Being an election year, much discussion of jobs, social issues, economics abound. Specifically, a rift exists between some who believe in free markets exclusively, and those who believe in a need for at least some government intervention into politics. Laissez-Faire this, Keynesian that. It’s is largely partisan.
Capitalism, at its core, relies on every actor in the market to act rationally. One main idea behind Keynesian economics is to make small compensations for when the rational actions are not taken, or when personally rational actions become overwhelming to what is beneficial or “rational” for the whole.
“Are agents in the market rational?” is a very obvious question to tease out how well competing economic theories fare in the real world. Observing how agents on the roadways act seems to give some good answers. First, I will explain the parallels I see between traffic and the markets.
Drivers, like actors in markets, have many different goals to evaluate in how they maximize their utility from the roadways. Drivers who are late to work will put many other factors aside as they attempt to arrive at their destination as quickly as possible. Other drivers attempt to minimize fuel consumption, personal stress or dangers associated with normal driving. There are some different limits imposed on the drivers. Speed limits, the number of lanes, traffic lights, density of cars on the road, accidents, police presence all affect how easily you can extract certain utility from the system.
What would a rational driver look like? That is a difficult and general question as every person has different orders and magnitudes for their priorities. However, some things should seem to be important to most drivers.
A rational driver would first and foremost do many small things to increase their personal safety on the roads. Things as simple as leaving 5 minutes earlier than “necessary” would decrease speeding and other risky “time saving” maneuvers. Increasing following distances would greatly decrease rear-endings which surely cost society a lot, in terms of lost time and insurance bills. Yet we all know that many drivers speed and many drivers tailgate.
A rational driver would also presumably work to decrease fuel consumption. Small cars, carpooling, slower acceleration, coasting and smoother braking are all great ways to save a lot of money. Yet large SUV’s, military cross over vehicles, and trucks not used for “work” are common on our roads. Carpooling has been historically hard to encourage. Next time you are out, think about how much gasoline you and your peers use to simply speed toward a red light or a dense spot of cars. This causes unnecessary braking, which is similar to just dumping that gasoline you just spent out the window. Braking early and smoothly similarly, increases conserved momentum and should increase brake pad life.
Stress has been associated with traffic. Leaving 5 minutes earlier and not worrying about “getting ahead” of the cars around you makes commuting less like a game and more like sitting down comfortably.
From these utilities, it is shown that drivers do not act rationally, considering how they endanger themselves and others, waste gasoline and needlessly stress themselves out. Are the other drivers the people you want to trust with thinking rationally about personal and societal benefit?
The book Traffic: Why We Drive the Way We Do (and What It Says About Us) greatly influenced my thoughts on driving and fleshes out some related topics in a more in-depth manner. I would greatly recommend it for those interested in the psychology, engineering, economics of this great staple of American culture.
Beyond rationalism, I often compare traffic patterns to economic “bubbles”. I would personally love to get a master’s degree in Econ to simply compare economics bubbles to how people drive.
