Published on 10/22/2013.
I recently got my driver’s license and I've been driving around the streets of Amman, Jordan for the past month. I honestly didn't want to get it, however I had to since there wasn't a decent public transportation system that could get me from point A to point B in an easy and timely manner. I shall discuss the benefits of public transportation and the positive spillover effects it has on an economy on a future day. For now, I want to comment on the behavior of Jordanian drivers.
I’ll start with a little “economic brainteaser”. I found this little gem online when I was searching for questions to prepare for a job interview. Consider a street connecting point A and point B (running both ways). Suppose a car accident occurred on the traffic incoming from point A going to point B. The accident has been cleared out of the traffic path and has been moved to the side of the street where it does not block the movement of cars. That is, both ways are clear of obstacles. The question asked is, why do you still observe traffic congestion on the road from A towards B, while the traffic from B to A flows smoothly?
Let’s start with the cars going from B to A (the road where the accident did not occur). Cars in this direction are able to observe the accident as they are approaching it. Thus they do not need to slow down. Each driver does this, and therefore the traffic in this direction goes unaffected. Now what about the cars going from A to B? Keep in mind that the traffic accident has been moved to the side of the road where it does not pose as an obstacle for incoming traffic.
Each driver, as they pass near the accident, slows their car down and admires the scene. Analyzing this decision economically, the driver incurs little cost (i.e. slowing down) and gains a lot by satisfying his/her curiosity regarding the accident (and as Jordanian drivers always do, start hypothesizing about the accident as if they know everything). Since the benefit outweighs the cost, the driver will slow down and stare at the accident. However, assuming all drivers behave the same way (which they do), all drivers slow down, this causes an aggregate effect in which it slows down the traffic almost to a near stop!
This is what we seek to understand. Since each driver incurs little cost (slowing down their vehicle to observe the accident), why does this behavior en masse cause traffic congestion? Well, since the private cost they incur is little (slowing down), they neglect the social cost which is larger. If all the drivers’ slow down, the traffic stops, everybody starts cursing, and suddenly everybody’s day is ruined! In this decision, the social cost is larger but ignored. Why? Because the individual decision to slow down (the private cost) doesn't affect only the driver in question, it affects all other drivers behind you – this is the social cost (i.e. the effect of you slowing down on all other drivers behind you which nobody in Jordan seems to consider!). The difference between the two is what economists call a negative externality. A negative externality is defined as a negative consequence of an economic activity that is experienced by unrelated third parties. Here, the negative externality resulting from each driver’s decision to slow down causes the traffic congestion. Next time you come across such a situation, I’m sure you’ll observe what I described.
Negative externalities occur almost with any economic activity. The most common example for this is smoking. Smokers damage non-smokers around them with second-hand smoke. When smokers smoke, they cause a negative effect (cost) onto unrelated parties (people passing by or in the vicinity). Another common example is pollution. Factories that do not behave in an environmentally responsible way emit toxins into the air as a result of their production. The factory does not account for this cost in their accounting books. But the pollution affects the nearby areas (direct pollution of water sources, acid rain, etc…). Now you could ask, what could people do to limit this activity since it hurts unrelated people? Well, economic theory suggests that in order to reduce any economic activity, you should increase its price. So if an economic activity, like smoking, is causing negative externalities (unintended damage) upon unrelated third parties, then you should artificially increase its price in order to reduce this activity.
An example explains this easily. Governments often impose taxes upon activities that incur negative externalities. Taxes on cigarettes are the most common ones. Taxes on polluting activities are another one. Taxes effectively increase the price. As a smoker, I do not care about the component of the price I pay (how much is the cost and how much is the tax) for a pack of cigarettes. All I care about is the total price I pay. The government imposes taxes on cigarettes, the price I pay for a pack of cigarettes increases, so I reduce my consumption since I have limited income and other purchasing preferences.
Now that I have explained the meaning of negative externalities and the classic way to treat them, let’s bring the discussion back to traffic issues. The drivers that I mentioned in the example cause a negative externality by slowing down. So what should we be doing? We need to increase the cost of their action in order to reduce its occurrence (and thus reduce traffic congestion). Guess what is the most popular mechanism employed in all countries of the world to solve this? Yes, I’m talking about traffic tickets. Note that I am not saying we should fine drivers for slowing down, after all it's not an offense. I am using this example to illustrate the idea of personal actions having unintended consequences onto others.
Traffic tickets serve as a classic example to remedy negative externalities. If you do not obey the traffic law, you are probably causing harm by disrupting the traffic flow, increasing the risk of accidents and/or death, among other effects. So every city in the world imposes traffic tickets to increase the ‘cost’ of bad driving behavior and thus reduce its occurrence. Think about it for yourself. If you knew that you are living in a city with perfect and all-knowing police officers, and that the ticket fee for double parking or speeding is $2 million, would you do it? Of course not (unless your Bill Gates)!
This is also the reason why different illegal driving acts are associated with different fines. For example, speeding by a mere 10 km per hour over the speed limit isn't a big offence (the cost of this action unto others is little) therefore it warrants for example a $10 fine. But speeding by 100 km over the speed limit will screw you over indefinitely (huge fine, suspension of your driving license, and maybe jail) since the negative externality of that action is huge (death of innocent pedestrians for example).
This is the logic for traffic tickets and fines. Seems fair right? But surprisingly, the Jordanian traffic police department decided to halt all issuance of tickets associated with small to medium danger during a religious holiday last week, in order for the people to save some money or whatever the damn reason is. This is what common sense calls a big mistake. Since people knew that police officers are not going to stop them, what incentive do they have to maintain the driving code? People with decent manners uphold the driving code without the need for constant patrolling of police officers to deter them. In Jordan, drivers are absolute maniacs, and anybody who drove in Amman knows this as a fact. The traffic department effectively gave them the incentive to drive even more recklessly! Evidence supports this (in Arabic)! As the example above showed, small driving mishaps occurring at the same time often cause worse effects when they occur in large numbers together!
The traffic department should do the opposite. I advocate an enormous increase on all traffic tickets and fines. Note that I am not saying we should fine drivers for slowing down, after all it's not an offense. I used that example to illustrate the idea of personal actions having unintended consequences onto others. I want the police to start enforcing the traffic code and fine people who are simply selfish! Fine people who break the code by committing selfish acts and ignore the social cost. Let more police officers roam the streets and catch all those douche bags (very interesting FB page, check it out), double parkers, speeders, and assholes and fine them with enormous amounts!
Not only could we solve our massive public debt problem, but we could enjoy a safer and saner traffic system. Since this mindset won’t fix itself, let everyone think twice before they break the driving code. Some people might say, well it's not fair for low-income households, or that what if someone just had to break the driving code for a good reason (i.e. health emergency). Other creative punishments can be put in place (Thanks to a friend for pointing this out) such as mandatory community service! It’s enough that regular Ammani’s should suffer from reckless driving behavior. It's time to stop this. This is our city, and we should seek to improve it!