June 20, 2007

Asking about mangoes

Infrequent updates of this site have got many people perturbed. Well, a few. Well, at least one. Me. Various reasons, none of which you want to know about so I won't tell you. Things will change soonish.

Meanwhile, from a recent desultory conversation, here is a list of situations, in no particular order. Not even alphabetic.
    1) Man pays cop a bribe to get off red light fine.
    2) Man buys tickets of hit film and resells (i.e. "in black") to eager movie buffs.
    3) During a bus strike, rickshaw and taxi drivers raise their prices.
    4) By paying more, you move to the head of a queue of devotees waiting to pay their respects at a popular religious spot.
    5) Bad crop of mangoes; vendors raise their prices.
    6) During a major sporting event, hotel owners in the city concerned raise their prices.
    7) Employee at stockbroking firm makes money selling "insider" tips to interested investors.
    8) Stockmarket journalist makes money publishing weekly newsletter in which he prints "insider" tips.
    9) Ticket collector on train takes money to allot berths to travellers.
    10) By paying more, you move to the head of a queue of patients waiting to see a doctor. [Forgot to include this one when I first put this post up].
Questions:

  • Are these all similar in some sense? If so, should they be in some order? What order? If they do belong in some order, does that order define a spectrum? What other situations can you think of that belong?

  • Or are they not really similar? Should they be all be on the same list at all? Which don't belong, and why?
  • 23 comments:

    Corporate Serf said...

    Dilip,
    Don't understand what you are trying to get at. Some are illegal and should be (1, 7, 9). 2 is illegal only because of our legacy. Most are supply-demand which most bloggers and all politicians want to make illegal (3-6). 8 seems to be an illustration that there always will be gullible people.

    Should there be a order?

    -- serf

    Dilip D'Souza said...

    CSerf, indeed, some of this (maybe even all) is explainable by supply/demand. Is that all?

    Why do "most bloggers and all politicians" want to make 3, 4, 5 and 6 illegal? I didn't know that. And even so I cannot imagine why they would want to make at least 4-6 illegal. Why do you say that?

    As for 8, what's the difference between 7 and 8?

    Please also see #10 which I just added (forgot to do so earlier) ... is it different from 4?

    thoughts of a blank mind said...

    all are illegal except 5,8 and 10.

    #10 is simply unethical.

    #5 nothing wrong in it. The vendor buys it in higher price, the crop owner increases price because of obvious reasons.

    #8 is different then #7, in #7 the employee might have come to know of the insider tip under an agreement and might not be allowed to disclose it legally whereas #8 might be anticipation or inside rumors.

    #4 is part of this capitalist world .

    But I would like to say that its a nice list you have come up with!!! How about including this

    #11 By paying donation you get admission in good schools and colleges ahead of merit-holders.

    zap said...

    In your earlier comment I don't understand why you have said '(maybe even all) is explainable by supply/demand'..
    All are explainable by demand/supply. Some are illegal, some unethical, some great if you are a free markets supporter. All of them give different insights into the human condition.
    But an order? I don't see one immediately..

    - Zap

    Corporate Serf said...

    Dilip,

    between #7 and #8, the stockbroker has a fiducary duty towards his clients not to use the information unethically. The journalist is not under any such duty. The analogy would be if your gynaecologist used his/her position of trust to post embarrassing pix of you in the blog, vs someone who shot you on his camera-phone while you were in your balcony (this is very rough, I am trying to come up with something off the cuff, but you get the idea: the stock-broker is breaking a trust, the journalist is not)


    3, 5 and 6 are exactly identical situation except for the item being sold. I am inclined to include access to your deity as similar, but I am an atheist. In any case, aren't most temples private trusts with the govt. as the trustee? (Churches and mosques don't seem to have well-publicised stories of similar nature, so excluding those) I would imagine private bodies should be free to pursue their business in the absence of an immediate and concrete public (or third party) harm (externalities, in other words, but see Coase's theorem in Wiki)

    Your new point number 10 is related to this, of course. I guess the nature of public harm depends on the amount of premium charged for immediate access, and whether some (honest) effort is made towards treating emergency cases. (I guess I am saying that if the criterion to determine the waiting time of the patient should include the medical condition as one of the factors) Now if you include the option of paying a premium to increase your priority, that's probably ok; so long the amount of the premium isn't too large; and so long reasonable effort is made to ensure that noone has to wait too long. Since you have a CS background, you should recognize that it is practically impossible to satisfy all these requirements in a single scheduling algorithm. The real solution is to increase the supply of doctors so the average waiting time decreases to something reasonable, and the inequity becomes simply something to crib about on blog pages rather than a life-and-death-issue as it is now.

