Kiasunomics 2: Economic Insights For Everyday Life. Sumit Agarwal
will bring Ethan to his kindergarten. The morning walk is quite pleasant. They call it ‘exercise’ and it gives them time alone with Ethan, talking to him about school and his friends. But it’s the walk back in the afternoon when they bring Ethan home that is unbearable under Singapore’s enervating heat. Ah Kong and Ah Mah would feel quite spent.
Wiping beads of perspiration off their forehead, they would then head to the cool air-conditioned comfort afforded by the nearby community centre. This saves them from incurring air-conditioning expenses at home.
“I’ve got to make more cooling tea for the family. Liang teh is good, especially for Teng since he’s driving around so much. The cool tea will balance the heatiness from this kind of weather. Remember to remind me to buy ingredients from the Chinese medicine shop on our way home,” Ah Mah told Ah Kong.
Air Pollution and Productivity
That evening, as Ah Mah served the family the liang teh she had carefully prepared, the family chatted about the weather.
“Crazy weather, isn’t it? So hot for so long, and then suddenly rain so much on another day. I’m sure quite a number of people will fall sick,” complained Siew Ling.
“Do you think the hot weather makes the air more dusty?” asked Ah Mah.
“I know it’s not like the haze we experienced in 2013 and 2015. I remember people were using more water and air-con then, and falling sick.1 But with hot weather for weeks or months, with little rain, don’t you think the air pollution has gotten worse?”
“Can you imagine the haze in Sydney from the forest fire last December?” commented Siew Ling.
“I think you’d better drink more water. And better still, don’t stay outside so long. Maybe the outside air is not as good as before. I still remember the haze then. Some people stopped working completely,” coaxed Ah Mah.
“Wow! Ma, you are quite a kiasu,” remarked Teng at the lengths his mother would go to ensure he stayed well.
The reality is that Ah Mah dotes on her son. Teng has been filial to invite her and Ah Kong to live with them. In return, as a parent, she should be looking out for his and his family’s health.
“It is true, Ma. I remember when there was the haze, some of my taxi driver friends stopped driving. Just a slight change in the air quality was enough to influence their decision on whether to drive,” Teng contributed.
“You mean they were so affected by the haze?” enquired Siew Ling with only a remote memory of the haze.
“Yah. My company was concerned because a drop in taxis meant fewer taxis on the road, which therefore meant less income,” added Teng.
“They did a study and found that taxi drivers drove less when the PSI (Pollutant Standards Index) increased. PSI has five categories: Good (0 to 50), moderate (51 to 100), unhealthy (101 to 200), very unhealthy (201 to 300), and hazardous (above 300).
“They found that taxi drivers drove less by 14 minutes each day when the PSI moved from good to moderate. Considering that the average driving time when PSI is good is 522 minutes per day, this is equivalent to a 2.7 percent drop from the average time a taxi driver spends on the road.”
“Wow! I didn’t know taxi drivers are so sensitive to the haze. I can’t recall you stopping to drive so much when there was haze,” said Siew Ling.
[E]very increase in the PSI by 50 led to a reduction of 30 minutes of driving.
Teng carried on. “On top of that, my company found that on average, every increase in the PSI by 50 led to a reduction of 30 minutes of driving. Of course, this gets worse at higher PSI levels. So when the air quality worsens, it is likely that there will be fewer taxis on the road.”
“Then surge prices can become even higher, right? There may be more demand than supply,” exclaimed Ah Mah, who had been caught in a dire situation before – when it was raining heavily, taxis were not easy to get and the prices of Grab cars went extremely high.
“Perhaps you are right, if people still want to go out despite the haze. But I think people would rather stay at home. So both demand and supply drop,” replied Teng.
“Maybe these drivers took a longer break in coffeeshops instead of driving around for passengers?” enquired Siew Ling, trying to understand better how taxi drivers behave.
“I don’t think so,” responded Teng. “My company found that taxi drivers didn’t take a longer break from driving. They stopped driving altogether when the pollution condition worsened. In fact, many took shorter breaks to try to earn as much as possible before calling it a day should the air quality worsen.”
“Hmm . . . That means poor air quality is not only a health threat, but it can also pose as an economic challenge. Productivity is affected,” said Siew Ling who was quite happy that she was drawing such inferences.
“Sadly so. Despite working in the comfort of their cab, taxi drivers are less productive when there is air pollution because inevitably they’ll be exposed to pollutants the moment they step outside of their home,” agreed Teng.
“I remember my company saying something else . . . something like in the United States, there was a study done and they found a 5.5 percent drop in productivity when there is an increase in ozone exposure, or something like that.”
“Wow! If this happens all the time, then we won’t be very productive,” added Ah Kong. Ah Kong has retired but he always has a strong ethic of working hard no matter what.
“I wonder whether other people, not just taxi drivers, will also drive less? Especially since cars in Singapore are so expensive,” wondered Siew Ling.
“Maybe if they drive less, there’ll be less traffic, and that will help reduce air pollution,” Ah Mah joined in.
Sunk Cost Fallacy
Just then, their doorbell rang. Their neighbour, Professor Sing from NUS, dropped by to give them some snacks he had brought from Japan. He had attended a conference there and as usual, brought food souvenirs home for the family and friends.
“Here’s some Kit Kat from Japan. They come in exotic flavours – red bean, crème brulee and even cheesecake. Quite interesting eh?” smiled Professor Sing.
“Thank you. You’re so kind,” said Teng. “Sing, may I ask you this . . . We were just talking about taxi drivers driving less when there is haze or possibly very bad air pollution. Then my wife asked whether other Singaporeans would drive less or not. What do you think?”
“I don’t know about the effects of air pollution. But I know given our high car prices, Singaporeans do not drive less. Do you have time? I can share with you about a study done by two NUS Business School professors and an NTU professor,” replied Professor Sing.
“Oh! You mean NUS and NTU profs do research together?” asked a curious Teng.
“I know, I know. We’re competitors, right? But we’re also collaborative. So these two NUS professors, Ivan Png and Ho Teck Hua, and Sadat Reza from NTU, used data from over 8,000 cars of one particular brand. For the life of me, I can’t remember which one. Anyway, when each car was sent for servicing, they tracked the kilometres driven and analysed the usage against the overall cost of ownership and congestion on Singapore’s roads.
“Interestingly, they found that people drove more when they had bought a car at a higher price. The higher price could be because of higher COE (Certificate of Entitlement) or Additional Registration Fee (ARF).
“And the more driving associated with high car ownership costs was not confined just to young drivers who might be buying the car for the first time. Even experienced and wealthy car owners drove more when the car ownership became more expensive.”
“Huh? How can that be? Ironic, isn’t it? Isn’t COE supposed to curb traffic jam? Now a high