The Cheat Sheet. AAP’s populism and Delhi Metro’s ‘free rider’ problem

That’s right. Delhi’s AAP government, headed by Arvind Kejriwal, has caused quite a flutter with the decision.

Oh, many things. Some claim that since the Delhi Metro Rail Corporation (DMRC) is co-owned by the Delhi and the Central governments, Kejriwal had no authority to unilaterally decide on its revenue stream. But that argument isn’t valid.

The Delhi government says it will bear the cost of the fare that the female ‘free riders’ would otherwise have paid. To that extent, the DMRC’s revenues are protected: it is the Delhi government, and therefore the Delhi taxpayer, who will foot the bill.

No, because there are other problems with the move.

Well, the Metro runs, at its extremities, from Gurugram (in Haryana) to Noida (in UP), so effectively, Delhi taxpayers will subsidise riders from neighbouring States. Provincialism isn’t of course an ennobling quality, but I don’t know how Delhi’s taxpayers will respond to that. But that’s only a political point of contention. There are other issues, too.

For instance, the logistics of the fare collection system on the Metro will be severely tested by the move. At the turnstiles, the ticket-reading facility — where passengers flash their tickets or tokens to gain access to trains — cannot distinguish between a man and a woman. Nor are the cards and tokens designed for separate genders. Moreover, as Internet memes have pointed out, this opens up the complexities of gender-fluidity, where, at the margins, it is impossible to determine a person’s gender based only on appearance.

You bet. That’s not even counting the opposition based on economic rationale.

Technically, it refers to the reluctance of individuals to contribute voluntarily to the support of public goods — because a market inefficiency generates the option to not pay and ‘free-ride’ on those who do. The story of the king who asked his subjects to pour one cup of milk into a giant vat — for distribution among the poor — is illustrative of this. When the vat was examined, it contained mostly water: many of the villagers had reckoned they could get away with contributing water instead of milk: they were effectively ‘free-riding’ on those who contributed milk.

In Economics of the Public Sector , Joseph Stiglitz and Jay Rosengrad reason that when no charges are imposed for publicly provided goods, it creates inefficiencies arising from overconsumption. In response, governments may be forced to limit consumption — either through pricing or rationing.

Extrapolating from research studies on efficient pricing in transport, it is possible to visualise the impact that Kejriwal’s ‘mispricing’ move will have. The ‘free ride’ proposal will likely lead to a surge in ridership by women, particularly those who earlier could not afford the Metro.

This will likely cause congestion and delays, and ‘crowd out’ even those who are ‘willing to pay but unwilling to wait’. Taken to the extreme, a congested Metro will only cater to ‘free riders’ who are willing to wait. All subsidised by the Delhi government.

Kejriwal’s populist move is a one-way ticket to a world of mispriced services and economic inefficiency.

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