to question this view. Maybe there's something inherent in our society that makes it hard to be governed. I wouldn't want to blame it completely on people, as it provides safe passage and alibi for politicians and bureaucrats but at least there seems to be some element of truth to the view that the broader pattern of behaviour of society is placing huge constraints on governance capacity.

Joe Midgal calls it "resistance to state penetration". As he says, almost all diverse countries faced this issue but such status quo was shattered by strong exogenous events like wars etc. It hasn't happened in case of India.

Thanks Anon for the comment. I thought about it an...


Thanks Anon for the comment. I thought about it and was careful to not draw any causality - used the term "associated".

I am sympathetic to your line of reasoning, but don't think it would have been any different. Multiple factors would have contributed to this shaping of response including the over-regulation part. But the fact is that such deviance is now pervasive.

Thanks for your comment. I suppose yes:))


Thanks for your comment. I suppose yes:))

Thanks for reading JCE and happy that you like it....


Thanks for reading JCE and happy that you like it.

You have put your dream into the article, it appea...


You have put your dream into the article, it appears

Several benchmark assessments suggest that even th...


Several benchmark assessments suggest that even the students of Indian-high end private schools perform below international average. It is surprising, given that the high-end private schools are less likely to face constraints of public systems like lack of resources, weak governance etc.

My sense is that it's due to the poor quality of board exams. Board exams set expectations/standards and schools only teach to these standards thus translating the poor quality of board exams to poor learning practices even in high-potential schools.

The solution is to upgrade the quality of board exams but to avoid the political pressures during the transition, it would be good to initially conduct two versions (basic, advanced) of each subject, with the choice to the student to choose either. Gradually, one can work on bridging the gap between the two.

The idea is that the advanced version will signal the higher expectations to schools and also creates demand from parents by providing them with an easily understandable metric gauge quality. Hopefully, this would lead to change in the status-quo.

The splitting of the exam will also serve another problem of our board exam - the dual purpose of both certifying minimum standards and signaling the capability of students. The basic version can be taken by students who are interested only in getting the 10th certificate to demonstrate minimum competency.....

Do you think that the behaviour of firms is due to...


Do you think that the behaviour of firms is due to long-time exposure to an environment, where they had to constantly find ways out of over-regulation (sometimes un-followable)?...and that rule bending tendency has seeped into finding a way out of reasonable regulations too?

Same to you! Keep up the good work. I'm a big ...


Same to you! Keep up the good work. I'm a big fan of the blog, all the way from Colombia

Would be glad if you read it and give your comment...


Would be glad if you read it and give your comments.


Interesting take on IFC report on private sector j...


Interesting take on IFC report on private sector job creation. Thanks for bringing to our notice about these important points. Pretty informative!

You are right when you say that "these playbo...


You are right when you say that "these playbooks are pretty well known". However, these rules can't just be lifted from a foreign jurisdiction and fitted into the Indian context. It requires tons of hard work to figure out how to connect these new rules with the rest of the Indian legal system so that they have the intended effect. If you look at US, there is an army of legal academics and researchers who work on drafting restatements and model laws. The skill sets required to do this job is very different from the contract drafting skills of private law firms and practicing lawyers. The Indian government and regulators need to realise this and invest in developing these skill-sets within Indian legal academic/research institutions. Outsourcing regulation drafting to private firms is not a long term solution!

@researchbyanand, thanks for your comments. I am ...


@researchbyanand, thanks for your comments.

I am not convinced by the distinction you make between the two types of elites. Actually they have now come to overlap almost completely. For example, the children and wives/husbands of the political elite occupy the "meritocratic" elite group. Eric Schmidt and Annie Marie Slaughter belong as much to the political elite as much as Hillary Clinton and Donald Trump belong to the "meritocratic" elite. The fortunes of your 1% "meritocratic" elite, as Brink Lindsey and Steven Teles show, are in no small measure the result of elite capture of the political system and their setting the rules of the game. As I have blogged several times, the danger with such levels of income concentration and inequality is that it is invariably followed by political capture...

Btw, what is meritocracy today? It is a simple Ovarian Lottery. Your life prospects are largely determined by the circumstances of your birth, the exposure and opportunities that this chance event endows you with. Isn't it true that education and personality development is more determined by your family environment, your networks, and external exposure than what is learnt in school? Is it any wonder that social mobility is at its lowest in the US today and the proportion of children earning more than their parents at the age of 30 has almost halved to just 50% since 1940?