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Meditating about Incentives

Posted by anandrr on January 7, 2008

traffic rules

Ever since I read Freakonomics, I’ve been big on thinking about incentives. But this picture just shows you why traffic in India is such a mess. Not a single fine over Rs 500. Most of them about Rs 100. For those of you keeping track at home, Rs 100 is what a fresh college graduate working at Google India makes in about 30 minutes of work. Let’s say at Infosys it takes her 2 hours of work. Even so this is ridiculous. Consider that traffic in Bangalore is a permanent parking lot on many main streets, breaking the law for the additional 15 minutes pays for itself very easily.

The problem here is the wide disparity in incomes. Rs 500 is actually a lot of money for most Indians. So long as we have one law for people in Bangalore as well as the rest of the state it will always be the case that huge numbers of people break the law with impunity because the punishment is so lax.

So we should follow a system like Norway where people are fined according to income and not by a fixed schedule? See the problem there is that cops are so poorly paid here. Imagine you’re a poor cop on the traffic beat. You stop a well paid software engineer for “jumping traffic signal.” The fine in the socialist system works out to be Rs 10000. So what do you do? Ticket him? Or promise to look the other way for a mere Rs 500?

So we not only need to revise the fines, we also need to start paying our cops more. Except, we can’t do that till we start levying higher fines. And so it goes.

Recently The New Yorker had this very funny article about driving in China. It reads like the author has been driving in India all along.

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One Response to “Meditating about Incentives”

  1. […] June 29, 2008 Professional economists tell us what we all already knew: Corruption is everywhere. As we’ve observed before, Indian governments are caught in a cleft stick here. The only way to solve this problem is to pay […]

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