The cost of monitoring

Yesterday, I was reminded of an age old practice in Bangalore’s buses.

During rush hour, the driver stops the bus by the side of the road and waits for the conductor to issue tickets to every passenger. This ritual delays the already slow rush hour journey by 10 further minutes.

Let us say the bus has about 60 passengers, 30 of whom the conductor sells tickets to during the 10 minute pause. The average price of a ticket is around Rs 15. Therefore, the revenue earned is Rs 450. However, 60 people lose about 10 min of their time. Assuming they earn about Rs 20,000 monthly on an average, they stand to lose about Rs. 125 per hour. This implies 60 people would lose a gross amount of 125x60x10/60 = Rs 1250. The net loss to the nation (the bus service is a public service after all) of delaying the journey by 10 minutes is Rs 800.

There is a cost associated with controlling and monitoring any system. When that cost exceeds the benefits, it is better to forego some revenue and keep the buses rolling.