Tuesday, 24 November 2009

Politics > Economics? Tough Call In Our Revenue-Driven World

SMU has recently raised its parking fees to tackle over-demand. I've always joked about the economic principle of supply and demand never really happening in reality when I point at crowded stalls with crazy queues around school and quip that they should raise prices to counter the problem. But such an action ever only benefits, at the end of the day, the 'market' which is largely an abstraction that certain people attempt to divorce from reality.

So I somewhat mock-applauded the decision because it was bold, it was sudden, it was - I believe - ignorant and it was, yet in a completely objective sense, practical. Let the price mechanism rebalance the situation. Economics textbook stuff. Want a parking lot? Pay a higher price. The price doesn't match your utility? Don't park! Problem should be solved and it's win-win - the school makes more revenue if the numbers don't dwindle, the ones who can pay can now have the luxury of less congestion.

But as expected, the market HARDLY ever works out. What ensued after that is typical of the everyday struggle between politics and economics. After the person in charge sent out the email notifying the school of the parking fee raise, student activism (of sorts) kicked in. People aren't normally happy that they can't have their pie and eat it too, so a few voices are raised and soon people are going to start petitioning or pulling the Student Association into this. Cookie points for our dear representative body soon, yay. To the credit of the student body, the carpark service hasn't exactly been up to par to begin with.

Of course, the most positive outcome to this would probably be that the demands cause innovation to occur and the school somehow builds a bigger and more efficient parking lot such that prices still remain low and demand can remain high. But such structural changes seldom take place because of a whole host of 'inefficient' reasons - the school is lazy, the school can get away with it, people can't deal with the construction, nobody wants to bother because students have a lifespan of about 4 years (duh) which is too little to care, etc. If politics triumphs, then the school will be forced to keep the prices low again and congestion will remain. But I suppose it's alright if people don't mind struggling for a parking lot if it means getting one that is cheaper, but at the expense of parking lot security. The utility comparison becomes: ($2.60/hr + parking lot insecurity) > ($3.00/hr + parking lot security), which equates to 40 cents per hour being waaaay too expensive for a higher assurance of parking lot spaces. There's no improvement, but it's okay as long as I don't ostensibly pay more. People can be funny that way.

We see this played out in Government, Union and Corporation battles across the globe regularly. Inflation forces prices to rise, workers protest against wage cuts, the market mechanism gets jammed, and we get workers who are perceived by economists as people who spend half their time believing in the power of revolt and the other half pretending to work. Wages remain high, costs stay high, and we continue pondering why the prices just don't stop rising. Hmm.

Only time will tell what will happen with regards to the SMU carpark saga. One has a hunch though that sometimes it is really money that garners political power in Singapore and the cream in$titution of the lot at $MU.

Note: My dispassionate perspective on the issue doesn't mean I do not feel the ball-squeeze for carpark users who have obviously been bearing the brunt of what is clearly rotten carpark service for quite some time, and then now this. This write-up is merely a lamentation about the vicissitudes of daily strife we wish we could come to embrace as normal, whichever side you're on.

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