Friday, July 14, 2006

German football and traffic chaos in India

As an outsider who's lived in Munich for the better part of four years, the sight of the normally taciturn Germans letting their hair down to celebrate their team's success in the World Cup was heart-warming. Leopoldstrasse in Schwabing, not far from where I live, was the centre of celebrations in Munich with much flag-waving and revelry following a German win.

So what, might you think, does this have to do with India's traffic problems? Well, for about four hours after the conclusion of the game, central Munich became a traffic free-for-all. There was no light-jumping (after all, we are talking about the Germans here - who will wait at pedestrian traffic lights at 2am) but plenty of joyous horn-tooting, the kind of which would land a person in serious trouble with the Polizei at any other time of the year. However, during that time, the police turned a blind eye - and the resulting noise would have rivalled ITO during rush hour on any given day.

The first law of economics according to Prof. Mankiw is: people respond to incentives. If I blow my horn or jump a red light in Germany, I can reckon with a pretty hefty fine and loss of driving privileges. If I continue to drive regardless and am caught, I will be a guest of the German government. Hence I have a pretty good incentive to obey traffic rules.

In India on the other hand, I can jump a light, honk at anyone I want, drive drunk, and if I happen to be a "celebrity" (or just rich enough), I can even run over people without fearing for the consequences. If I am caught I know I can pay my way out of trouble without denting my wallet too much. Hence my incentive to follow the traffic rules is pretty low. If everyone knows this and thinks like me, everyone will break the rules - resulting in chaos for all.

So what could be the solution? Simple - create enough disincentives for people breaking the rules. Impose stiff fines for traffic infringements. Cut out the middleman (the traffic police) by investing in cameras at junctions - they should pay back soon enough.

Will this happen? The first may, the second definitely won't. Again all to do with incentives - the first measure in the absence of the second will increase the potential earnings of the traffic police (since the heavier the fines, the more inclined I will be to pay off the cop). The second measure will wipe out these earnings - and who would willingly agree to do something which would reduce his income?

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