Yesterday's post against three-wheeled auto-rickshaws, arguing for four wheels instead, elicited a host of comments, some of which inquired about the "economic argument" backing my case. After all, said one reader, an auto-rickshaw represents lower Capital costs to start a small business. Further, the rides are cheaper than taxis. Allow me to elaborate on these economic arguments in this post.
First and foremost, the auto-rickshaw does NOT represent lower Capital costs for the poor entrepreneur. Since they are licensed, and permits are hard to come by, a second-hand auto-rickshaw in New Delhi can cost around 2,50,000 rupees. This, when a second-hand modern car in reasonably good condition comes for about 80,000 rupees. In other words, if there was no licensing, the poor entrepreneur now driving an auto-rickshaw would be the owner of three taxis. If licensing was abolished, entrepreneurs would fare much better, and passengers too would get a much more comfortable ride. The RTOs are therefore destroying Capital that belongs to poor entrepreneurs. They are also guilty of depriving the consumer of quality transport services.
Second: The real "cost" of the auto-rickshaw business is the inefficient use of scarce road space. In urban areas, roads are precious Capital, and they are scarce. Therefore, they must be used efficiently. If roads had private owners, they would surely restrict the entry of vehicles that slow traffic down and disrupt road safety. In all our cities and towns, because of the profusion of auto-rickshaws, traffic has become a nightmare, impossible to regulate in any scientific manner. The costs of the auto-rickshaw's inefficiency are being transferred to other vehicle owners. Thus, there are huge "negative externalities" - as, for example, when a bus swerves into the middle lane to overtake an auto-rickshaw and every car driver has to slow down, change gears, and waste fuel as well as time.
Thus, auto-rickshaws are neither cheap, nor efficient, nor comfortable. They proliferate because of our socialist system. They are a part of the grand socialist "design" to keep the country poor. They are cheating the consumer. They are a cause of harassment to all other road users. And they are not the best option for transportation entrepreneurs either. If a poor man was allowed to use a second-hand car as a taxi, his productivity would rise, the efficiency of road use would rise, the consumer would be better off - in other words, there would be huge gains all around.
So spread the word: The socialist three-wheeled auto-rickshaw must go.
Real CARS, with four wheels, must replace them.
Our RTOs are a huge "knowledge failure" as well. All over the world, scarce urban roads are being priced for efficient usage. Our officials are causing "capital consumption" of these scarce roads. As always, our bureaucRATS display rank ignorance. Our nation is in the hands of fools.
Ever since I started reading your blog, I couldn't help but wonder that there is a certain elitist tone to your arguments. This post pretty much confirmed my suspicions. The auto is cheaper than a car anyway you cut it. Initial cost is a factor, but fuel economy, other operating costs play a major factor. Most metros now have a taxi cab, people still use the autos because it ends up being far cheaper. And yes, the capitalists control those autos too as most of them are leased to the poor drivers by their owners(who control the capital).
ReplyDeletegood one Sauvik,
ReplyDeleteclear arguments, thanks
I'm no economist, so my curiosity on this topic comes from a general perspective. Despite your patient explaining, forgive me if I say that I still get a sense that here the economic math is being manipulated to fit a decided outcome. This would be harmless if your blog were prone to grumpy rants rather than coherent arguments with a clear logical audit trail — happily this is not the case, which is why I dwell on the post in question.
ReplyDeleteI don't live in India, so I'm happy to accept as a given that auto-rickshaws are A Bad Thing in terms of subjective annoyance. (I dislike small buzzing vehicles myself.) However, a few months ago I was in Thailand where the auto-rickshaw appears to play an important role in the domestic and tourist ecosystem, acting variously as a lower cost-per-mile transport mechanism than car-taxis (for use by locals and tourists alike), and as a tourist attraction in its own right! So I'm curious about any reasoning that appears to consign these little machines to the dustbin of history: from my ignorant perspective, I'd have thought that these ingenious transports exemplified capitalist, entrepreneurial principles bubbling up like irresistible primordial life from the most deprived echelons. Influencing this impression are recent memories of the bustling, unorthodox genius on display in places like Thailand, where you'll find a whole public transport industry based on crude wooden boats with 3rd-hand auto engines harnessed to steerable rudder-propshaft-propeller mechanisms, all understandable and maintainable by the owner-driver. Using your math, I would find it hard to understand how ripping these home-brew craft from their owners' greasy hands, and requiring them to purchase more complex watercraft which arguably might have higher costs per mile and cost of ownership, should be seen as A Good Thing.
I'm also intrigued by the implicit suggestion that Economics could write equations of such depth and precision that one of the variables would be the number of wheels on public transport vehicles ;-) Your recent posts on economics-as-a-science (which also troubled me somewhat) are pertinent here.
As for details: your para 2 appears to compare the cost of licensed auto-rickshaws with an unlicensed 4-wheeled car. Apologies if I got that wrong… are we comparing like with like here?
No mischief intended in these observations. I like the ideas expressed in this blog and occasionally like to prod them with a curious finger to see what they're made of.
anonymous:why would you not support horses and buggys then? cheaper than tuktuks.the question is does anyone want "more of a bad" given a choice.
ReplyDeletein a freer market,the tut tuk would be eliminated.the higher productive,cheaper,comfortable cars will win over the outmoded tuktuks anyday.
ofcourse,tuktuks can continue to exist as anachronistic oddities to entertain tourists like yourselves.
ps:tuktuks are cheaper because they happily externalize the cost of pollution -they are the worst polluters on indian roads after 15 yr old tata trucks
Dsylexic: Not sure the issue is what I do or do not support. It's more a case of what behaviours spontaneously emerge in any complex system, and whether intervention is desirable and practicable (particularly given the laissez-faire mindset of the Austrian school).
ReplyDeleteDsylexic: Not sure the issue is what I do or do not support. It's more a case of what behaviours spontaneously emerge in any complex system, and whether intervention is desirable and practicable (particularly given the laissez-faire mindset of the Austrian school).
ReplyDeleteSauvik,
ReplyDeleteI have to respectfully disagree with your economic arguments here. Let me elaborate:
1. Auto price is artificially high because of the licensing mechanism. But the same mechanism will also increase the price of 4 wheelers which will turn into taxis. You have to compare both prices either with licensing or without. You can't pick and choose where to consider the ill effects of licensing. All in all, three wheelers are less expensive than cars that could be used to substitute those three wheelers for carrying passengers.
2. I am not sure if your efficiency argument holds water either. 3 wheelers typically can carry 4 people in all, while cars can carry 5 (notwithstanding cramming, in which case all bets are off). The space occupied by even a reasonable sized car is much bigger (I would venture at least 50%) than that of an auto. So, on a per unit volume of the road occupies basis, 3 wheelers are more effecient. They also provide higher mileage than cars do. Also, we need to understand what % of the rides are at full capacity. If there is a couple that needs transportation, a 4 wheeler is indeed more inefficient use of limited road space. 3 wheelers are clearly a better choice.
3. I completely agree that the odd sizing of three wheelers do impose some problems for efficient traffic management. But I am sure the science can be extrapolated to find efficient solutions to accommodate certain percentage of 2 and 3 wheelers in the mix. I think the problem is that our transportation experts have demonstrated no intention to do this. The scientific traffic solutions that work in developed nations and cities need not be used directly in an Indian context. Indeed, many cities have semi-successfully tried separate lanes for 2/3 wheelers.
Now, cars are surely more comfortable as a ride than autos, but the market can clear out the preference through pricing.
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