Make sure to read Rashid’s (THE Chicago Cabbie’s) response to my earlier blog post in the comments section or using this link! He gives excellent insight and some of my assumptions about the cab business are corrected.
Also, you can follow @ChicagoCabbie on Twitter or visit his website at www.mychicagocabbie.com to learn more!
“Taxis!”
It was about the only thing that came to mind when my high school econ teacher Mr. Belcaster asked us if we could think of an example of perfect competition a standard model in Microeconomics differing from monopolistic competition or a monopoly. He said it is hard to find real examples of this theory but in order for a particular market to be perfectly competitive, it must meet the following conditions:
1. There must be many “firms” in the market. As a true Chicago girl, I can verify by peering out my window that there are indeed many taxis waiting to be flagged down.
2. Each “firm” must produce and sell a nondifferentiated product. I think we can agree that the average consumer considers a cab a cab. They take you from A to B and most people aren’t choosy, they just take the first available.
3. Everyone has to have perfect information. PI is hard to come by. Of course, the driver may have a better sense of direction and go “the long way” which would be problematic. But in terms of the service and pricing, both the drivers and passengers have perfect information. At the time, this seemed sufficient to satisfy the criteria for my then 11th grade self.
4. Finally, there must be free entry and exit in the market. This means that anyone should be able to start driving a cab or quit. I have no idea how easy or difficult it is to become a cab driver or if there are other limits but I still went with it.
Okay, so my example isn’t perfect (pun intended). Definitely some holes, but at least it gets us thinking about taxis. For the most part, we all know what to expect when we hire a cab. Each one is essentially identical. They all cost the same amount. They all get us from A to B.
Additionally, I think that it would be difficult to stand out as a cab driver. I am ignorant to how the process works but I’d imagine that between getting dispatched assignments and picking up bar crawlers in Wrigleyville, it can sometimes just be luck of the draw. How do you stand out as a cab driver?
Let me introduce to you THE CHICAGO CABBIE!
@ChicagoCabbie figured it out! I heard about him on the radio the other day. His website www.mychicagocabbie.com introduces himself as Rashid, has some fun personal facts, allows Chicagoans to connect with him via Twitter and Foursquare plus allows people to track him. You can Tweet at him to request a ride and he is faithful to respond to each @mention! Plus, his site boasts about his clean cab, great service, wifi and other cool features. I would say he has definitely set himself apart and from the looks of the Twitter buzz, he is very popular and a great guy. And if he can’t pick you up, he will send a fellow cabbie your way! The radio (maybe KISSFM?) even mentioned that since becoming active on Twitter and creating a website, the Chicago Cabbie’s business has tripled.
Now that is good marketing! In a business where it is hard to differentiate yourself, Rashid came up with an innovative way to get more customers. Plus, it is obvious he works his tail off to respond to each Twitter request. Hard work pays off. I think that is awesome! Good for you, Chicago Cabbie!
Being so impressed, I decided to tell my roommate about The Chicago Cabbie. She is a frequent cab rider and I thought she might be interested. Wrong. She was upset.
“He shouldn’t be allowed to do that”
“Why not?”
“It’s not fair to the other cab drivers. Plus I don’t think the cab company would like it.”
“The cab company would love it! They get commission, so the more business he gets, the better for the cab company.”
“I just don’t think it is right. It’s not fair.”
“Why isn’t it fair?”
“All the cab drivers should get the same amount of business. The company should dispatch calls evenly and everyone should get a fair share. Why would someone want to show up to work if they knew they might not get an equal number of customers?”
At this point, I didn’t respond. I quickly realized that she and I were operating from completely different paradigms. She was not going to agree that @ChicagoCabbie was a stroke of genius and that his marketing campaign was an example of being innovative and achieving success. She was adamant that The Chicago Cabbie was creating an unfair environment for other cab drivers and his advertising should be limited. I didn’t realize that when I started the conversation with her that it would lead me to think about much bigger issues than cabs.
The interesting thing about all this for me was that I didn’t even consider that people would be upset. I did not imagine that a hard-working guy who comes up with a great idea to improve his business and opportunity for success would be a point of controversy or contention. While I can no longer say that taxis are an example of perfect competition, I assumed that everyone would see that Rashid is living the American Dream and that it would be something we would want everyone to try and achieve.
I was wrong.
Thoughts?
Yes, I must admit that the letters above look fairly confusing and unusual. Yes, it is Greek. No, I don’t know all of the specific letters. No, I don’t know any other Greek words (except perhaps for “polis”). And no, I am not a Greek scholar.
I am simply an aspiring economist.
Before you start asking me to fix our current economic crisis or shove a sign with some percentage on it in my face, let me clarify a few things. I have no interest in the macroeconomy. I have already resigned and will leave arguing over fiscal and monetary policy, bailouts, and the federal budget to the powers that be though I am not sure whether Federalist Paper 51 will be enough to keep them in check.
Instead, I am interested in everyday life, real life, the good life. It is the day in, day out, trudging along of human existence that most of us seem to overlook and yet we all experience it. Surely there must be some fascinating insight behind all of this meaningless הבל hebel (that’s Hebrew).
From the time we wake up until we go to bed, we spend the day making decisions and interacting with others. Obviously, these decisions will result in various outcomes. However, sometimes natural laws overpower the human will and it is this powerful combination of human nature and the natural laws of our world that have lead me to the study of “οἶκος+νόμος” (oikos nomos).
So what is the deal with this oikos+nomos? Say it out loud. Sounds familiar, right? Economics as a word comes from the Greek οἰκονομία (oikonomia). Oikos is the Greek word for “house” and nomos is Greek for “law”. Roughly translated (remember I am not a Greek scholar), we understand it to mean “law of the household”.
So maybe you thought that economics had more to do with the government, banks or large corporations. Not always. Before humans had to put up with such nonsense, the Greeks only had one concern and that was to live the “good life” in the “polis”. I suppose I can relate as I take every opportunity to abandon these cornfields and spend an evening in Indy, though I try to find the “good life” in Upland, Indiana. Anyways, the Greeks had it pretty good and in order to live the good life, they had to make a lot of decisions. How should they delegate duties to their servants? Accumulate wealth? Put their wealth to use? Distribute food? For the Greeks, allocating their resources and wealth within the household was of chief importance. The “law of the household” determined whether or not the “good life” would be achieved.
Economics in its basic form is exactly the same today. It is the study of how to manage resources in a world of scarcity. If we can find a way to produce, distribute and consume appropriately, it would seem that even today we might experience the “good life”.
So why the oikos+nomos blog?
We can all relate to economics because we do it every day. We all must manage our scarce resources and we constantly try to maximize our efforts. To say that we don’t practice oikos+nomos is like denying the sun is hot. If we don’t recognize its importance and existence in our lives then we will surely be burned.
That sounded scary and a little extreme. Maybe I should put it more like this: If we don’t know the sun is out, then we can’t enjoy it.
I don’t intend to make every blog about some obscure economic theory, but I hope to spark the curiosity of my readers and inspire them through exposure to economics in a unique way. Feel free to send ideas, comment on posts or debate me so we can explore this stuff together. Economics can be insightful, intriguing and fun, so why not apply it and try to make sense of this hebel?
