Phd economists talk a lot about reforms in their respective fields. How about reforming the source of their learning – their Phd Program?
Archive for May 5th, 2010
- Dallas Fed’s US Economy Update and International Economy Update
- James Kwak shows Financial Sector excesses in 4 graphs (HT: Urbanomics)
- IMF Blog discusses Does Cheap Foreign Money Bring Risks for Latin America?
- Excellent interview of Raj Chetty who discusses his work (HT: Urbanomics). This is a must read. He is doing superb work on taxation and policy.
Most auto-rikshaw/taxi drivers in Mumbai end up wasting too much fuel on traffic signals. I don’t know if other cities also have such auto/taxis. The meter keeps running while engine is on. This incentivises the drivers to keep the machine on just to get more fare from the commuter. On telling them to switch off their engines, most refuse and are ready to argue.
)Why have this rule of keeping the meter running in traffic signals? I could think of two reasons.
- First, compensate auto-rikshaw/taxi drivers on the time they waste in these signals/jams (but so do commuters).
- Second, it could be like a tax charged so that commuters don’t take already burdened busy roads during peak hours. So, if you have urgent work, pay up or else don’t take these busy routes.
Whatever the reason, wasting fuel is a huge cost. Add pollution etc to it as well. The current system provides incentives for wastage.
The government/regulators should pass orders to redo these meters. It could also levy stiff penalties on drivers for keeping their engines on during traffic signals/jams.
Could there be some kind of nudge to prevent this wastage? Say an additional indicator on the dashboard signaling how much fuel is being wasted while keeping engine on during jams. Or another indicator asking them to switch off engines after some time. I don’t know but something can be done. But this could be costly and can be done in new versions.
For the old ones, some changes are required. High time to act on this.
Stephen LeRoy a visiting scholar at FRBSF gives this issue a historic perspective. Starts from Adam Smith and how Pareto gave it Smith’s ideas a more precise framework. He follows it up with contributions by Debreu, Arrow and Hayek.
The single most important proposition in economic theory, first stated by Adam Smith, is that competitive markets do a good job allocating resources. Vilfredo Pareto’s later formulation was more precise than Smith’s, and also highlighted the dependence of Smith’s proposition on assumptions that may not be satisfied in the real world. The financial crisis has spurred a debate about the proper balance between markets and government and prompted some scholars to question whether the conditions assumed by Smith and Pareto are accurate for modern economies.