Thomas Wipperman and Timothy Sowula have a paper that’s available on Drishtipat blog that proposes to “raise the social and economic status” of rickshaw pullers through the nationalization of the rickshaw industry. Like others who have commented on Tim’s post and paper on DP Blog and elsewhere , I think the effort needs to be commended. The thoughts that motivate the piece - that rickshaw pullers deserve better, both from the State and society at large, and that rickshaws can play a larger role in our thinking about an effective transportation strategy for Dhaka - are ones that I agree with wholeheartedly.

There is however little else in the proposal that I do agree with. I think it’s fundamentally wrong-headed.

Consider the operational heart of the proposal - Tom and Tim’s token system. (Nifty diagram on Page 26.) Tokens are picked up by customers at shops. They are used to pay fares The fare, as Tom and Tim would prefer it, would be based on time. The tokens are redeemed by the rickshaw puller periodically for a wage, with a minimum wage guaranteed. And this (page 19):

However, this would be monitored to ensure that some rickshaw pullers are not making extra money whilst other rickshaw pullers can not fulfil their contracted requirements. Should their be a large surplus of demand, or not enough demand in an area, the base levels of capital flowing through the system could be adjusted to reflect this. However, unless a puller grossly and continually underperforms, a base rate of 100 BDT per day would remain guaranteed.

How exactly such “monitoring” would happen is unclear. How exactly the “flow of capital” or excess supply and demand (what do we mean by “excess” supply and demand), would be noted is unclear. Such questions are at the heart of why a centralized, nationalized system like the one proposed by Tom and Tim doesn’t work in practice. They would have done well to remember their Hayek.

(And btw, why are T&T basically proposing to punish the rickshaw puller who by dint of his perseverence, intelligence and luck consistently brings in a higher income than others? I have a fundamental philosophical problem with T&T’s position on this.)

Think a little bit also about how this sort of thing would work in practice. Think a little bit about various incentives at play:

1. Let’s assume for a little bit that everything runs perfectly. If the fare is based entirely upon time the incentive of the rickshaw puller would be to drive as slowly as possible. This is a mere quibble, for I guess however we could easily adjust T&T’s proposal so that the fare would be based on some combination of time and distance mimicking what rickshaw pullers are already doing.  I doubt if you were adding the cost of metering the rickshaws the implementation costs would remain as rosy as T&T make them out to be. But laying that aside - it’s also the case that metering would not make the rickshaw-pullers better off in the short and long run. For in the short-run, rickshaw-pullers would lose their ability to price discriminate for customers. For example, let’s say we’re talking about a client taller and heavier than the average 5′5” Bangladeshi client - for this example (and only for this example, mind you, on the “heavy” bit) let’s say Saif’s visiting Dhaka and wants to go from his dear Nani’s house to his lovely Fupu’s house. It’s clear that the rickshaw-puller is not better off when he can’t get Saif to pay a weight surcharge ’cause the freakin’ meter won’t let him. I guess we could adjust the proposal so that the rickshaw-puller could take all sorts of surcharges for all sorts of things over and above the actual fare that the meter reads. Why are we bothering with tokens and meters and whatnot then?

The problem with set prices in the longer run is that they don’t adjust with the rest of the economy. I guess you could index the token prices to inflation. It’s questionable whether the inflation indices you choose are appropriate. And then there’s the political economy problem with the whole thing which will be clear from 3, below.

Oh btw - T&T’s 2 BDT a minute estimate is a gross overestimate. It’s sad, but it’s true.

2. Now let’s make our models a little bit more realistic. The setup that T&T have given us is this: You’re guaranteed a certain income unless you consistently underperform. You get paid by the number of token’s you bring on payday. Given this setup, the following will likely happen:
* Individual rickshaw-pullers over time will figure out what the “underperform” level is. Once they’ve figured it out, they’ll offer services for tokens only upto the point where they’ve reached the required performance level. Once they’ve reached the performance level - they’ll offer their services only for cash. If you’ve unsuccessfully tried to get a rickshaw at 1 PM in Motijheel, you’ll know why customers would agree to p(l)ay along.

* If they have an excess of tokens over the performance level, they will sell these excess tokens for cash in some kind of secondary market for tokens, which I guarantee you, will exist. They will likely make more than the redemption value of the tokens in the secondary market.

* Rickshaw-pullers who are below the performance level will purchase tokens from these secondary markets. The purchase price will be much higher than the redemption value of the tokens. Depending on the size of the secondary market (among other factors), a good portion of the guaranteed income for underperforming rickshaw pullers may go into paying the premium for purchasing secondary market tokens.

* It is likely that secondary market operators, as well as the initial distributors of the tokens, will partake in substantial hoarding of tokens.

I can go on.

3.  Nationalizing something like the rickshaw industry is a demagogue’s wet dream. Think about the kind of power that the governing party in a system like ours would be able to wield if the rickshaw system were nationalized. Want to be able to earn a living from the occupation that has historically been one of the only few sources of income available? You can - but only if you support my party. Want to be sure that you’re tokens will be redeemed next month? You may - but only if you promise to vote for me in the elections. Want to get a BDT 100 a day guaranteed income? You may - but make sure you pay my guy some chaanda first, and be sure to be at my next rally. This time, I won’t even pay you or for your transportation as I usually do for “supporters”.

People, we don’t need more government. I am not a knee-jerk anti-government reactionary, I’m not. This is an underappreciated point that people need to realize: the Bangladeshi State - and the politics of controlling it - is involved in too much of the economic life of our people.  And the point is worth making that this is more than about money and cash-flow. It’s about freedom. There’s something inherently wrong with a system where a student knows that she can’t get a well-deserved first class in university because her father supports the wrong party. There’s something inherently wrong with a system where a clerk can only get and keep his job by doing obeisance to some slimy politician’s slimier PS. Yes, our rickshaw pullers are getting the short-end of the stick with the system as it is - and I agree completely with T&T this just isn’t right. But nationalizing the rickshaw industry will only destroy one of the few sources of income for our brothers uprooted from the countryside by the evil that men often do and the misfortune that nature often inflicts. And while it does so, it will place them at the mercy of greedy men who have little time or heart for compassion.