    How is paying a bribe to get off a traffic fine a supply-demand thingie?

    -- serf

    Dilip D'Souza said...

    ToaBM: all are illegal except 5,8 and 10.

    How do you figure that? For example, what is illegal about #4 and #6?

    #10 is simply unethical.

    Ah, so now we're getting somewhere interesting. What makes it unethical? (I would find this objectionable too, I'm trying to explain to myself why). How is this different from #4? Or what if it isn't a doctor, but a palmist? Or an auto mechanic? Where does it get unethical and why?

    CSerf, how do you define a premium that "isn't too large"? Is it the size of the premium that makes #10 unethical or objectionable or whatever?

    #8 is different then #7 [also CSerf's position]

    OK; now what if the stockmarket journalist publishing the newsletter in #8 is really an employee at a stockbroking firm as in #7. He has just decided to widen his reach by putting his tips into a newsletter. Now what?

    #11 By paying donation you get admission in good schools and colleges ahead of merit-holders.

    Indeed. Where does your #11 fit in the list above?

    CSerf: 3, 5 and 6 are exactly identical situation except for the item being sold.

    Well, I picked those three because they are actually subtly different, and I wonder how important those differences are. #5 is a price rise because of suddenly decreased supply; #6 because of suddenly increased demand. Does that make a difference? And about #3, at least in Bombay, the rick/taxi drivers have in effect entered into a contract with the public about fares (which are negotiated, agreed and published). If they raise their fares during a bus strike, have they broken that contract?

    Zap, what I meant in my earlier comment was, you can say some (or all?) of these situations should be decided by supply/demand considerations. But are there other considerations? Like the contract I mentioned in the previous para? Or ethics?

    I'm thinking of orders on various lines: from ethical to unethical, or from "best left to a free market to decide" to "must be regulated and enforced", etc. There may be others.

    finally, CSerf: How is paying a bribe to get off a traffic fine a supply-demand thingie?

    Good question. But then put it alongside the TC of #9. I have done something wrong (got onto a train without a reservation). I pay a bribe to escape the punishment (being turfed out at the next station). In this case, the bribe results in a berth allotted to me. Supply/demand is certainly relevant -- everybody who has got on without reservations is trying to bribe the TC, he chooses the highest bidder. In what way is this different from the cop at the red light (apart from the supply/demand consideration)?

    zap said...

    All are explainable by demand/supply. Ethical/unethical, legal/illegal are variable depending on the POV of the person or the State or the Times(the 4th dimension, not the newspaper).
    Which means there is either one thing that is common or a hundred threads that connect a few of these.

    Corporate Serf said...

    Dilip,

    regarding the stockbroker / journalist; the law is pretty clear and is captured in the two words I used: "fiduciary duties". If the journo is really an employee of the stockbroking firm, he cannot be an employee in a fiduciary position in the firm: he cannot advise clients, nor can he have access to non-public trade data. In the US, the SEC does enforce these rules pretty well. It is another matter that the SEBI is toothless; which is why you do not see as much retail participation as the US, particularly after stockmarkets fall: there is a crisis of confidence (though this is improving, we really have to wait until the next few crash to say anything with certainty)

