Traffic and Simple Economics

On the list of things that all countries share -- regardless of whether they’re rich or poor, free or totalitarian, the United States or another country – are corruption, crime, inequality, and traffic. Let’s focus on the last one, traffic, and let’s look at it in the context of two specific countries, the U.S. and China. There’s something a little ironic in the way the nature of traffic in these two countries.

First, let’s look at China, which is probably more interesting to you. China’s traffic can be characterized as exceedingly chaotic and anarchical, replete with every type of vehicle imaginable from buses to rickshaws to taxis to tiny bicycles that whiz in and out of lanes. Cars are constantly fighting to cut into each other, traffic rules are very rarely obeyed, and traffic moves that would make transform the most sedate American driver into a screaming, horn-blowing icon of road rage are carried out every minute of every day from 6am to midnight in China’s major cities like Beijing, Shanghai, etc. Taxis, as in any culture, epitomize the worst of the lot, and will often within the course of several seconds narrowly scrape by several cars, “create” new lanes for itself in the midst of traffic, and somehow squeeze all the other fantastically aggressive drivers just to make a green light.

Because of all this, traffic in China moves excruciatingly slowly. Average speeds on roads in major cities range between 10 and 15mph. Even on freeways, cars tend to top out around 50mph. A benefit of slow traffic is that there are few devastating, violent accidents. Instead, accidents, if any, come in the form of small scrapes or at most little bumps that cost little more than a hundred USD and certainly no human lives. But this comes at the cost of terrible commutes, stressful driving, and decreased productivity due to time spent on the road which I’m sure someone somewhere can make quantifiable.

In the end, China’s traffic is painfully slow because traffic regulations are not strictly enforced and so drivers do anything they can in their own interest, like cutting other people off, even though it’s often to the detriment of the interests of the group and, as a result, is also a detriment to their own self-interests. In other words, drivers in China are allowed to freely follow their own interests even when in actuality, it would be better off for everyone including them, to stick to the regulations. A classic Prisoner’s Dilemma.

Now, let’s look at America. In America, quite the opposite occurs. Traffic is strictly enforced to point of drivers thinking the “California roll” at stop signs as an increasingly serious problem. Simple driving etiquette emerges from the order created by the law to further regulate the situation such as the way cutting in front of other cars is greatly frowned upon despite the fact that it’s not the most illegal move in the world. In short, tickets are expensive and frequent and so traffic in America is relatively well-regulated which results in smoother (again relatively so) driving for everyone at higher speeds with less unnecessary congestion. This is a case where the Prisoner’s Dilemma is solved – by an external force, the law.

The irony emerges when you look at these two traffic systems as analogies for economic systems. The Chinese traffic system, like an extremely deregulated and free economy, has all the problems associated with an extremely free market system: people fulfill their own self-interests to give them an edge in the short run, like making that green light, at the expense of everyone including themselves. For example, quite often trying to weave in and out of traffic to get to that green light causes other cars to make the same mad dash, which then blocks other cars which in turn block your path and prevent from reaching the goal you had set out to reach. Of course, it’s much more complex than that, but that’s the basic idea. So essentially, China’s traffic epitomizes all the detriments and disadvantages of an unregulated market economy, and it goes without saying that this is very different from their actual national economy.

America, on the other hand, has traffic that more closely models a properly regulated free market economy. Individual drivers are free to do whatever they want, go anywhere they want anytime they want, but only if it doesn’t interfere with the interests of the group. Such interferences include the ones I discussed about China: cutting other cars, saddling lanes, weaving in and out of traffic, etc. These negative externalities are greatly mitigated by the law and the result is a faster, smoother, more efficient system. And America’s own national economy is, arguably, something to that effect.

It’s odd but yes, you can learn something about economics through a simple observation of how traffic works in two very different settings. In fact, while I observing traffic in China, I noticed how despite the lack of regulation, traffic in some ways flowed very elegantly. There was a roundabout in Xi’an where cars, buses, and bicycles, nearly seamlessly entered and exited, somehow “missing” other cars by just a foot or two. It was pretty hot day and I hadn’t eaten anything for a while, but I was mesmerized by how everything just barely made it and slipped in just in time and how others reacted to and anticipated each other just right. It was like a very good improv performance. Anyways, this is just a simple observation and analysis of traffic and economics. By the way, I think entire careers can be formed around the study of traffic patterns. It’s a game theorist’s paradise.