Games Indians Play

by V Raghunathan

  Weak self-regulation and weaker regulation

  It does not take an ‘intelligent Indian’ long to figure out that in the wee hours there is little vehicular traffic and no traffic cop in sight. So what purpose is to be served by his stopping at the red light? Whom is he trying to prove his traffic sense to anyway? In short, he will jump the red light when there is nobody to stop him. Soon this trait emboldens him into jumping red lights not only during late hours, but at any time there is no cop in sight. It is again only an incremental step for him to jump the red light even when a cop is in sight, if the latter has no vehicle to give chase. Even if the traffic cop has a vehicle at his disposal to chase him, what will the consequence be, after all? A hundred-rupee fine? Not a serious enough deterrent. Even that may be easily mitigated with two curled-up twenty-rupee notes deftly thrust into the eager palms of the constable. So he is now jumping red lights in broad daylight under the very nose of a traffic cop. Not only does the ‘intelligent Indian’ defy all rules and norms, he also graduates to honking at you should you be conscientious enough to stop at a red light when he wishes to jump. In his calculation, it is a waste of time to stop at red lights, particularly if there is no risk of being stopped by a constable, and it saves him a few precious minutes. With little patience or self-control, before long we too begin to mimic the ‘intelligent Indian’ and soon we have on our hands a traffic nightmare. A mass-scale defect–defect behaviour.

  Why does the system not penalize traffic defectors? Why does it not confiscate their driving licence? Why don’t we have a system that will encourage a traffic cop to book traffic offenders? How is it that such systems work everywhere in the world except in our country? This being the case, should we be surprised if our already weak propensity to self-regulate grows weaker?

  Ithaca, Ahmedabad, Bangalore and Elsewhere

  Richard Thaler cites the example of a one-lane bridge across a creek behind Cornell University in Ithaca.1 During traffic hours, there are always many cars on either end, waiting to cross the bridge. In a wonderful display of self-regulation, four or five cars will cross the creek and then the next car in that direction will stop to let four or five cars from the other direction to cross and so on. One realizes this will hardly work in New York, leave alone in Indian cities and towns.

  There is another standard practice in many countries that is testimony to the self-regulation of the residents there. On most railway crossings, there is only a thin bar that comes down when a train is about to cross, which spans half the road (on the side where the traffic is supposed to move). Similarly, there is another half bar on the other side of the crossing, so that technically all you have to do when the bars are down is zigzag through the two bars to get across the rail lines. But I have never seen anyone do that. Everybody waits patiently on his side for the bar to lift, before he moves on.

  In contrast, there are two trademark practices I have seen in Ahmedabad. These practices are more or less rampant in other Indian cities as well. Ahmedabad is dotted with railway crossings. The railway gates there, like those anywhere else in the country, are formidable affairs. These gates invariably span the entire width of the road, and then some, on either side, with a skirt-like barricade hanging all the way to the ground. But this barricade means as much to the gritty pedestrians and two-wheelers as the closed drawbridges of forts meant to the determined Vikings. Most of these dedicated souls can be seen lifting the iron skirt and squeezing themselves and their vehicles through.

  Trademark practice number two: Whenever the railway gate is down at any crossing in Ahmedabad, as vehicles begin to queue up on the left side of the road, others begin to queue up on the right-hand side of the road, hoping to be the first to get through to the other side as the gate lifts. Needless to say, those on the other side of the barrier have the same idea, so that when the railway gate lifts what we have is a most frustrating bedlam, as citizens try to outdo each other on a logjam, compounded by honking, pushing, shoving, cursing, scratching and denting. This happens in every Indian city. People never realize the futility of their action. Nor do the traffic police realize that they ought to penalize the stalwarts who line up on the wrong side of the road. Clearly, we lack self-regulation just as much as we lack regulation.

  Now imagine if we were all lined up on the left side of the road, as expected of us. Let us say there is one defector who decides that it pays to line up on the right-hand side of the road so that as the gate lifts, or the light turns green, he can zoom ahead of the others. For some reason, instead of discouraging such a defector, most often than not, we all end up aping him.

  Yet another defect behaviour is to take off from a crossing when the digital clock on the red signal shows five or six seconds to go. If thousands of commuters have internalized this habit, we have a disaster waiting to happen. Sure enough I witnessed one such accident in Bangalore, where two vehicles coming from perpendicular directions in those last few seconds rammed into each other. As in most other cities of India, self-regulation is an alien concept for commuters in Bangalore.

  In contrast, peoples of other nations appear to have a greater sense of self-regulation. Even in the Philippines, Malaysia and Thailand, nations comparable to us in many ways, I have observed much better traffic compliance. In Beijing, I have seen the taxi driver stop at every red signal even at 2 a.m., though there was no other vehicular traffic at that hour and no traffic constable in sight. Of course any comparison with China evokes a discussion on democracy and other forms of governance, as if democracy must be blamed for all our failures and the relative lack of it in China credited for all their successes.

