Coordination and Behaviour

Being coordinated and uncoordinated:

Queuing as a co-ordination mechanism

In some countries queuing has become a social norm. In other countries queuing is not so established. Here are some images of queues in China on so-called "queuing" days, days when queuing is enforced by the government. You can read about why these "queuing days" are necessary here and how they were introduced here, here and here and the perils of getting in a taxi here.

A comment posted with the photo stated:

Queuing is never in China's vocabulary and cutting a queue is perceived as normal. You could encounter this act in almost anywhere such as restaurants, banks, toilets or ATMs. Once I experienced this in a super-mart. A customer shouted at the counter girl that since he bought only one small item he should be served first and it would be ridiculous for him to go to the end of the queue for paying. Surprisingly, the counter girl gave in.

The picture here depicted a scene where the Chinese are forced to queue up for purchasing the train tickets before their Chinese New Year. Noticed that they are so worried that people may cut into their queue they have to hug or arm-lock one another.

Here's a normal day getting onto public transport in China.



Here's how it looks on designated "Queuing Days"


Of course, the Chinese reaction to queuing, or lack thereof, can be viewed in a completely rational manner. Time spent in a queue is time wasted. It is likely that a society wastes a huge amount of resources when people stand in queues. This time could be spent more productively instead of waiting in a queue. Is their a more efficient way of organising queues as a coordination and allocation mechanism.

Steven Landsburg, the armchair economist, has a theoy on this. A foolproof method to shorten queues.

You spend too much time waiting in lines. "Too much" isn't some vague value judgment—it's a precise economic calculation. A good place in line is a valuable commodity, but it's not ordinarily traded in the marketplace. And this "missing market" inevitably produces inefficient outcomes.

Under the current rules, line formation suffers from economic inefficiencies because we enter lines without regard to the interests of later arrivals who queue behind us. How to make line formation more efficient? Change the rules so that new arrivals go to the front of the line instead of the back. Then the addition of a new person in line would impose no costs at all on those who come later. With that simple reform, lines would be a lot shorter. People who got pushed back beyond a certain point would give up and go home. (Well, actually they'd leave the line and try to re-enter as newcomers, but let's suppose for the moment that we can effectively prohibit that behavior.) On average, we'd spend less time waiting, and we'd be happier.

Follow the link above to see how he proposes that this can work. You can read more about this idea here and why queuing is bad for business here.

The Wisdom of Perfect Competition

On Friday we looked at the model of Perfect Competition and how market particpant's behaviour is coordinated to bring about the most efficient allocation of resources even though no one is acting explicitly to achieve this. This view of Adam Smith's Invisible Hand was proven theoretically by Arrow and Debreu and shown to be true in an experimental setting by Vernon Smith. See chapter five of The Wisdom of Crowds for more on this. All of these people were awarded the Nobel Prize in Economics. The conditions necessary for a market to achieve the most efficient outcome are

• Perfect information
• All participants are perfectly rational
• Freedom of entry and exit
• No transaction costs

In these short clips from South Park we see how a lack of barriers to entry means that super-normal profits are eliminated in the long run.

First the boys come up with a great idea....

Then they realise that with freedom of entry, positive profits are only a short run phenomenon