Why Uber/Ola is Nehruvian

According to Ramachandra Guha’s India After Gandhi, the ostensible reason for India adopting a statist/socialist/planned approach was the scarcity of capital.

With capital being scarce in the newly independent country, Jawaharlal Nehru had reasoned that in order for the country to develop, whatever capital existed had to be deployed in the most productive manner possible. A free market for capital would end up deploying capital where it wasn’t required the most, denying more critical sectors of capital. A planned economy, on the other hand, would result in more efficient usage of capital.

While India has developed significantly in the 70 years since independence, it is still not completely out of the woods. Poverty remains high and India’s per capita income is at the lower end of the spectrum. Thus, while capital may not be as scarce a resource as it was in 1950, effective deployment of capital is still necessary to ensure India’s continued economic growth.

From this perspective, think of the car. When at rest, it is adding no economic value apart from making itself available to its owner (and its owner alone) at a point of time when the latter needs it. From this perspective, the economic value that the parked car adds is almost entirely in terms of “option value”.

A parked car also consumes valuable economic resources, with the most important being the real estate it stands on. This particular resource is so important that it forms an important form of urban regulation in most markets (a building or a business needs to have a certain minimum number of parking spaces and so on).

Moreover, the two common axes on which the value of a car is evaluated are age and distance travelled. Considering that the car adds economic value only in terms of the latter – when it helps transport someone, depreciation of the car in terms of age is entirely uncompensated. On this account, too, a parked car is a dead weight loss.

It is not hard to see, thus, that a parked car is an enormous waste of capital; capital that an emerging economy such as India could very well utilise elsewhere. Yet, the large number of cars in the country that are standing still at any point in time show that despite being an overall inefficient use of capital, a large number of people value the inbuilt option value.

Back in the time when Nehru had his way, he had solved the problem in his own unique way – by limiting the number of cars that could be manufactured and sold in the country, which automatically put a limit on the number of parked cars. In this technologically advanced day and age, however, we don’t need such drastic measures.

All we need is a restructuring of economic incentives such that the option value of a parked car goes down. And what better incentive than to provide the option to summon a car on demand? While this summoned car might have a higher marginal cost per trip than an owned car, taken in aggregate it leads to a significantly lower cost.

Thus, the Nehruvian answer to the inefficient capital wasted in parked cars would be to encourage services that allow you to summon a car on demand. In other words, services such as Uber and Ola fulfil a Nehruvian objective by freeing up capital that was being earlier wasted in parked cars. There is data to show that such services have resulted in a decline in growth of car ownership.

Given that Uber and Ola follow the Nehruvian ideal of reducing wasteful capital, it is baffling that the government in Karnataka, which belongs to the Congress party which is based on Nehruvian ideals, or the government in Delhi, headed by the Nehruvian Arvind Kejriwal, were to campaign to clamp down on such Nehruvian services.

There might be some tremors under Shanti Van.

Car Ownership

People, especially in the US, make a big deal about home ownership. In fact a large part of the current economic meltdown has its roots in the American craze for home ownership. Fannie and Freddie were created to help home loans become cheaper, then there was the CDO wave. Then came subprime. NINJA (no income no job amortized). All that. Boom. Bust. Jai.

A related concept that no one seems to talk about is car ownership. They say that the safety of a neighbourhood goes up if the proportion of owner-occupied homes goes up. And this is the underlying theory behind most of the home ownership craze.

|||ly, road safety is directly proportional to the proportion of owner-driven vehicles on the road. Take Bangalore for example. Till the late 90s, the traffic there was excellent and well-behaved. Some roads were already clogged, yes. But drivers were in general very well behaved. And the reason behind that was that most people owned their bikes and cars. They had a greater incentive to make sure that there was no damage done to their vehicles nad drove more carefully.

Yes, personal safety also plays an impact and is independent of whose vehicle the driver is driving, but I think in the progression of severity of accidents, vehicle safety gets compromised before personal safety. In other words, there is a one-way implication here – if you drive keeping in mind the aim of not damaging your vehicle, it is more likely that you are not going to get injured. The reverse doesn’t necessarily hold. And that is why car ownership is so important.

So what happened in Bangalore in the early 2000s when traffic suddenly became horrible? This thing called BPO happened, which brought with it the mostly chauffeur-driven taxis. Now, on one hand, these guys had perverse incentives as their efficiency was measured on the speed from which they got from point A to point B. Apart from this, most of them were not driving their own vehicles (this was a departure from the earlier wave of taxis and autos, most of which were owner-driven) and so they didn’t care so much about damaging their vehicles, which led them to drive more rashly.

Similar is the case with Delhi, which is known to have always had horrible traffic. Being the political capital, Delhi has always had a reasonably high proportion of chauffeur-driven cars. Which is why, for a long time, its roads have been known to be rasher than roads in other cities. And things still haven’t improved.

