The other day, a foreign friend of mine complained: "Auto drivers just look at me and charge me a ludicrous price."
"Why does that bother you?" I asked. He gaped like I'd just questioned the value of human life itself.
"It's discrimination," he sputtered.
"Yes," I said gleefully. "Price discrimination. First degree."
Once I got over my (nerdy, short-lived) joy at being able to semi-accurately cite microeconomic theory in casual conversation, I really began to think about this in greater depth.
One of the (dubious) joys of informal economies is informal pricing for goods and services. In New Delhi, millions of people work in the informal sector, meaning their wages are dependent on a complex process of negotiation and determination that involves everything from the weather forecast to their employers' mood. The government, except as an institution whose members demand bribes, remains largely aloof from this process.
For someone raised in America, "fixed price" is practically a moral precept (although in actuality prices are not as fixed as most people might think). The idea of haggling with the coffee vendor over the cost of a morning Starbucks is heinous, likewise the idea of negotiating exactly how many quarters are required to operate a machine in a laundromat. In India, where these services are provided through informal networks, that haggling is a daily reality, with interesting results.
Recently, I read a pretty spirited back and forth over email between several expats who wanted to know the "fair wage" to pay a Delhi driver. The use of the word "fair" ignited an online flame war.
The broader question of whether or not the rich should pay excess rents for services in order to address income inequality in society aside (answer: maybe?), life in New Delhi offers endless opportunities to reflect on what the word "fair" really means.
Here are some representative wages. In these cases, the word "average" has no meaning.
A maid who does daily sweeping and mopping, depending on the area of Delhi in which she works and the profile of her employers, can make anywhere from Rs. 500 a month to Rs. 5000.
The young Indian girls who stand around in short skirts at promotional events usually earn around Rs. 1000 per night. (At the events they attend, that's about the price of a single drink.) But at some events, the prices can go as high as Rs. 1000 per hour.
An unregistered office worker in a print shop in a South Delhi market might make Rs. 7,000. If he does skilled work - uses software, equipment - that can go up to Rs. 12,000.
But these are wages. Back to the idea of short-term pricing:
The auto driver who over-charges me might not be thinking beyond his next meal or his next rent payment, but he's also operating on the same principle of "fairness." According to some philosophers, he'll get a lot more out of an extra Rupee than I will. I don't know whether that means he deserves it. Certainly, if I knew (which I don't) that my extra Rupee would go to his child's education, I'd be far more willing to pay it than I would if I knew it went towards his next beer.
(Which reflects my priorities, not his.)
Of course, considering the frivolous things on which I spend the majority of my disposible income, it's probably a safe bet that he won't make worse use of that extra Rupee than I will. (If we're curious what better and worse means, I guess I'd put "education" ahead of "beer" in terms of things that improve and enhance the level of happiness and productivity in society. Some economists argue with that, but then economists argue about everything. It's unfortunately true that most people seem to love beer more than they love reading.)
My grand point here is that - regardless of how you feel about it - I do subscribe somewhat to the notion that if an auto driver overcharges me, and I agree to pay the price he charges, that transaction has probably brought both of us closer to efficiency. He has, in academic terms, captured my surplus willingness to pay. Good for him.
But it also means that for the average foreigner negotiating India's inexplicable pricing, the best response to a price quote isn't to feign outrage or to point to a passing Indian and demand, "how much would you charge her?" Sadly, that question isn't relevant. The more relevant question is, "Am I willing to walk to the nearest Metro station?" The answer, I'm willing to bet, will almost always be no.
Of course, I could always give less money to auto drivers and more money to charity. Hopefully my extra Rupees would go towards a poor child's education rather than, you know, an aid worker's next beer.
"Why does that bother you?" I asked. He gaped like I'd just questioned the value of human life itself.
"It's discrimination," he sputtered.
"Yes," I said gleefully. "Price discrimination. First degree."
Once I got over my (nerdy, short-lived) joy at being able to semi-accurately cite microeconomic theory in casual conversation, I really began to think about this in greater depth.
One of the (dubious) joys of informal economies is informal pricing for goods and services. In New Delhi, millions of people work in the informal sector, meaning their wages are dependent on a complex process of negotiation and determination that involves everything from the weather forecast to their employers' mood. The government, except as an institution whose members demand bribes, remains largely aloof from this process.
For someone raised in America, "fixed price" is practically a moral precept (although in actuality prices are not as fixed as most people might think). The idea of haggling with the coffee vendor over the cost of a morning Starbucks is heinous, likewise the idea of negotiating exactly how many quarters are required to operate a machine in a laundromat. In India, where these services are provided through informal networks, that haggling is a daily reality, with interesting results.
Recently, I read a pretty spirited back and forth over email between several expats who wanted to know the "fair wage" to pay a Delhi driver. The use of the word "fair" ignited an online flame war.
The broader question of whether or not the rich should pay excess rents for services in order to address income inequality in society aside (answer: maybe?), life in New Delhi offers endless opportunities to reflect on what the word "fair" really means.
Here are some representative wages. In these cases, the word "average" has no meaning.
A maid who does daily sweeping and mopping, depending on the area of Delhi in which she works and the profile of her employers, can make anywhere from Rs. 500 a month to Rs. 5000.
The young Indian girls who stand around in short skirts at promotional events usually earn around Rs. 1000 per night. (At the events they attend, that's about the price of a single drink.) But at some events, the prices can go as high as Rs. 1000 per hour.
An unregistered office worker in a print shop in a South Delhi market might make Rs. 7,000. If he does skilled work - uses software, equipment - that can go up to Rs. 12,000.
But these are wages. Back to the idea of short-term pricing:
The auto driver who over-charges me might not be thinking beyond his next meal or his next rent payment, but he's also operating on the same principle of "fairness." According to some philosophers, he'll get a lot more out of an extra Rupee than I will. I don't know whether that means he deserves it. Certainly, if I knew (which I don't) that my extra Rupee would go to his child's education, I'd be far more willing to pay it than I would if I knew it went towards his next beer.
(Which reflects my priorities, not his.)
Of course, considering the frivolous things on which I spend the majority of my disposible income, it's probably a safe bet that he won't make worse use of that extra Rupee than I will. (If we're curious what better and worse means, I guess I'd put "education" ahead of "beer" in terms of things that improve and enhance the level of happiness and productivity in society. Some economists argue with that, but then economists argue about everything. It's unfortunately true that most people seem to love beer more than they love reading.)
My grand point here is that - regardless of how you feel about it - I do subscribe somewhat to the notion that if an auto driver overcharges me, and I agree to pay the price he charges, that transaction has probably brought both of us closer to efficiency. He has, in academic terms, captured my surplus willingness to pay. Good for him.
But it also means that for the average foreigner negotiating India's inexplicable pricing, the best response to a price quote isn't to feign outrage or to point to a passing Indian and demand, "how much would you charge her?" Sadly, that question isn't relevant. The more relevant question is, "Am I willing to walk to the nearest Metro station?" The answer, I'm willing to bet, will almost always be no.
Of course, I could always give less money to auto drivers and more money to charity. Hopefully my extra Rupees would go towards a poor child's education rather than, you know, an aid worker's next beer.
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