    I should have realized abt the rickshaws and taxi's fares being set by the commissionar. In that case, yeah, it is illegal, but is there a chance that the prices are set without taking the demand spikes into account (in which case I will have less sympathy to what I perceive to be your position)? In NYC, likewise, taxi fares are set by the TLC, but abnormal demand spikes are so few and far between (we had an MTA/bus strike in 2005 or 2006, and that was probably after at least 15 years) and fairly well managed by the authorities, so there is less griping (for example in this strike they enforced a ban on cars carrying less than 4 people below 86th Street in Manhattan, and this implied that even if the taxis charged above meter, per capita it wasn't a huge increase; plus they did ensure that the parking garages couldn't increase the rates; there was a court case about exactly that: whether a transport strike is an exceptional condition which lets the parking lots use the escape clause they have in the contract with the city; I don't quite understand why they have a contract with the city, though) Point is, if the justice system works, you don't get into these situations. The justice system by and large works because the courts are not overloaded with cases. The courts are not overloaded with cases because regular day-to-day business activities are not declared illegal, nor require government oversight, which increase the scope for corruption and contention.

    The Ticket Collector point: Illegal, of course. Both in this case, as well as in the traffic stop case, the bribe is not getting paid to the bigger organization, but to an employee of the org to break the rule. The org is losing money due to it. If the railways were not a monopoly and there were effective alternatives; and the load placed on honest people by the corrupt was sufficiently great (which it is currently); people would switch. Just like corruption in the private sector purchasing departments (as a fraction of the total transaction volumes) decreased after liberalization, because the revenue lost to the firm due to corruption started to matter due to the greater competitive pressure. So yes, a free market (demand-supply, if you will) lessens the impact of corruption; but corruption is still corruption and you will have to prosecute those in public life (government, regulated monopolies, etc); and leave private corruption to civil cases brought by people who are actually affected.



    Regarding 3, 5, 6. I still don't see any ethical dimension involved here. It's part of regular business. Yeah, the supply or the demand curve might even have shifted, but these are still competitive markets (mangoes certainly, hotel business, at a slightly larger time frame)


    School/College entrance: I thought I did use this a mini example in an earlier post. In this market there is a natural throttle to how much schools can subvert the merit list: if it takes in too many "for-money" students, its reputation would suffer and it would not be as attractive to potential employers. Of course given the severe shortage of quality schools and the structural and legal impediments placed in the way of creating new schools; I don't see the situation improving any time soon.

    Sahodaran said...

    I can answer your question.But,I hate 3,9 & 10. Mainly because... I feel I can identify to be at the receiving end, receiving serious bruises.

    The rest are quite harmless.

    Anonymous said...

    Attempting to grade in order of increasing 'harm' from least to most harmful:

    5) Bad crop of mangoes; vendors raise their prices.

    4) By paying more, you move to the head of a queue of devotees waiting to pay their respects at a popular religious spot.

    2) Man buys tickets of hit film and resells (i.e. "in black") to eager movie buffs.

    10) By paying more, you move to the head of a queue of patients waiting to see a doctor

    3) During a bus strike, rickshaw and taxi drivers raise their prices.

    6) During a major sporting event, hotel owners in the city concerned raise their prices.

    8) Stockmarket journalist makes money publishing weekly newsletter in which he prints "insider" tips.

    9) Ticket collector on train takes money to allot berths to travellers.

    1) Man pays cop a bribe to get off red light fine.

    7) Employee at stockbroking firm makes money selling "insider" tips to interested investors.


    1 = 7 pretty much, no difference.

    I grade 9 (TC) slgithly less because if you boarded the train with RAC, and there are genuine no-shows, you get the berth (you should get it as a matter of right but I have had to pay for it, despite being RAC1). I guess its possible that RACs are cleared up and even a couple of WL passengers get accommodated in empty berths.

    No reserved passenger interest is being harmed, but IR does not benefit and the reservation money + some extra is being pocketed by the TC who is clearly violating the rules of his job.

    regards,
    Jai

    Anonymous said...

    Mistake with 6, the order should have been:

    5 mango
    4 temple Q
    2 film Q
    6 hotel
    10 doctor Q
    3 auto n bus strike
    8 stock journo
    9 Rly TC
    1 traffic cop bribe
    7 stock insider

    regards,
    Jai

    as said...

    Viewing things in light of public/private property combined with written contracts . Think laws like public contracts which we sign by proxy.

