Traffic Regulations for Pedestrians?

Appears that some of the powers-that-be in London want to regulate pedestrian traffic on Oxford Street in West End, London. 
http://marketplace.publicradio.org/display/web/2010/11/05/pm-slow-and-fast-lanes-for-pedestrians-of-oxford-street/
http://www.thisislondon.co.uk/standard/article-23859833-divided-pavements-would-put-the-tourists-into-slow-lanes.do

This one surely has to fall in the class of problems that have low returns/economic impact and yet tend to occupy the public sphere of debate. However:
1. It is entirely sensible from a pure economic theory point of view - the same constrained resource (footpath) is being demanded by two sets of agents - one is the dawdling shopper and the second is the busy worker bee. Since the demand from the resource is different (the former wants to have a good-time window-shopping and/or shopping; the latter wants to cover the distance as rapidly as possible), it is only sensible that a solution to this problem be attempted.
2. While dividing the footpath into fast/slow lanes sounds sensible, there is an obvious issue of enforcement. It is a bit like designating a minimum speed by lane on a highway and penalizing anyone who violates this rule. It is close to impossible to implement.


Finally, two things stand out:
1. Similar rules have had some success on roads for vehicles (differential tolls by lane/dedicated car-pool lanes etc) - however, given the whole sensitivities involved in a plebeian activity like walking, the hackles are up immediately when there is any mention of 'segregating' pedestrians. Although the underlying economic logic is exactly the same in both scenarios.
2. One continues to marvel at the dogged attempts by the state machinery to put in regulations that are pretty much un-enforceable !

The Economics of Parking

The apartment complex where I live comes with limited parking slots. A little over 2 years after the complex was built, it has filled up with close to 100% occupancy. And as usually happens in such cases, the demand for car parking has outstripped the supply. And as usually happens in such cases, the only way to address this problem is to introduce a price mechanism that would bring demand and supply in alignment. Since each apartment comes with a parking lot, the problem is with the 2nd car syndrome, increasingly common in most affluent urban households. This clearly opens up a 'market' for a 2nd parking lot.

1. There is a space constraint (street parking is ruled out in our neighborhood) - in other words, supply is constrained and cannot expand infinitely to meet the demand. This is generally true since parking supply is highly inelastic (it takes a very long time to add new parking spaces and conversely, once added it is practically impossible to re-use the parking spot for some other purpose).
2. Where the price mechanism can be regulated by a voluntary residents' association, it is very difficult to agree to a sensible pricing strategy.
3. Residents and guests end up going after the same supply of parking lots. Resident parking demand is very, very inelastic. Once a resident has chosen to buy a 2nd car, her demand for a parking slot becomes completely inelastic - in other words, she will be forced to pay irrespective of the fare demanded. And this amount, theoretically, could go up to a point where it becomes viable for the resident to park her car at some other location and pay her way back to the complex!
4. On the other hand, guest parking is relatively more elastic - as parking becomes difficult, the residents can even ask guests not to bring their cars. Obviously, the feedback loops are not perfect here, which in turn impedes the elasticity.

While #1 would automatically posit that a variable pricing mechanism where the price is dynamically determined by the demand with the marginal price for each additional parking slot keeps on increasing, the obvious constraint to that would be #2 which makes any price structure that looks remotely exploitative difficult to implement.

So, what is the way out?

1. Obviously, paid parking is the way to go. The challenge is to improve elasticity of both demand and supply to the point where the market mechanism can take care of the problem dynamically.
2. While it is ideal to have a dynamic pricing mechanism, implementation issues will force a fixed pricing mechanism.
3. The price itself should be revised as frequently as possible to align demand and supply. If nothing else, this would control demand for parking from guests.

The topic of the economics of parking has been studied extensively - two interesting articles:
Recent article by Tyler Cowen in NYT and a more scholarly, yet very interesting, paper on the economics of parking in Chicago around the Cubs stadium during the games - where there is high, relatively inelastic demand for short bursts (during the season home-games) in a highly constrained supply environment

Fare Dodgers!

