Tag: divider

The Lingaraj Effect and Financial Regulation

Lingaraj was a driver who used to work for my father. He had a unique way of dealing with traffic jams on two-lane roads without a divider down the middle. He would instinctively swing the ambassador into the right lane – meant for traffic in the opposite direction (the jam ahead meant there was little traffic flow in that direction).

I remember both my father and I abusing him (Lingaraj) for this method which would only make the jam worse. However, he would persist. And we soon found that he wasn’t unique in his methods. It is the favoured method of most Bangalore drivers. Thus, whenever there is a minor jam somewhere, thousands of Lingarajs clog the “return lane” in all directions, and end up making it worse.

The funny thing about Lingaraj’s method was that it was “too big to fail”. Having switched to the right lane, we would progress much faster (till the site of the jam, of course) than our law-abiding brethren stuck in the left lane. There, someone who had taken responsibility of clearing the jam (not necessarily a cop) would realize that a necessary condition to clear the jam was to get our ambassador out of the right lane. And we would be given passage to shift to the left lane, and past the jam site, much ahead of those suckers who stuck to the law.

For drivers like Lingaraj, moving to the right lane in the wake of a jam is seen as “arbitrage”. And a necessary condition for it to be an arbitrage is that the offending vehicle is “too big to fail”, as I mentioned earlier. And given that in Bangalore, measures like traffic tickets sent by post aren’t that effective, this continues to be an arbitrage, and hence you still see so many drivers use this “method”.

While stuck in a traffic jam like that one last weekend (I was driving, and I consider myself socially responsible so stuck to the left lane), I realized how similar this was to the financial crisis of three years ago.

Traders noticed an “arbitrage” that didn’t really exist (namely, some AAA rated bonds traded at higher yields than other AAA rated bonds) and proceeded to trade on it. When they got into trouble the regulators realized that they had to be bailed out in order to clear the larger mess. The resemblance is uncanny.

So what should the regulators have done? Basically, drivers should’ve been prevented from getting to the right lane in the first place. Then there would have been no requirement to bail them out. In some places, this is done by installing road dividers, but in my experience I’ve seen that doesn’t help, too. People use whatever gaps are available in the divider to go to the right lane, and contribute to the jam.

The only option I can think of is some variation of postal tickets – having bailed out the drivers for going to the right lane, they need to be made to pay for it. Yeah, postal tickets (sending tickets by post for traffic violations) may not be effective, but that seems like the best we can do to regulate this problem. The upshot is that once we figure out how to solve this problem on the road, we can extend the solution to financial regulation, too!

Traffic signal policy

Is it fair on the part of the city government to direct people’s choices of routes by imposing a suboptimal timing plan on a traffic signal? Or is the government supposed to respond to demand and design the signals looking at the traffic in various directions? Which is supposed to lead which? Which is the hen and which is the egg?

Yesterday I passsed the airport road – victoria road T-junction on the way to office and noticed that the average perceived waiting time on the Victoria road side was significantly higher compared to that of the two branches of the Airport Road meeting there, which was clearly inefficient. Though it is very likely that it has come about because of a generally poor design of the signal, it could also be by design – because the government wants to disincentivize people from using that route.

Given that we are not yet at the libertarian ideal of  “private roads for everyone”, in most municipal regions, the government has the responsibility to build and maintain roads. And given constraints such as the Braess’s Paradox, occasionally it might actually make sense for the government to occasionally direct traffic, rather than leaving it for a free-for-all. I suppose efforts such as converting roads into one-ways are in the same direction.

So given that the government has the monopoly to “give” roads, does it have the right to “take” away roads? If it does, it means that it is effectively trying to control how and where people move. Isn’t that against stuff like freedom of movement? It’s kinda scary.

But if the government doens’t have the right to “take away” roads, what happens to stuff like one way roads, etc.? After all, when you make a road one way, you are imposing a higher cost on certain people (who are willing to brave the heavier traffic in order to move in the “opposite” direction so that the total cost to society at large goes down. Sinilarly, when you put a road divider, you cut off access to certain intersections which would have been very convenient for some people in the larger interest.

So does an elegant solution exist to this problem, assuming that we cannot put tolls on all roads? In principle, putting tolls on roads is fair because we are already taking toll from motorists in non-monetary ways – such as by not maintaining the road, or by subjecting them to too many intersections, or by allowing so many vehicles on the road that reduces the speed of the road. Given all these costs that are imposed on motorists, monetizing them is not tough in principle.

However, politically it is a huge issue and is unlikely to happen for several years to come. In this context, does there exist an elegant solution to traffic management and regulations, that can compensate for inconvenience caused to people in the name of interest of the society-at-large?