A Different Economic Perspective on Traffic
On his New York Times Freakonomics blog, Steve Levitt discusses “profits” and government intervention in the scope of people cutting in line in traffic. If an aggressive driver cuts in line on the road, social welfare is reduced, as people entering the ramp (or wherever) feel unequal costs and subsequently will not allocate themselves efficiently. Levitt concludes that police officers should concentrate their efforts to dissuade such behavior instead of, for instance, speeding, since the latter’s social cost is far less.
Levitt’s argument, technically, is really that line-cutting is rent-seeking and that speeding is profit-seeking. Not to be confused with what you pay for your apartment, “rent” is the term economists use to differentiate unjust gain from profit, which is no more than the financial return one can expect to get given the costs involved. In contrast, rent is the result of government intervention (for example, protectionism), market power, or criminal action. When a pickpocket steals your credit card, her gain is rent. When a firm increases its profits by keeping out foreign competition or receiving subsidies, its gain is rent. Finally, as Levvitt points out, when someone cuts you in line, what he gains is rent.
The most apt metaphor in intuitively understanding the difference between rent-seeking and profit-seeking behavior is to consider all the available goods in the economy as a pie. Profit-seeking behavior desires a larger proportion of the pie, but in doing so, also makes the pie bigger. New technologies and other cost-cutting measures perform such an action. Rent-seeking activities take that larger slice of the pie while making the pie smaller or leaving it the same size. Levitt assumes that the jerks who knowingly disregard those waiting in line do not make the pie bigger. Theirs is a zero-sum action, or that their gain in cutting is canceled out by the loss from everyone else.
Levitt’s other assumption, that speeding is profit-seeking, is enlightening. It calls into question the very structure of the traffic laws of western nations. If it’s five AM and you’re shooting down the interstate at 85 miles per hour, there is very little chance that you’ll hit someone. There is a benefit to driving at a higher speed, and if our assumption is utility maximization, one must balance the loss of life against time savings. Obviously, there is already a certain degree of balancing involved, as otherwise speed limits would be even lower. In any case, speeding in good weather with few others on the road seems intuitively to increase the size of the pie rather than a zero-sum action. Cops should eliminate irrefutable rent-seekers before prosecuting crimes whose true total costs are far more indefinite.
Perhaps, this definition of rent-seeking does not tell the whole story. Instead of assuming a utility-maximizing, pie-”centric” environment, let us take into account property rights and freedom of association. The effects of corporate welfare, crime, and tariffs could all transfer wealth without increasing the size of the pie, but that does not mean that the size of the pie is what matters. Corporate welfare and crime each requisition a portion of a citizen’s income for another’s wellbeing; that is theft, either arguably or literally. Tariffs financially dissuade citizens from making an informed choice in a transaction; that depresses free association. Considering the factors of why rent-seeking is not beneficial to society, rather than tunnel-visioning the lack of benefit, allows more perspective.
This analysis falls apart when bringing it back into questioning traffic laws. Personally, when I drive, I always leave a car’s length of space between myself and the next bumper, even when traveling 15 miles per hour. I feel justified since, well, the law says I should, but also because I have the right to. However, this isn’t necessarily utility-maximizing, but more importantly, there is no cosmic, underlying “right” I have to that space on the road. Abstractly, you could stretch right to life to fit the notion that I have the “right” not to be very slightly endangered by someone else taking that space, but that doesn’t really mean much in practice. As they say, the right of my fist is up to the skin of your nose. Since I don’t really have the right to the ten feet in front of me (which precludes a line cutter from entering) in any meaningful way, a certain amount of anarchy on the roads is inevitable through this understanding.
Again, let’s rephrase, in the terms of an economic principle I’ve discussed at unconscionable length elsewhere on this blog, externalities. To summarize, externalities are economic transactions where the people making the transactions do not feel the full cost or benefit of what happens. If manufacturing a good causes pollution, it is a negative externality, and the producer sells too many of the goods to be socially optimal since he doesn’t feel the true social cost. If your neighbors’ property values rise because you cut your grass beautifully, it is a positive externality; not enough landowners make their land looks nice. Externalities focus on third parties who are affected but in no way really partake in the transaction.
Rent-seeking behavior is similar, but it affects the second party in the transaction, directly or indirectly. A thief’s behavior is rent-seeking in that it directly hurts the person from whom he is stealing (there are externalities within that “transaction”, where the property values of those nearby are hurt, but that is secondary). Likewise, limiting the market through tariffs directly constrains the consumer to the benefit of domestic industry. Far more lucidly, this model of rent-seeking demonstrates how the line-cutter steals from another driver.
But really, steals what? Despite the rules of the road the government provides us, you don’t have a cosmic right now to be queued. The classic example of failed public goods is the Tragedy of the Commons. In the analogy’s dated environment, local farmers brought their herds to the public commons, where anyone was free graze. Since no farmer had any incentive to limit his herd’s consumption, the commons became desolate and everyone gets screwed. Analogously, someone cutting you in line is the equivalent of a rival farmer’s livestock aggressively chomping on every bite of grass right before your cow had a chance to. It’s a jerk move to do, but there isn’t anything cosmically wrong when the good was free to all in the first place. The government legislating against it means nothing… and to say otherwise is begging the question.
The best model for considering jerk drivers is the second model, which I previously rejected. The real problem here is the lack of private property on the roads. If someone breaks a rule on a private road, however arbitrary that rule may be, she is breaking a fundamental, cosmic law of property rights. If the rule is truly arbitrary, then the owner is screwing himself out of profit (assuming that it is a tolled road), and if nothing else, rules for private property can be far more categorically accepted than whatever the local government decided this morning. That is to say, a dissenter can always break a law on public property if he believes that dictated regulation to be unreasonable, but societal concerns are immaterial on private property.
I conjecture a corollary to the Tragedy of the Commons. Since there isn’t ever anything cosmically true about the regulations we choose for public goods, those with differing respect for the law will align themselves differently, thus resulting in a misallocation of those goods. The line-cutters may be right in assuming that the length I put between myself and the car in front of me is not socially optimal and that they might as well jam themselves in there. Most, or any of them, may not think that, but it is a justification. If a private firm (even a monopoly) is in control of the roads, it pays for its mistakes and is subsequently rational. If you cut in line and get banned from the local highway simply because the firm wants to eliminate predatory behavior, guess what jerk? You’ve lost your job since you can’t make it to work on time and you’ll have to move. Such punishments may never pass the legislation, but private owners can do whatever they want.
Until then, we’re getting by with social niceties and fines.
