Atanu Dey On India's Development

Who’s the boss?

The other day I received a forwarded email informing me that in Mumbai there is a traffic law which requires that a taxi driver has to comply with a request — no, not request but rather a demand — for service. Here’s what the email said:

Do you know, Rickshaw & Taxi Drivers do not have a right to say NO. So remember that each time the rickshaw/taxi driver tells you a NO, take down his vehicle registration number, note the time date and place, please click on the following link and register your complaint.

We have had enough of these guys bullying us around, and refusing to ply specially when its urgent. They have been told that they cannot say a NO to any customer when their meter is FOR HIRE! not even for short or long distances. I’d suggest you stop asking them whether they will take you wherever you wish to go and rather tell them where you want to go. And if they refuse. REGISTER a COMPLAINT. Let’s teach these guys who’s the customer , and who’s the boss!


I did not care much for the tone of the email. It was needlessly adversarial. The ending suggests an unhealthy attitude of putting someone who is most likely struggling close to the bottom of the economic ladder firmly in his place. If one has any doubts about whether one has the upper hand in the taxi-driver/rider relationship, there is little room for debate. This rule needlessly imposes additional burden on the party that is already socially disadvantaged. Even more importantly, it makes no economic sense, as I argue below.

Imagine that you wish to travel south and the taxi driver you encounter wishes to go north for some reason (such as his home being in that direction or that he had previously arranged to pick up fare somewhere north.) Forcing that driver to take you south is wasteful because there may be other taxis which would be happy to travel south. The economic waste arises from the mismatch between the preferences of the parties involved.

Which brings us to the most important principle ever discovered by humans about economics: trade is welfare improving provided it is voluntary. Conversely, coercion in trade leads to avoidable losses. If any party is forced to participate in a transaction, the full gains from trade are unrealized. People should not be forced to sell their labor or their goods. This principle is not only good economics but it lies at the foundation of a free society. Involuntary servitude is characteristic of regressive regimes and socialistic societies.

My objection to the Mumbai taxi law (and I am assuming that it indeed is the law) arises from a matter of principle. A society which does not value individual freedom is doomed to poverty. Every one of us has to have the right to refuse to provide service to anyone without having to justify it. Yes, it would be inconvenient for me personally if the only taxi driver available is unwilling to be hired by me. But the possibility of occasional personal inconvenience has to be balanced by the greater threat that I face when society enlists me for involuntary servitude. It is a slippery slope and it is easy to slide from forcing taxi drivers to obey orders to people being forced to bake bread when they are more inclined to build furniture.

I recall a story which I had read many years ago in high school. I think it was by “Saki” and the title was (if memory serves) “All About a Dog.” It was a dark and stormy night and the driver of a bus notices that the lady who boarded the bus was carrying a small lap dog. He stopped the bus and asked the lady to get off the bus as the law was that no dogs were allowed on board. It was late at night and she would have had serious difficulty finding alternative transportation. The other passengers had no objections to the lady with the small dog and pleaded with the driver to please allow the passenger to continue. The driver refused to drive any further. I don’t recall how the story ended but the writer made the point that while the driver stuck to the letter of the law, he clearly violated the spirit of the law.

I am not sure how bad laws get enacted and how one can go about removing them from the books. I think that the taxi law should be removed. Personally, I always move on to the next taxi if one is reluctant to take me as a fare. In a small way, I feel a sense of satisfaction that I have not reduced social welfare and caused economic inefficiency by insisting that service be involuntarily provided even though that may be the law.

So what would I do if I really needed to go somewhere and the only taxi available refused? Actually, there is always a price — a ‘reservation’ price — above which the driver would be willing to drive me. If my need to get the service is sufficiently strong, I should be able to meet that price. Yes, I am a market economist and I will only enter into a transaction where both parties are willing and able. Otherwise we would be on the road to serfdom.

  • http://jisan.blogspot.com Jisan

    I agree with your reasoning. I believe that Mumbai’s auto/cab drivers are best in the world.
    My perspective is that, if you goto hotel you pay good amount of tip willingly. why not to reward drivers? they serve you pretty well, they do try to take advantage in adverse conditions but those are in minority.