This one is pretty creative. A group of people in Paris are trying to institutionalize the age-old practice of fare dodging (once the exclusive preserve of students ...).

http://www.timesonline.co.uk/tol/news/world/europe/article7115236.ece

Under the guise of a very specious argument that public transport ought to be a pure public good (i.e. the state should provide this for free), they are promoting the idea of dodging fares on the Paris metro. They even have an 'insurance fund' in place as a risk pooling mechanism. I wonder if the ever-enterprising Mumbai local train commuters figured this model out ...

To begin with, public transport is clearly not a public good - given the simple fact that there is always a shortage of availability of good public transport in any city (and certainly a city of the size of Paris), there needs to exist a price mechanism to ensure that the demand is controlled to align with the supply. Which itself may sound paradoxical, given that one of the goals of public transport is to offer a low-cost alternative to people. So long as the cost of public transport is lower than any other means of private transport at the margin, it will always remain the more effective mode of transport. And once you add up all the other negative externalities that transportation creates (pollution, global warming, oil dependency et al), public transport wins hands down as a public utility.

Giving it away for free will create an administrative headache of managing the demand, which will almost certainly outstrip supply -hence the need for a price mechanism. And so, if there is a city where the supply of transport far exceeds the demand, there may be a case for the state to subsidize a large part (if not the complete) cost of public transport.

How much is a tiger worth?

Went to Kabini (Nagarhole National Park in South Karnataka) last week. This National Park is one of the largest tiger sanctuaries in India. And given the ongoing "Save the Tiger" campaign, there was naturally a lot of talk about this among the visitors to the Park. Everyone felt that we must do 'everything that it takes' to ensure that we don't wipe out the species.
Which got me wondering - how much should we (as a country) be spending on this exercise? In other words, how much is a tiger worth? The rational economist would first try to put a number on a tiger's worth and then multiply it by the desired increase in the tiger population - and if the cost of doing this is less than this value, then it is a worthwhile investment.
Makes sense - but leads to an obvious question: how do you go about measuring a tiger's worth? Now extending this argument - how do you measure anything that cannot have a market (say, a beautiful scenery, a sunset etc)? This is, by the way, not merely an academic question: it has practical implications. For instance - if a mining company wanted to dig up a hillside, how much should they be made to compensate for the loss in quality of life for everyone who would otherwise enjoy the view? Similarly, in a developing country like ours which is resource constrained, any expenditure on 'Save the Tiger' campaign is money taken away from some other deserving social programs.
After some trawling on the internet, it emerged that there is an obscure area in economics which deals with these exact situations and it goes by the name of "Contingent Valuation". Some interesting leads:
http://www.ecosystemvaluation.org/contingent_valuation.htm
http://www.ecosystemvaluation.org/contingent_valuation.htm

One thing that is obvious as you read through this is that this can be highly subjective - perhaps naturally (!) since there is a huge sphere of human activity that is beyond the confines of the domain of revealed preferences (i.e. where a need or want is expressed through the price mechanism) and in the domain of stated preferences - which is why we take pleasure in watching a beautiful sunset or the lush green countryside but abhor the idea of putting a price to these experiences. Talking of such experiences - try the train ride on the Bangalore-Mangalore route. This has recently been upgraded to a broad gauge and the stretch between Sakleshpur and Subrahmanya Road through the Western Ghats is breathtaking (esp. in the monsoons). I am pretty sure that in pure economic terms, this is an investment that the Railways will never recover - but then the ride itself is, well, worth it!

The economics of taxi/auto markets

Slightly dated post - but goes to show that this is an interesting topic.
http://www.marginalrevolution.com/marginalrevolution/2010/04/are-taxicabs-allocated-optimally.html

The next big question that is intriguing is that of pre-paid autos. Are they efficient - both from the demand and supply point of view? If that be so, then why not create multiple such hubs around the city? I suspect that they may not be an efficient as it sounds. Food for thought ...

Trashing behavioural Economics?

http://www.nytimes.com/2010/07/15/opinion/15loewenstein.html?_r=2

Gods in the stock markets?

We are now bent upon taking the concept of divine intervention to a new level.

http://timesofindia.indiatimes.com/Biz/India-Business/Trust-moves-HC-seeking-demat-accounts-for-Hindu-deities/articleshow/6159083.cms