    1-illegal as fines are public property
    2- illegal currently but i see no objection from pov of property
    3-illegal/unethical if contract exists, its something like an inventor signing away his IP when joining up an R&D lab
    4-depends on public/private temple
    5-sounds like good business
    6-good business again
    7-illegal/unethical as defies contracts
    8-if getting tips is legal then why not, but getting such information may make you accessory to fraud.
    9-train is public property, thus all such private income is illlegal/unethical. On a private bus, they do charge you an amount to seat you, its usually higher than public transport and thats cool.
    10-Public/private practice? More subtly , since a good deal of medical education is publicly funded, this could be thought of as an implicit contract, could be enforced too. If completely private education, then should be certainly allowed legally but should be transparent.

    As to order, I would base it on ethics of laws, ie legitimacy of framing such laws combined with utilitarian damage. Thus contracts which bind taxis seem arbitrary, laws which bind employees to confidential information seem fine to me, law which make bribes illegal also seem fine. Since in case of doctors no explicit contract exists, So rate it a lesser evil than breaking laws.

    Dilip D'Souza said...

    CSerf, this is not about SEBI being toothless. I'm asking, what if the journalist was actually an employee with your "fiduciary duties"? Or let's try it another way: an employee with those duties hands out tips regularly to a journalist friend, who publishes them. Now what?

    Re: the taxi/rick case. OK, you want the demand spikes taken into account in establishing the contract. Fair enough. Consider this variation. AT a lot of popular bus stops in Bom, you will find rickshaws soliciting passengers, three at a time, to share a ride to the station (or wherever). Each passenger is charged a rupee more than the bus fare. I see nothing wrong with this; but BEST has raised objections. Why would they object?

    bangalore daze said...

    I love this post.
    Got me thinking, which is more than I can say for most things I encounter on Monday mornings other than my super strong cuppa filter coffee...

    These situations obviously have some things in common. Commenters have already started on flogging the legal-or-not and ethical-or-not angles, so I'll refrain from contributing to equine murder.

    But there are other facets that can be used to look at these situations as an ordered set.

    For one, when the common man/woman/neither find him/her/it self at the receiving end of any of these situations, they are wont to find it irritating. Obviously the order of this group would vary from individual to individual, so I'm not going to bore you with my own order. Caveat for this group is that #8 would logically only irritate you if the TC had sold off YOUR seat.

    Another way to look at these as a group would be that they are all going to be incredibly hard to fix. (Noting, of course, that "mango" and "hotel room prices during the olympics" are just placeholders. Replacing them with other examples would drastically alter the desire to "fix" the problem. Try replacing them "mango" with "caviar" and "hotel rooms during olympics" with "hospital beds during a tsunami" and you'll see what I mean.
    I would attempt ordering that set if I didnt have to make a beeline for my real job.

    Just one parting observation:
    Many of these situations are an offshoot of the fact that we live in a world that is not governed by one philosophy. Religion, Capitalism and Socialism all have different demands off the system in which they exist. And today we live in a world that accomodates all of these world views. As a consequence, neither one of those world views has a space to exist in it's ideal form. So we have "adjustments" required, which give rise to these phenomena that we dont want to see, but have to deal with.

    I trust I dont have to give examples to explain that parting shot?

    Dilip D'Souza said...

    as: I'm very intrigued by your comparison of #3 (taxi/rick drivers) to an inventor joining a R&D lab; and by your mention of "public/private temple". How do you figure those, would you explain?

    Also, what is it that makes one kind of contract OK, but another "arbitrary"? Couldn't we make the argument that in the absence of a contract to set fares for taxis/ricks, the consumer is severely inconvenienced? (As happens in Delhi, where nobody goes by meter).

    And extend this to trains: you buy a ticket at a fixed price for your journey. It is not market dependent, nor is it subject to the "demand spikes" that CSerf worried about. So why is this implicit contract (i.e. the ticket) OK, why is it not arbitrary? Why shouldn't it be that every time you step into the Delhi Metro, the guy at the counter looks at you and hears where you want to go, and decides on the fly what you must pay? (As ricks in Delhi operate)

    BangaloreD: I like your parting shot. That's one of the points, about the adjustments we all make, the way we cannot take one view of things.

    Corporate Serf said...