  • http://thehologram.blogspot.com Sailesh

    There is indeed a law in Mumbai which prohibits all taxi/auto drivers from refusing a customer. But I do not know anyone who complains about taxi/auto drivers refusing to ply (this is not to say there aren’t people who do that).

    Your argument makes sound sense, except for one small point. There are many taxi drivers who refuse to go to particular places because they know they will not find any customer for the return journey. This severely disadvantages people who wish to travel to such regions because, typically, other means of transport is also limited.

    Perhaps one way to get around this issue (assuming that a taxi/auto driver can refuse customers) is to create a fare chart that is also based on location and not just distance. But I suppose such a system can be easily abused (haven’t thought through this).

    That said, taxi and auto drivers from Mumbai give you the least hassle when compared with those from other Indian cities. The fare is always paid as per the meter and there is no hassle of negotiating a fare over and above the meter value. When you talk about a reservation price, the concept of fixed fare is rendered meaningless. Plus, isn’t demanding a fare above the meter supposed to be illegal?

  • Amit

    Hmmm… Atanu, so how does your logic apply to a case like this?
    http://www.iht.com/articles/ap/2007/04/16/america/NA-GEN-US-Muslim-Cabbies-Alcohol.php

    I agree with your point, but what if the taxi driver’s behavior to refuse someone is because of an unjustified prejudice?

  • http://palscape.wordpress.com bongopondit

    Good points as usual.
    I would like to point out an additional reason for problems with cabs refusing passengers: the lack of enough cabs on the road (due to regulations and barriers for owning/starting a cab business). This was particularly true in Kolkata till about 5-6 years ago. Cab drivers knew they could refuse one passenger because they would find someone else in a short time. With more people buying cars or using ‘private taxi services’, there is a sea-change in the attitude of Kolkata cab drivers – now they wont even refuse a ride around the corner !

    It is also high time that cab services were privatized with a few companies allowed to operate cab fleets in various cities. And in this day and age of cell-phones and SMS, major Indian cities should adopt the practice of calling a central number for a cab.
    The last two practices should abolish the need for such draconian taxi laws.

  • SReddy

    I generally agree with Atanu’s reasoning. However, I wonder if there is a Taxi-Drivers Union that coerces the taxi system to function less efficiently. Given that, this mumbai law is probably just a symptom of the original union problem.

  • http://None Rajalakshmi

    Absolutely agree with you.Wish there were more like you, capable of clear thinking tempered by compassion and awareness of ground realities.

    This error of clinging to the ‘letter’ relinquishing the ‘spirit’ is exactly what Sri. Krishna holds Yudhishtra guilty of while talking about ‘Dharma’ after the war in the battlefield.

  • rishi

    Atanu,
    There is actually such a law in the books. The reasoning is that the auto rickshaw driver has a choice of taking passengers or not taking passengers (the meter UP or DOWN). But once a passenger has got in, he should take him to anywhere he wants to go, within the city limits.

    That said, there are many things wrong with the auto system in India. Licenses are required, competition is restricted, fares are fixed and raised arbitrarily. The taxi and auto rickshaw drivers also strike at any mention of new types of vehicles, e.g. the mumbai air conditioned taxis, or the six seater rickshaws.

  • http://perpendicularthought.blogspot.com shadows

    Yes, Atanu, that is a law.

    I dont entirely agree, I am afraid. It is not entirely about servitude, many a times, its just a ploy to get higher fares from the stranded passengers. How to determine if it is not ?

  • raven

    The part of your argument relating to customer behaviour in a free market sounds correct. However, for customers to behave like that, the suppliers also should be in a free market. In this case, however, the cab license regime makes it anything but free. Government restricts the number of cabs and their fare rates, and they respond by refusing for uneconomical routes (including cost of discomfort & time).

