The Price of Liberty is 45 Cents of MTN Airtime

It’s often said that “the price of liberty is eternal vigilance.”  Usually people mean vigilance against the government.  But after more than 3 years in the nation with perhaps the world’s highest level of personal liberty, I’ve learned that it can just as well mean vigilance against your fellow citizens: people and companies can infringe on your liberties just as well as any government.

A few days before leaving for Christmas break, I’d bought a 50 MB internet bundle on my phone for UGX 1,200 (about $0.45).  Less than 5 minutes later the internet stopped working.  I requested a balance inquiry by SMS and, incredibly, was told that I had used up my entire bundle.  Impossible! I thought.  I hadn’t been syncing documents, watching Youtube, or downloading big files.  My phone data logs suggested that I had used less than 50 MB in that period.  And indeed, with internet speeds of around 100 kb/second, it is practically impossible to have used 50 MB in 5 minutes—the most I could have used would have been 30 MB.

The next day I suffered a similar outrage, when my pre-paid call and text bundle stopped working for no reason, resulting in me getting charged for calls and texts I had already paid for.  MTN never refunded me; that money was just “eaten.”  Like the police who every year before holidays suddenly start working extra hard to “enforce” traffic violations, it seems MTN was also “looking for Christmas.”

I’m not the only one with such experiences.  Whether Ugandan or foreigner, anyone I tell about disappearing data nods their head in agreement.  Airtime seems not to last as long as it used to—or worse, seems inconsistent.  Sometimes 50 MB lasts you a day, and sometimes just a few minutes.

Now I’m not saying MTN (the network operator) is deliberately cheating its customers.  Perhaps they have imperfect systems that don’t always measure data usage accurately.  Or perhaps it’s consumers like me who underestimate our data usage, and blame the company for the results of our flawed mental calculations.  But in the former case, MTN should still refund me for their mistake.  And the latter would indicate that MTN has not done a good job of winning consumers’ trust.

So what’s a vigilant citizen to do?

For a libertarian it’s easy: trust the market, and competition for customers will eventually force such practices to stop.  If a company is artificially inflating customers’ data usage, another more savvy company is bound to enter the market, advertise and execute on fairer and more transparent data charges, and win market share, forcing the dishonest company to adapt.

A follower of Ayn Rand may be even blunter: it is a company’s right to cheat its customers.  Greed is good, and if companies can get away with artificially siphoning off their customers’ airtime, it’s customers’ fault for letting them.  Take time to measure your data usage.  Go to the company and complain.  But if you get cheated, that’s your fault.

But let’s actually think about these arguments for a second.  First, is it really my job to hold a half-billion dollar a year company accountable?  If I want to complain about the UGX 1,200 I lost, it will cost me 10 times that amount (UGX 10,000-14,000) to get a boda to and from the service center, not to mention 2 hours getting there, waiting in line, and getting back—time I could have spent doing something else, like working.  And when I get there, there’s no guarantee they will even refund my money.

In other words, it’s just not worth it economically to complain: I’ll spend more time and money solving the problem than the problem actually costs me.  For UGX 1,200, it’s easier just to suck it up and buy another bundle.

Economists call this “distributed costs and concentrated benefits”: one party gains a lot by inflicting small bits of damage on many.  When you add up the damages to everyone who’s been hurt, the cost to society outweighs the benefits.  But on an individual level, the cost of addressing the damages is more than the cost of the damages themselves, so no one takes action.  In this case, a phone company that arbitrarily deducts $0.45 in airtime from each of its 7 million customers once a month will make close to $40 million a year out of thin air, while each of those 7 million customers finds it cheaper to tolerate the abuse than to stop it.

This is why we have consumer protection agencies and class action lawsuits.  It’s not worth it for one individual to spend $5 complaining about $0.45, but it is worth it for society as a whole to pool $50,000 together complaining about 7 million individuals losing $0.45: establish a consumer watchdog for $50,000 a year, and save a net $39.5 million in losses to society.  Lawsuits work a similar way: a trial lawyer can make a fortune spotting such distributed costs and bringing a class action.  The lawyer gets rich, customers get their money back, and the punitive damages make the company think twice about doing it again.

Even if libertarian approaches did work, do we really want to live in a society that requires such vigilance all the time?  Contrary to the libertarian’s expectation, fewer laws and regulations don’t reduce surveillance and control—it merely shifts the burden of vigilance from the government onto everyone: everyone watches everyone else.

This is what you have in developing countries with low rule of law: you’re constantly on guard, every moment a decision.  Is the phone company cheating me out of data?  Is the fruit lady overcharging me for these tomatoes?  Is the boda I’m about to get on drunk… or a rapist?  If I cross the street when the light is red, will the car heading toward me actually stop?

In the absence of trust brought about by institutions and the rule of law, everyone suffers.  Businesses don’t do deals because they have no way of making sure the other side will hold up its end of the bargain.  People learn to accept small abuses and injustices because it’s just not worth it to complain about.  And injured parties resort to mob justice because there’s no other way to settle disputes.

Laws and regulations don’t necessarily reduce liberty: they can also make us more free by allowing us to focus on doing things we want instead of constantly watching other people and businesses to make sure they’re not cheating, abusing, or otherwise harming us.  We can either spend all our time vigilantly looking over our shoulder, or we can outsource some of that vigilance to institutions that can do it better and more cheaply, allowing ourselves to relax and focus on other things.

Regulations exist so that we don’t have to spend $5 and two hours fighting over 45 cents of airtime.

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2 responses to this post.

  1. Posted by cfp on January 28, 2015 at 4:33 am

    Pretty awesome argument for the role of government in society. You ought to see if you can get this published, after fixing a few things.

    “Is the boda I’m about to get on drunk… or a rapist?”

    What is a boda? Is it some sort of sexually-active, sentient mode of transport, when not in the tank?

    Reply

    • Working on it! The more readers, the better the chance of syndication.

      A boda boda is a motorcycle though being sexually active and sentient, 99% of them are good honest people, although occasionally you hear of one at night driving you to a dark dirt side street to try to rob or rape. The more likely danger is that theyre drunk at night, because that applies even to the good ones. So youve got to get the ones you know, or take one from the “stage”, which is a designated place where they wait for customers

      Reply

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