Why is it unjust and probably corrupt?

Mantolee, as Imani’s Patrick Stephenson calls it, burdens all motorists with the cost of the negligence or misfortunes of a few and gives the profits to one private entity, with no connection between the profits and the work done. Motorists would still pay and RSML (The Zoomlion subsidiary) would still collect its profits even if they don’t have to tow a single vehicle in any given year. In other words, the scheme socializes the cost and privatizes the gain.

Why is the design flawed?

Mantolee confuses a service with a punishment. If I pay a company to tow my car to a mechanic in the event of a breakdown, that’s a service. If the government tows my broken-down car and charges me a fee to retrieve it, that’s a punishment. An insurance is a service. Is Mantolee a service or a punishment? Under the current design as I understand it, all motorists will get punished just so the government can serve a few.

A better design would encourage motorists to get that service from whomever they wish, and if they fail to do so, or if the service provider fails to deliver within a mandatory period, punish the motorists who would then punish the service provider by demanding a refund or taking his business to another. The sequence matters.

Why is it unlikely to achieve its goals?

There’s this economic theory of moral hazard that occurs when a person takes more risks because another person bears the cost of those risks. This concern is inherent in the insurance business but especially problematically so in this context.

If you are a motorist and you know that someone will tow your vehicle for free if it breaks down, you have less incentive to get it off the road in the event of a breakdown regardless of how long it takes for the tow truck to arrive. Even if you can do it quickly by yourself, wouldn’t we all prefer for someone to come and tow it for free straight to our mechanic?
On the other side, if you’re RSML, you have less incentive to go and tow a broken-down vehicle if you’ve already been paid by the State and you have no competition. Besides, you can always make plenty believable excuses—bad traffic, no drivers, wrong location, etc. etc.—if you have no competition.

How can we fix it?

Now consider the alternative world where the towing company is given the legal authority to tow the vehicle and the affected motorist must pay the towing company or risk the vehicle getting auctioned off. In that scenario, both parties would be highly motivated to get that vehicle off the road fast.

Even without mandating drivers to purchase towing insurance, as some have proposed, the market for that service would grow naturally, because people would not want to pay the higher punishment fee if the government is forced to tow the vehicle.

To get to this promised land, the government simply must decentralize and auction the authority to tow vehicles at a pre-determined price. If RSML can do this more effectively and efficiently, it would very likely come out tops in the bid for most Districts. In other markets, other players would play. If the parent Zoomlion decides to acquire those other players over time, that’s fine as long as it fits within antitrust laws governing the sector.

Government would then simply play referee by ensuring that the towing companies tow vehicles within laid-down rules that government should set. That would include having clear signs for where you can park/can’t park, etc.

It’s not complicated.

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By: @Kobina

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