    Dilip,
    Thought I made it quite clear. If you have fiduciary responsibilities and you violate those, either by giving out info (tips) or by doing private trades on them; then you are guilty as hell and need to go straight to jail for a few years (depending on the value of the info, size of the market move because of your trade and so on). To make it clear, fiduciary means arising out of trust. In this case, the relationship between clients of the brokerage house and the brokerage house itself is the fiduciary relationship (by law).

    I thought this was pretty clear from my post (as well as the meaning of the word fiduciary).

    Also, please do not put quote marks around the word as it is unclear whether you are purely quoting me or you are making some other meta-point.


    Regarding your new example rickshaw vs BEST: I'll assume you are really asking whether BEST can object from a ethical / legal / public policy point of view. Of course not. Isn't it clear yet that I prefer to have total freedom for people so long as they don't harm (or impinge upon the freedoms of) others? (There is a mu calculus semantics hiding in there)

    -- serf

    Corporate Serf said...

    Very interesting discussion indeed. Dilip, I have problems with your mode of argumentation but not the subject.

    This is an interesting bit:

    And extend this to trains: you buy a ticket at a fixed price for your journey. It is not market dependent, nor is it subject to Why shouldn't it be that every time you step into the Delhi Metro, the guy at the counter looks at you and hears where you want to go, and decides on the fly what you must pay? (As ricks in Delhi operate)



    To a certain extent this is how the local mudir-dokan works (worked) (in the sense that you have a reasonable chance of successfully bargaining (as my mum still does). Shops in the US used to be similar as well until some national chain got the idea of having posted prices and not giving the employees freedom to bargain (they became employees rather than agents). At that point of time, in that cultural context it was a successful innovation as buyers appreciated it and it removed one source of uncertainty in the revenue stream for the company, plus the central office had more control in the setting the pricing policy.

    I think you are seeing something similar there. If large taxi / rickshaw companies are allowed to form, you might see more posted prices. Current economics (given the fact that the large companies will not have freedom to set the prices, and the set price levels probably does not allow reasonable profits) probably does not let the formation of large companies in any case, even if the law allowed it.

    as said...

    Arbitrary contracts , I think of loosely as those which we have to sign by diktat aka compulsory recognition. All contracts that we sign freely(not under shadow of gun) are ok.

    In case of taxi drivers, I assume there is some tangible benefit which taxi drivers derive from getting recognized by the govt. If they do and freely sign a contract for those benefits , then they give away their rights to setting their prices on their own. Just like an inventor in an R& D lab. If they do not get any benefits and have to sign that contract by diktat, then it is arbitrary.

    Well, I am not sure if people in Delhi are more inconvenienced than Bombay and am not sure if they are getting fleeced. Severe haggling goes on and people who have information haggle effectively. people who are new to city can use things like prepaid autos and public buses. In this case prepaid autos get premium parking spot in railway stations and airports and in case of buses , the drivers get an assured pay irrespective of flow of traffic.


    Same with Delhi Metro, the operator's salary comes from public funds and is assured irrespective of heavy/slow traffic. That paystub is his contract.

    Public/private temple would essentially mean, who owns the land and who funds the operations? If publicly funded then no rights to engage in price discrimination , but if private then jus like a club/discotheque , the bouncer can and does exercise his right to admit/deny/preferential entry into the place. Or like restaurants reserve the right to deny service and they should.

    I enjoy your socratic style.

    Dilip D'Souza said...

    CSerf, I meant nothing by using the quotes except making it clear to whoever else reads this that I was quoting your phrase. I hope that is clear! I don't know what about my "mode of argumentation" (quotes for the same reason) bothers you, but if you tell me I will make amends. For me, this is an entirely academic exercise, I'm enjoying the thought process, and I hope all here take it in that spirit.

    Yes, you did make it clear re: the stockbroking question. In some ways I'm less concerned for now with the legalities of these things. I'm trying to tease out (for myself) the ethical issues involved, if any. The stockbroking question is actually prompted by a good friend of mine, sharp and forthright journalist, who used to put out a well-regarded newsletter (for which he charged a stiff sum) in which some of what he said came pretty close to what I would imagine are insider tips. (That he had obviously got from sources). No laws broken that I know of, but was there an ethical issue there?

