I've been reading one of Dave Zarembka's blog
entries, about the background
of the violence in Kenya. There's something I don't understand.
Dave says:
There are 80,000 matatus on Kenyan roads, most of which
are owned and operated by Kikuyu. I estimate (I sit a lot in the
matatus and have ample time to analyze the business) that a matatu
has an income of $100,000 per year: on average each Kenyan spends
over $200 per year for matutu transportation. The conductor rents
the vehicle for the day, including the driver, and pays for gas and
other expenses keeping whatever is left over at the end of the
day. So, he has to push and push to make sure that he doesn't
actually lose money. The relationship between the conductor -- who
is always trying to increase the price of the ride, stuff more
people into the vehicle, and get the driver to go faster -- leads to
amazing antagonism. There is no customer service, but customer
dis-service. The riders continually believe that they are being
abused and taken advantage of. This happens almost every time one
gets into a matatu.
How can this be? Dave must be leaving something out. In a
marketplace with many buyers and sellers, competition ought to
extinguish such behavior. Yet it doesn't, according to Dave's
description. Dave is a Quaker, and so I'm sure that he's relaying the
facts as accurately as he can. So there must be something else
happening, that he left out of his description.
Whenever you make a choice in a marketplace, you are presumably
making the choice that pleases you the most (or minimizes your
unease). If an outsider like myself looks at your market, and
perceives that all your choices are bad, he (I) must conclude that
something is preventing better choices from arising.
I don't know enough about Kenya to say what that thing might be. I
can, however, speculate on possible causes.
- Licensing. The Kenyan government might restrict the number of
matatus available to passengers. New York City does this by
restricting the number of taxi medallions it issues. Last I
heard, the price of a taxi medallion is $50,000. If you guess
that the entire amount of this sum must be paid by taxicab
passengers, you'd be right.
- Bus stops. Control the bus stops, and you control the bus
industry. If a matatu is only allowed to pick up passengers at a
bus stop, then whoever controls the bus stop also controls the
rides that the passengers receive. Airports in the US typically
only allow taxicabs to pick up passengers at taxi stands. Drivers
who wish to pick up a fare at the airport must go wait in a line.
- Inefficient branding. Let's say that you wanted to charge a
little more and provide better passenger service. How would you
communicate this to your potential passengers? If the government
doesn't protect branding (trademarks), then your competitors could
just adopt your branding, and your prices, but provide poor
customer service and save themselves money.
- Tribalism. As Dave says, nearly all matatus are owned by
Kikuyus. Tribes may have a prohibition against price competition
by fellow tribe members. Somebody who tries to out-do his fellow
Kikuyu may find that in-tribe penalties are assessed.
- Poor incentives. It may be that the matatu owners have
structured their businesses so that conductors and drivers are
rewarded only for poor service. That would be a mistake, but
cultures can drive mistakes, e.g. Germany's antisemitism for a
century preceding Hitler.
- Ignorance. It may be that the matatu owners and conductors
have simply not discovered that they can make more money and
charge a higher price by providing better service (this is
unlikely, but consider that every economic discovery had to be
discovered, and rediscovered whenever forgotten.)
I have no idea is the problem with poor matatu service is caused by
one of these flaws, or some other one I have not named. It is clear,
however, that
something is wrong with the marketplace for
public transport in Kenya.
posted at: 03:09 |
path: /economics |
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