The thing with car ownership is that it forms a positive-feedback loop. Suppose the number of chauffeur-driven cars goes up. Then, the traffic in general becomes more rasher. And driving becomes more of a headache for you. Which increases your incentive to employ someone to drive your car. Which further pushes up the proportion of chauffeur-driven cars. This is what has happened in Delhi over the last 50 years. This is what has happened in Bangalore over the last 10 years.

In order to make our streets safer, we need to incentivize people to drive their own cars and bikes (one clarification – by own, I mean either your own or something that belongs to close family or friends; in both cases, incentive to keep vehicle safe is high). If I’m not wrong, people can claim tax exemption against the salaries they pay their driver. This needs to go first. Next, insurance companies need to have different levels of payout for self-driven and driver-driven accidents (I know this is going to be hard to be implement).

Yes, this might increase unemployment since driving other people’s vehicles is a major occupation nowadays. But is greater unemployment too high a price in order to ensure greater safety? (ok I can quickly think of one counterargument for this – if people become unemployed, the chances they’ll become goons rises, which makes society in general less safe)

Sit down behind the wheel, and be counted. Say no to drivers. Drive your own car. It is in your own, your car’s , other people’s and other people’s cars’ interest. You don’t need to be driven. You need to be in the driver’s seat.

Search Phrases – February 2009

I don’t plan to make this a monthly feature, but will write this whenever I find enough funny search phrases to make a post on  them worth it. Googlers and google seem to have had a field day this month,

The top search phrase that has led to my blog is of course “noenthuda“. In second place is the fairly boring “blog.noenthuda.com” .  Third place is extremely interesting – top reasons marriage engagements break in pakistan. And I’ve got over 50 people who have searched for this phrase in the last month and then landed up at my blog! Now it makes me wonder what the top reasons are for marriage engagements breaking in pakistan.

Here are a few other gems from the month gone by.

  • gay in iimb (17 hits)
  • 3-letter word for pertinent
  • aunties in chickballapur (chickballapur is my father’s native place, for the record; it is famous for its extremely spicy chillies)
  • best english speaking course in north india
  • can we put the shoes and chappals near the entrance of the house
  • cricketers animal names
  • funny message for my cousin who wants to move back to bangalore
  • i am working in singapore what do i need to do to buy a car in delhi
  • i don’t know how to speak english but i know hindi can i work in delhi
  • iimb course to be on your own
  • job interview edition on savitabhabhi.com
  • karwar muslims
  • matha amritha, things she does
  • number of north indians settled in south india
  • societal influence on a bastard child
  • the true story of a man who learnt fluent spoken english
  • which indian breakfast item can be made with bread?

Ok that has been a very long list indeed. Much longer than I intended it to be. But it only reflects the brilliance of googlers and google in the last one month.

Re-run of an old story

It’s been a strange evening. Maybe it’s the first time in a long time that I’ve left office really early, without a definite plan. My evening has followed approximately this kind of a pattern – nostalgia, delirium, nostalgia again, sadness (because Anand lost), yet another bout of delirum followed by yet another bout of nostalgia; then the inevitable full-blown NED, followed by declaration of NED, and then a long storytelling session.

I don’t write much fiction. In fact, I think I’ve written not more than two short stories in my entire adult writing career. There have been a number of other projects that I’ve started, but most have been stillborn. When I write fiction, my method of choice is what can be called in Digital Signal Processing (DSP) terminology as “sampling and interpolation”.

My memory is organized in a way that it mostly remembers snapshots. Usually in pictorial form. When I try to remember a certain incident, I remember it as something like a slide show. A series of images flash in my head. They are usually enough to tell the story, but not enough for the story to sound complete to a second person. Hence, I will need to supplement these pictuers with commentary. It’s like drawing a line through a set of points. Interpolation. It’s late in the night and I don’t want to get technical, but I suppose you perfectly understand what I’m talking about if you know DSP.

I revisited one of the two short stories a week back, and was horrified as to how badly it was written. This was written some four years back, within the first year of my writing career. And when I had written it, I had thought I had written a masterpiece. Now it seems all so juvenile, and cliched, and definitely not something I would be proud of.

After the storytelling session an hour back, I found reason to revisit the other short story that I’ve written. I’m not perfectly happy with it – I still think it needs a lot of polishing, but I like the basic construct. I like the way I’ve structured this story. Maybe two years down the line I’ll find this to be crappy too, but right now I still like it. I want to re-run it here for the benefit of readers who have started reading my blog in the last two years. As for the rest of you, I still think it’s woth it if you would read this story again. It’s fairly good, trust me.

I begin: (story behind the fold)

Continue reading “Re-run of an old story”