    BEST's objection, as I understand it, is that only they have the legal right to transport passengers from a bus-stop. I don't know the law here, but I would hope that if this is challenged in court, it would get thrown out.

    I'm not sure I buy the "large companies" argument about posted prices. Two counter examples come to mind. One, at the corner paanwalla (incidentally thanks for that delightful term mudir-dokan, never had heard it), it's not just sweets and drinks and the like (which you might argue have their prices set by the manufacturer) whose prices are fixed and not subject to bargaining, it's also the paan itself (which the paanwalla makes on the spot). Two, ever bought a car? Price is always subject to bargaining.

    I wonder if fixed prices come about when you're talking about commodities (and services) where it's really not worth the consumer's time and effort to bargain.

    as, you have a point about people in Delhi not really feeling inconvenienced by not having meters. You get into the habit of haggling hard, it's just another fact of life. My gut feeling is, though, that as a rule they pay more for the same distance travelled than people do in Bom. The reason for this is that the posted fares in Bom are a result of, in effect, a collective bargaining process. Whereas in Delhi it's one-on-one every time. As I said, this is a gut feeling, I'd love to see it either bolstered or shot down.

    I don't understand about the Delhi Metro operator's salary. I was talking about the passenger and his ticket -- what has that got to do with the operator's salary?

    I see your point about temples now. (Are there any public temples like that?). Actually, that's why I mentioned the doctor case. Why do I feel it's OK for a temple to allow higher-paying devotees to jump the queue (though yes, I would feel irritated if I was in the queue), but I don't feel it's OK for a doctor to do the same with his patients? Another gut feeling I'm trying to explore.

    Thanks for the stimulating back-and-forth, ladies-and-gennlemen! I'm learning, and look forward to more.

    as said...

    Well, my feeling is that the difference between doctor/temple has something to do with a question that I struggle with often " Am I my brother's keeper?". When it comes to the life of a person , we seem to intuitively believe so, albeit selectively.

    Corporate Serf said...

    Dilip,
    I guess the socratic style gets a bit tiresome after a while. I do enjoy your posts and response, though, so pay no mind to my carping.

    I won't press the fixed price thingie. I thnik that's one mechanism that can operate, but the system is by no means constrainde enough that other mechanisms are precluded. For cars in the US, though, the guy in the dealership you haggle with is not an employee, but an agent, in that the significant (usually 100 per cent) of his compensation is calculated as a fraction of the profit he generates for the dealership; and the dealerships are independent businesses, though very close to the car companies. In this case it is the dealership that is acquiring the inventory risk; whereas in the situation I described, it is the parent corporation. In case of taxi fleets, I suppose the carry risk would be the cost of garaging the cars, maintainance, licences etc.


    Thanks for clarifying the stockbroker situation. I think whoever gave the tip is behaving unethically if he betraying customer trust. It is still murky: for example if the tip says "there is a lot of selling in the tech sector", to me no trust is broken. So the specifics are important.


    mudir dokan is of course Bengali for grocery shop.

    The price setting discussion is of interest to me as it seems to be related to some market micro-structure type works I have been reading; though I understand you focus is primarily on ethics, but it is still important to understand the incentives in the situation.

    Anonymous said...

    "... Why do I feel it's OK for a temple to allow higher-paying devotees to jump the queue (though yes, I would feel irritated if I was in the queue), but I don't feel it's OK for a doctor to do the same with his patients? ..."

    Perception of possible harm? We mostly rate our need for healthcare at a higher priority than our need to pray.

    That's why I graded the list as I did, in terms of

    - need to eat mango/ possible harm from not eating mango

    ... onwards to ...

    - need to preserve confidentiality / duty of non-disclosure /possible harm from breach

    Good thought provoking list. Unlike others I havent concerned myself with the legality aspects.

    regards,
    Jai

    Rohit said...

    These are just everyday examples of our hypocrisy. We regularly castigate people for being corrupt while doing the same thing on a smaller scale as these various situations show. If not legally worng, these examples should at least appy to the morality of the people. No hope though because it is a question of convenience and greed.