  Going back to Thaler, he also writes of the delightful rural areas around Ithaca, where farmers leave their fresh produce on a table by the roadside, along with a cash box strapped to the table. The rates are displayed on the table and the customers simply pick up the veggies they want and drop the money into the thin slit opening in the box. The farmers in Ithaca apparently have the right amount of faith in their fellow citizens. They know that enough citizens will pay for the corn, yet they also know that, if the cash box is left unchained, somebody might simply walk away with it! A similar system is followed in Europe for newspapers.

  Can this system work in our country, where even the slot machines are manned? If you think such a system is impossible in India because the poor may be tempted to cheat, think again. The economically well-off too cannot be trusted even when it comes to coffee. Let me cite an example.

  At a leading business school I suggested an Ithaca-farmer like system for dispensing coffee and tea for its faculty, staff and students. Back-of-envelope calculations showed that, even if half the tea or coffee guzzlers did not pay, the system would break even, given the relatively high cost of employing four to five men to serve coffee morning and evening and to pick up empty mugs strewn all around. The suggestion was turned down without any deliberation in the faculty council. Some of the questions raised were: How can we create a trust-based system in a formal organization, knowing fully well that some people will free ride on the system? Why should others pay for these free riders (even though the others were not paying any higher, mind you)? Why should we subsidize free riders?

  Here is another example. In the 1980s the annual fee in leading business schools in the country was equivalent to the price of a good pair of shoes. Or two maybe. And the monthly cost of living in the hostel for a student was probably about the same. But the socialistic thinking of the day obliged the public-sector banks to provide educational loans to needy students at interest rates as low as 4 per cent, when the market interest rates were 12 per cent and more. What is more, the banks were not prone to chasing their bad loans assiduously, given the relaxed accounting and regulatory environment of those days. As a consequence, full repayment of the loans by the students after they passed out was more an exception than a rule. The result: most of these loans turned bad on the books of the banks, and in due course they stopped giving educational loans. Most o
f these students had the best jobs the country had to offer and many of them had fabulously paying jobs abroad. The loans outstanding against them, in most cases, would at best have equalled a dinner for six at a five-star hotel. Surely, these defectors were not economically challenged, at least not when it was repayment time?

  FAIRNESS, TRUST, SELF-REGULATION AND US

  Over the years, I have posed the following question to MBA students in Europe (representing several nationalities) as well in India: ‘If you were dining in a restaurant in a new city that you are certain never to visit again, will you tip the waiter who served you?’ (The question was originally posed by Hofstadter.)

  Clearly, this is a one-time PD situation, at least from the individual’s perspective. I have observed that the proportion of students from the Indian subcontinent responding in the negative is typically higher than the European students.

  The same phenomenon appears true when you shift the focus from customers to vendors. For example, one might say that a vendor on a railway platform has less reason to be courteous to a passenger or serve him quality food, considering the passenger is not likely to patronize him again. An Indian vendor is far quicker to grasp this fact than his counterpart in the West. I recall witnessing a one-time PD situation on a train a couple of decades ago. A teenaged boy on the platform was selling cold water in terracotta cups to the passengers on the train, at twenty-five paise a cup. The train was about to chug off. Here was this gentleman in the compartment with a twenty-five-paise coin clutched between his thumb and forefinger, insisting that the boy hand over the cup of water first, before he let go the coin. And the boy was afraid to let go the cup without having the coin in his grasp, lest the man not release his grip on the coin before the train pulled away. It was several seconds before the tussle was resolved. To me this has remained a representative example of our distorted sense of self-interest and our mistrust of others. Of course this is not to say one hasn’t had some wonderful experiences as well, where complete strangers spontaneously come up to help in a variety of situations.

  I think there is a lot of wisdom in the old adage that urges one to treat others as one would like to be treated oneself, that is, fairly. That wisdom merely requires one never to be the first to defect.

  But whether that adage is followed in compliance or rejection, cooperation or defection, as a rule or as an exception must depend on whether or not the majority of the people are instinctively fair, cooperative and self-regulating. Interestingly, behavioural economists have done considerable work in the area of fairness as a constraint on profit seeking, though in a somewhat different context. (Their work essentially questions or modifies the assumption of rationality as assumed by standard finance theory.) Some discussion on the nature of work relating to self-regulation, fairness and trust will give the readers a better insight into what is typically regarded as noncooperative or unfair behaviour and whether or not we punish the unfair.

  What’s Fair?

  Let us consider a situation where there has been a truckers’ strike and suddenly vegetables in the market have disappeared. Before the strike, onions were retailing at Rs 20 a kilo. Now which of the two situations below is fair or acceptable?

  A1. A vendor who has a large stock of onions from before ups the price to Rs 35 a kilo.

  B1. A vendor who does not have any previous stock and is paying a much higher price for the onions, on account of the more expensive alternate transport arrangements, prices the onions at Rs 35 a kilo.

  Most respondents faced with the above situations are bound to find the first scenario unfair, and the second fair, even though the buyers are called upon to pay the same price under both situations. Clearly, it is not the final action, but the motivation underlying the action, that decides what is or is not viewed as cooperative or fair behaviour.

