Assume the Best of Tbilisi Taxi Drivers & Get the Best
Ever since moving to Tbilisi more than 11 years ago, I’ve never stopped practicing the Eric Livny taxi experiment. Here is how it goes.
Every time I hail a taxi, I open the door and sit in front. No questions asked, no tedious haggling over a Lari or two. About 30 seconds into the ride, I use my basic Georgian to tell the driver where we are heading, which very often happens to be my home in Tbilisi’s Vera district – Gogebashvilis meore shesakhvevi, mesame chikhi, nomeri khuti.
Soon after, a Georgian language conversation ensues, involving questions like where I am from (Israel? Wow, what a great country, I have lots of childhood friends in Ashdod); how many years I’ve lived in Georgia (11 years? That’s a long time, how do you like it here, is your wife a Georgian, what do you do?), and more.
By the time we finish going through this routine, the taxi arrives at the destination, which is when the most intriguing part of the experiment begins.
Without saying anything, I hand the driver a bill of 10 GEL and wait for him to give me some change. Of course, I know that a short ride should not cost more than 3-4 GEL, but the whole point of the experiment is to let the driver decide, all by himself, how much change to give back.
The driver’s options are to give me the right change of 6-7 GEL, cheat a little (give back, say, 5 GEL) or cheat a lot – give back 2-3 GEL or nothing at all.
How much money do you think I get on average?
I recently told this story to my economics students, inviting them to guess how much change I normally get. The answers obviously ranged, but the majority expected me to be cheated a little. The most frequent guess was 5 GEL.
Now, the truth is that in more than 90% of my taxi experiments, and I’ve conducted a lot of them, I received exactly the right change! 6 or 7 GEL. I’ve not been cheated a lot. A few times I was given back 5 GEL, but even then the drivers felt the need to apologize for not having small change.
Moreover, I recall two rides when the drivers did not want to take any money, explaining that I am a God-sent guest (stumari) in their country and, therefore, it is a pleasure for them to offer me a free ride. Finally, on one difficult-to-forget occasion, the driver gave me the right change, but then insisted that I should try his home-made wine. And he really meant it. The next day he delivered a 5-liter bottle of delicious Kakhetian Saperavi to my house.
If you happen to be holding a glass of wine in your hand, this is the time to raise it to Georgia’s hospitality traditions!
There could be many serious takeaways from this story. One of them concerns my economics students. It is quite possible that some of them have experienced a rough ride (or two) with Tbilisi taxi drivers. Another possibility, however, is that they’ve studied too much economics.
What economics theory teaches, at its core, is that people are not really the complex humans that they are, but primitive buy/sell algorithms. Economists assume (without any evidence) that people simplistically maximize “utility” derived from the consumption of goods and leisure. At its simplest, they sell their time to employers (or clients) and use their earnings to buy food, clothes, and in some cases, villas and private yachts.
Importantly, economists assume that people will cheat whenever the benefits of doing so outweigh the costs. So, had the Tbilisi taxi drivers behaved according to economics textbooks, I would have been left with little change in every single round of my experiment.
The economics logic is quite straightforward. Drivers cannot derive any material utility from treating me fairly. Given that we haven’t agreed on the price in advance, they have every “legal” right to charge me anything they want. Therefore, they will face no sanctions for giving me the wrong change. And since the ride is a one-off transaction with very little probability of repeat business, ripping me off (at least a little) makes perfect sense, speaking economics, that is.
Why then, am I treated so generously?
I believe that in my particular case, Georgian taxi drivers are driven (pun intended) not by greed, but by a desire to impress me, to make me feel welcome in their country. This desire may be quite strong because of how I set up the experiment: I am, indeed, a visitor to Georgia, but unlike other visitors, I feel comfortable sitting next to my driver-hosts (I realize that some female visitors do not feel safe doing so). Furthermore, I am making a genuine effort to speak to them in their own language. Finally, given how I entered their car, our business transaction is based on trust, rather than any kind of contract.
Like most Georgians, the drivers in my experiment are probably having a hard time making enough money to make ends meet. And yet, the base economic motivation to earn an extra buck off a naïve client is somehow trampled by a desire to feel good. To feel that they have treated me in an honorable way, contributing to their country’s centuries-old tradition of hospitality.
As demonstrated by experimentalists such as Dan Ariely, the feel-good motivation in people is a lot stronger than mainstream economists would like to admit. Eager to feel good, the drivers in our example are making a conscious contribution to a “public good,” something that should not happen according to most economics textbooks.
Think of it. Georgia’s reputation as a safe and hospitable place is, indeed, a public good, something that serves every single person living in this small country, regardless of whether they themselves behave in a hospitable and honorable way. Just like clean air, it can be enjoyed to the same extent by the crooks and the righteous Georgians. It is there for everybody, regardless of their contribution, creating powerful economic incentives to free-ride and misbehave.
Another important takeaway from this story concerns whole societies. What economics teaches us, is that every human action is based on an individual cost-benefit calculation. Yet, societies in which people are socialized to constantly make such calculations, and free-ride at the expense of others, would not survive in the process of evolution. Their sons would not sacrifice their lives for the sake of future generations. Greed and egoism will chase such people apart; what pleasure is there in being surrounded by neighbors who would screw you over the moment they have a chance?
Unlike many other ancient societies, the Georgian people have survived throughout centuries, and they probably owe their survival to their land’s honorable traditions, including the tradition of hospitality. Despite their importance for the survival of whole nations, pro-social norms, such as hospitality, cannot be easily incorporated into inherently egoistic models to be found in economics textbooks. I hope, however, that my economics students will not be blinded by these textbooks, and will quickly learn that when we assume the best about people, we are also likely to get the best out of them. Just like in my taxi experiment.
By Eric Livny, Tbilinomics Policy Advisors
About the author:
Eric Livny is Founder and President at Tbilinomics Policy Advisors. In 2007-2018, he served as President with the International School of Economics at Tbilisi State University (ISET) and ISET Policy Institute.
