What traffic lights teach us about good public policy

Traffic lights are more than just places where you are forced to practice mindfulness. They are an amazing social technology which can teach us a lot!

You may think of social technologies as those which have been built to coordinate people and to influence their actions. Social technologies include voting methods, lawmaking tools, and... traffic lights!

Without traffic lights, we would constantly be playing Games of Chicken at every intersection, having to gamble whether to continue or wait for others. As I wrote a couple of weeks ago, coordination mechanisms create better outcomes by helping people to decide when to wait and when to go. Others have gone before me and have already made a game theoretic model showing how traffic lights create better outcomes for society as a whole. There is more to the story though.

Consider this: people waiting for traffic lights are willing to accept a tangible cost to the direct benefit of others. This is worth it to explore further, because it is at the core of solving many problems in society, from climate change to COVID control. How is this possible?

In order for a mechanism to be accepted, it should be credibly neutral, making it likely for people to believe that other people will follow the rules, and for people to believe that other people will believe that others will follow the rules, and so forth. Indeed, traffic lights all share some characteristics which make them appear credibly neutral:

1. Traffic lights don't favour anyone in particular
2. It is possible for everyone to evaluate in which order different traffic lights in a junction change color, if not from the lights themselves, then from the traffic driving in it.
3. Traffic lights are simple: three lights at most in most countries. Fancy analyses based on traffic flow are uncommon.
4. Traffic light protocols do not change. Traffic lights have been around for a hundred years, as they clearly win over roundabouts in certain scenario's, and we can expect them to stick around for a while.

If it seems like any of these rules are broken, and a person is waiting just a single round too much, they will get mad, quickly. It may only take a slight cultural change to flip the tide: the more you observe people ignoring the traffic lights, the more likely it is that you will join them.

Some traffic lights give you only an illusion of control, they work automatically but they still let you push a button. This further reinforces the idea of the importance of the social angle: what people subjectively think of the traffic light is just as important as how the traffic light objectively operates.

Lessons for public policy

Governments are all about introducing costs to people (through taxes and laws) in order to benefit society as a whole (through subsidies and more laws). We should prefer legislation which achieves high and easy compliance to the right adjustment.

In order to achieve high compliance, these actions should appear credibly neutral. This is best achieved when the following principles are adhered to:

1. Laws should not mention specific people or specific outcomes. In everyday language: laws should not have political aims. However, in practice there are many laws with clear political aims such as redistribution, or promoting or preventing the production of particular goods. Even when we look at the realm of politically loaded laws, there is a whole spectrum of neutrality: a law indicating that a particular person has to be taxed heavily is different from a law indicating that anyone with a certain high income should be taxes heavily.
2. Laws should be public. In democratic governments the process of making laws is usually public to some degree (but not completely). Approved laws are public, but it can be extremely difficult to verify all of them in order to see what applies to the situations of yourself and those around you. There is a lot to be won in this regard.
3. Laws should be simple. The jungle of regulation which we've found ourselves in can make it seem like there's a long way to go. Profitable companies exist living off of regulatory arbitrage, unfairly favouring those who have become most adept at playing by the rules. Both the extreme tax avoiders and tax evaders place a burden on the moral middle ground.
4. Laws should not be changed too often: this is a balancing act, but one should take into account that change creates a real cognitive cost.

Building any technology can be dangerous, as the first traffic lights showed:

"Although it was said to be successful at controlling traffic, its operational life was brief. It exploded on 2 January 1869 as a result of a leak in one of the gas lines underneath the pavement and injured the policeman who was operating it."

Innovation can be challenging, but let's hope not all of our social technologies have such drastic consequences!