  Kahneman, Knetsch and Thaler present many such situations.2 For example, which of the following two situations (the numbers here have been changed to suit Indian currency) is unfair?

  A2. There is a shortage of a popular car model and the waiting line for delivery has grown to two months. A dealer has been selling this car at the list price. But now he prices the car Rs 25,000 above the list price.

  B2. Another dealer has been selling this car at a discount of Rs 25,000 to the list price. Now he prices this car at the list price.

  A majority of the respondents view the first dealer to be unfair, and the second one acceptable, even though both dealers call upon the buyers to pay Rs 25,000 more than before. In other words, the first scenario is likely to be viewed as a noncooperative behaviour.

  Here are some more situations.

  A3. A landlord rents out a house. When the lease falls due for renewal, the landlord learns that the tenant has recently taken a job very close to the house and admitted his children in a school close by. Figuring that the tenant is unlikely to move away under these circumstances, the landlord raises the rent by 30 per cent.

  B3. A landlord rents out a house. When the lease falls due for renewal, upon learning that similar houses in the neighbourhood are going at much higher rentals, the landlord raises the rent by 30 per cent.

  The respondents typically find the first situation unfair, but the latter one quite acceptable. Any deliberate exploitation of the special circumstance of an individual is viewed as unfair or non-cooperative behaviour. (Recall the Chennai businessmen in the TVS story who exploited the special dependence of their clients during the post-war period.)

  A4. An airline, during peak tourist season, finds that there are four tourists desperate for a last-minute ticket. The airline decides to auction the ticket on the spot to the highest bidder.

  B4. An airline is trying to recruit a software expert at a time when there has been a big lay-off of professionals from the software industry. Four candidates, all equally qualified for the job, are shortlisted. The airline asks each candidate to quote the lowest salary he would be prepared to accept and then offers the job to the lowest bidder.

  In both the cases the airline’s conduct is regarded as unfair or non-cooperative by a majority of respondents, presumably because the airline is trying to profit from competition among its potential passengers or employees. However, the first situation becomes quite acceptable when respondents are told that the proceeds will go to a charitable cause.

  Are We a Fair People?

  I am struck by the differences in the response patterns to questions like the above between Indians and other nationalities. For example, consider the following poser of Kahneman et al.:

  A5. How much will you tip for satisfactory service in a restaurant that you visit often, for a meal costing $10?

  The mean response to the above question in their study was $1.28.

  B5. How much will you tip for satisfactory service in a restaurant, for a meal costing $10, in a city that you are unlikely to visit again?

  The mean response to the above question was $1.27.

  The difference in tips between the two situations is not very much, indicating a high degree of self-regulation. When the same problem is posed before Indian respondents for a 500rupee bill, I have often found the average amounts vary significantly in the two cases: around Rs 30 and Rs 5 respectively. Clearly, self-regulation among Indians is a weak trait. And it shows in every walk of life.

  OUR RELUCTANCE TO PENALIZE UNFAIR CONDUCT IN OTHERS

  Consider the following:

  A6. There are two competing vegetable vendors near your house. One of them shuts down and as a consequence you notice that the other hikes his prices by about 5 per cent. In protest, would you switch your patronage to another vendor who may be ten minutes away from your residence?

  While over two-thirds of respondents elsewhere in the world seem to say a more or less unambiguous ‘yes’ to the above question, I have observed that the Indian response is often less affirmative and qualified with various conditions, such as, ‘It depends on the quality of vegetables’, ‘Depends on how inconvenient it is to go
to the other vendor’, and so on. Clearly, Indians invest a high degree of intellectual exercise in responding to such questions, but are far less prone to punish unfairness.

  Here is a variation:

  B6. A grocer close to your home runs a rather indifferent-looking outfit and keeps the frontage of the shop dirty and untidy, but on an average charges you 5 per cent less than another grocer about ten minutes away, whose shop as well as the frontage are immaculately clean (the products themselves are assumed to be equally clean in both outlets). Which of the two are you more likely to patronize?

  And what if this situation is reversed, namely, the one closer to your home is the well-run grocer and the other is the untidy one? Will your choice flip? What if they are simply adjacent to each other?

  While I have not polled these questions extensively, my experience and observation reveal that we Indians are less prone to take offence at the opportunistic vegetable vendor, as well as less inclined to pay for such intangibles as cleanliness. Our conduct may be economically rational in that we are not willing to pay the cost of an extra ten minutes of travel for penalizing the offending vendor, or that we are not willing to pay a premium of 5 per cent for rewarding the cleaner or the fairer grocer. But it seems that as a people we are less prone to pay an economic price to punish offenders or reward the good.

  In Chapter 5 I argued that probably, as a people, we Indians are highly given to D–D behaviour. Yet, the illustrations A6 and B6 present a category of problems where we appear to exhibit a D–C behaviour! For example, in illustrations A6 and B6, when the other party (the vegetable vendor or the grocer) defects (by increasing the price opportunistically or running an untidy outfit), we end up cooperating by continuing to buy from that party. We do not seem to retaliate against the offending behaviour of the vegetable vendor or the grocer, for what we think is in our selfish interest.