free_LUNCH

I was hungry the other night and decided to order pizza. When I arrived at the Domino’s site, I was greeted by the graphic above. And a bulb went on.

Fairness principle applied at its best – Order any three (or more) items for $5.55 each. For a family or a group of friends this is a great deal provided we need fairness. Lets look at the distributive principles at work here:

• Parity – Every member is free to choose what they want. Difficult to be jealous of one another.
• Proportionality – 1 order per person or if more than more, proportionally higher price paid.
• Priority – Not applicable in this scenario. Any person can choose any item in any given order.

On December 9, 2009 (i.e. today) Indian government agreed to create a new state. It will be called Telangana and will be carved out of the current state of Andhra Pradesh (see right image – Telangana is marked in white). The division had been called on by Telangana supporter for a very long time and most recently activities had become quite volatile. In fact, the leader of the movement has been on an indefinite hunger strike for the past 10 days. Finally the government had to give in and accept the demand.

But what is the reason for this uproar? Why do some people want a separate state and not be a part of the larger whole? Haven’t we read than co-operation is better for all players involved? The answer lies in the fairness principle.

Long before, Telangana used to be a separate state. In 1953 the government of India merged the then Andhra state and Telangana state into one big entity called Andhra Pradesh. The reason it was done was because then Prime Minister Pt. Jawaharlal Nehru wanted to create states based on linguistic lines. Both Andhra and Telangana had predominantly Telugu speaking population. He had also appointed a committee to oversee the matter. Even then Telangana did not want to be a part of Andhra. The issue was resources and revenue sharing. From Wikipedia:

The region had a less developed economy than Andhra, but with a larger revenue base (mostly because it taxed rather than prohibited alcoholic beverages), which Telanganas feared might be diverted for use in Andhra. They also feared that planned dam projects on the Krishna and Godavari rivers would not benefit Telangana proportionately even though Telanganas controlled the headwaters of the rivers. Telanganas feared too that the people of Andhra would have the advantage in jobs, particularly in government and education.

The committee hence, rightfully so, suggested not to merge the two states. The central government decided not to follow the suggestion and combined the states. They additionally negotiated an agreement that provided reassurances to the Telangana people as well to Andhra people in terms of power sharing as well as administrative domicile rules and distribution of expenses of various regions. This agreement is known as Gentlemen’s agreement of Andhra Pradesh (1956).

Well, it seems that the “Gentlemen’s agreement” did not live up to its nature and hence all problems began again. This time though, after careful deliberation and discussions, the government of India has decided to split the states back to their original forms.

Some time back I had written a piece about my experience with Atlanta’s transit system – Marta. Recently I had an opportunity (or should I say, misfortune) of travelling on Marta again. Because of current economic conditions Marta had decided to make some changes in its fare structure. And guess what, in my opinion, they took the wrong step. The fare has been increased from $1.75 to $2.00 and if you don’t have a breeze card (that costs $5.00) then you don’t get a transfer. C’mon!!!

But instead of complaining again, I want to look at Marta’s fare structure from a different viewpoint – fairness.

As I had spoken in my last writing, I do not find it correct that Marta charges everyone the same fare. If I have to travel 1.5 miles to school, I pay the same amount as someone who has to travel 15 miles to the other end of the town. It seems that because of simplicity of operational implementation, Marta decided to adopt this fare structure. But I feel that I am actually subsidizing the passenger who wants to travel longer distances. This assessment can be done by looking at some principles of fairness. Is the fair equitable or proportional? Definitely not. Is it efficient? Possible and will require further analysis. Is it envy-free? H**l no! So why does Marta have to adopt such a pricing structure?

Are there other solutions to this problem? Check out fare structure of Singapore’s transit system, one of the best in the world. It has a tiered pricing scheme that works well and hopefully caters to all the fairness requirements much more than that of Marta’s. It is important that Marta plays around with the supply demand curve much more intimately than just moving up the curves.