    Free up the license regime and, my guess is, there would be a multitude of service providers just as you’d see in a small town today – cycle ricks and shared autos for short distances, meter autos for medium distances and cabs for longer intra- and inter-city distances

  • tejas

    Every one of us has to have the right to refuse to provide service to anyone without having to justify it.

    this is ridiculously false. suppose every doctor refused to treat you for a bellyache (just because they wanted to), that -should- be unlawful. (merely on discrimination reasons). or, can white shopowners / upper-caste brahmins refuse to treat black customers / dalits without having to justify it?

    the price argument does not make sense either, should i pay $100000 to be treated for my bellyache? should the dalit walk to the next village to buy a bag of flour?

  • http://topedgemonk.wordpress.com Aravind

    Atanu, I’m in Chennai now. This is a place where the auto rates are governed according to principles of free market economics. No autorickshaw driver follows the meter. The government unsuccessfully tried to make meters compulsory. All fares depend on the time of the day, the number of prospects and the climate. If there is some sign of rain, the fares automatically double. Its more of being a cartel and determining prices. If one guy in an area refuses to go for a lower rate, none of the other guys in the group will go forcing the passenger to go at a higher rate. Its not a pleasant experience

  • http://chanakya2006.blogspot.com AG

    I completely disagree with this notion.

    The taxi driver is rendering a service for which he receives compensation. He’s not doing any public service.

    if the cabbie feels the compensation is not enough, he shold vote with his feet (i.e. turn in his cab and his license) and not compete in the market. Once in the market, he should play by the rules of the market — which have been set in concert with cab owners.

    The rule, in fact, creates strong incentives for making the cabbies more productivity focused than less.
    So, if a cabbie does not want to go south, he should not be on a south-facing road — which is easily done. This problem occurs most often at airports and railway stations. And the famous refrain you here then is “I waited for 4 hours to get a fare”. To which i reply “no one asked you to wait in the queue!”
    Cabbies know fully well that standing in a queue is a bit like roulette — if lucky, you go to nariman point, if not, you go to vile parle.
    They should join the queue only when they’re willing to accept this risk.

    What they instead do is join the queue but arm twist and distort the market (by refusing to ply). Which is why laws like the ones above — are required to protect the customer.

    Because when it comes to cabs — the providers decide how much supply is available and also the price at which it becomes available (remember in mumbai prices are set in unison with the cabbies — even after the shift to LNG, which is ~40% cheaper, the rates have not gone down!).

    Eliminating laws that safeuguard consumers merely allows the cartel to hold them to ransom.

    This is not a humanitarian problem. If it was, your bias should be for the user — not for the producer. The producer, can, after all, choose not to produce. What does the consumer do?

  • http://sood.net.in aadis

    I agree with AG. Cabs ply under a social contract, which i effect says “we give you an exclusive license to ferry passengers, but you cannot refuse fares while on duty”.

  • triya

    Ouch!! All about a Dog is by A G Gardiner. Chennai auto drivers are not in a free market. It is a cartel like you mention and is quite successful for some reason. To reply to Tejas. I think people have a right to their prejudices and usually those who loudly claim to be fair are the most hypocritical. Assume you go to a doctor with a bellyache and at the point of a gun force him to serve you, well he has the scalpel and the medical knowledge.. :) As Atanu rightly points out, coercion of any form that restricts individual freedom will just spiral down into a police state.

  • http://frissko.blogspot.com avinash

    ‘All about a dog’ ends with the lady getting off the bus in the middle of nowhere(she is referred to a ‘seal-skin lady’ i think, cos she wears a seal skin coat) and very cold winds blowing into her face…
    And yea, am in agreement with your take…

  • http://www.comradesinfoserve.blogspot.com Nagesh

    Hello..this is nagesh..
    Its right that these drivers dont have right to say NO for the passengers. They have been allotted the duty to serve the passengers in form of permits to run Taxi or Rickshaw..

  • Vijay

    There are some situations when the aboslute freedom of the cabbies to refuse the passengers on the basis of his prejudices can lead to trouble. Like in Minneapolis, where the Muslim taxi drivers refused passengers who had a bottle of alcohol or even a dog , even blind persons. As per Islam , dog is haraam, so these cabbies refused even blind peeple with their guide dogs.

    Vijay

  • http://valluvar.blogspot.com shiv

    Life is not black and white. Its mostly shades of grey. The auto thing is like that. I grew up in chennai and without doubt the worst auto drivers in the world are head quartered there. Mumbai, bangalore etc are much better. Social equality meets free economics. The ARDU (CITU arm) will probably be glad to have the law revoked, but will not like where it came from.

  • http://abhijatm1.blogspot.com Abhijat

    Hi Atanu

    I generally enjoy your posts without commenting and this is one of the few times that i am disagreeing with you.

    My 2 cents. I agree to your point that one should not be forced to make furniture when you want to make bread. Essentially, no one should be allowed to do something that he does not believe is economically viable. The argument is the same for airlines forced to go on unviable routes.

    However in the same grain – i am not a ‘market fundamentalist’. However neither i am a fan of unbridled (read opportunisitc) capitalism.

    In my view the problem is 4 fold :
    - refusal to go on unfrequented routes (without charging a premium)
    - arbitrage opportunities related to demand fluctuation
    - cartelisation and artificial scarcity
    - refusing to go by the meter (and base the fare on his assessment of how desparate you are)

    I am able to stomach the first two but vehemently oppose the last two.

    Point 1 – Refusal to go unfrequented places. My view here is that the market should put the rules straight – an autowallah has no right to refuse in a given radius. Outside this radius he/she should be able to charge a pre-published premium as it is not a frequented place. But if someone is willing to pay the pre-defined premium, then no right to refuse.

    Point 2 – Demand fluctuation. While capitalism is about taking advantage of fluctuating demand, sometimes it seems downright greedy. While i will concede that the largest corporations do it — but it is difficult to feel much sympathetic for the cabbie who auctions his services to the highest bidder in pouring rain ?

    Point 3 – Cartelisation. My biggest grouse with autowallas is that in cities other than bombay (have you taken it in Chennai/Delhi?) there seems to be a systemic cartelization and ‘boycott’ of the customer. If one refuses, others refuse vehemently subsuming their own interests. Yes, sometimes the customer is able to play one against the other and break the cartel but my point is that the sheer energy expended in this entire effort is unproductive for both. It leads to unnecessary expenditure of energy and tension for most commuters.

    Point 4 – Fluctuating fare. This is a strict no-no even in the market. The price of something is not based on one’s value derived but a common publicly known price. Most often the guy will refuse to go but seeing that you are desparate will up the fare a neat 30 %. This is nothing but rip-off and no praises of the market/individual freedom will convince me.

    Moreover, refusing service is akin to discrimination. It is open to subjective judgements as pointed out (muslims refusing to take specific passengers). If you strech this logic an autowallah may refuse to take you because he does not like the way you are dressed. Are you willing to support a similar subjective assessment in case of an airline/bus and other public transport? (if i pay pre-determined fare, there is no way they can refuse service)

    What i am saying is that there should be certain rules that both the participants (buyer and seller) should agree to. Thereafter there can be a market norm to charge a premium (for unfrequented routes)/give a volume discount (hire for the whole day). However refusal of service is dangerous.

    Perhaps your view may be altered when you see the autowallahs ‘exploiting’ the desperation to get somewhere urgently. Chennai/Delhi is a good teacher.

  • http://girishmallapragada.blogspot.com Girish Mallapragada

    Atanu,
    You make a very valid point that each one of us (as a service provider) needs to have a right to deny service. However, when the service provider is using the public commons as a platform to hawk this service, I feel there is an obligation not to refuse service.
    What I mean to say is that, when taxi drivers are allowed to park their taxis in front of railway stations, public bus stands which are paid for maintained by taxpayer’s money, there is an expectation that these service providers will not refuse based on their self-interest. Your argument is more valid probably when I call a taxi service or when I just flag down a taxi on the road.
    Do you think this is an unreasonable expectation?

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