The Light Touch of No Government Regulation                                            Summer, 2011


In the socialist economy of China, government regulation is often as derided, or ignored, as in any of the tea party fantasies coming out of prole-land or Romney-Ryanville.

A key example is elevator operation in China, particularly in the non-western oriented buildings  (meaning buildings that have Chinese oriented businesses, not buildings that don’t have a western wall on the outside).    I can’t really speak to elevator safety, or emergency situations.   I don’t inspect limit switches, or floor leveling software, or cables, or brakes.   I have seen some heat-activated floor selection buttons, which have long been a no-no in the heavily regulated US, but what I really want to talk about is elevator floor selection software.

Back in the good old days, elevator floor selection programs were one of the homework problems for simulation courses in system dynamics.    You have several floors, and varying demands for service coming from those different floors, and pretty much everyone wants to go either up or down.   But some people on one floor could have demands to go up, and others to go down.   And some demand is to go all the way down, and some demand is to go down one floor.  And you could satisfy some of the down demand by chance, as it were, if someone on an upper floor happens to want to get off on a floor where someone who wants to go down is waiting to get on.  And you can have an elevator that has satisfied all its demand, the market for elevator service has cleared, and now the elevator is free as a bird, to do as it wishes.   What should it do?   And you have limited supply of elevators.   You want to serve your customers in the least time – or some other optimization.     It actually is a fairly complicated market problem.

I have absolutely zero knowledge of current US elevator operating software.  No doubt by this time, the programs used in the US are so standard that the tweaking is about how long the doors should stay open, and the tweaking is done by some two year community college graduate in Bangalore.

But you can see the heavy hand of the government in the heavily regulated markets in the US.   Ever try to use the “door close”  button in a US elevator?   Has this button ever worked on an elevator in the US, in the last forty years?   Why do we even have this button, except as a way to frustrate people, and remind them of the heavy hand of the government in the nanny state – “no, you can not choose to close the door faster, because someone might have their feelings hurt by the automatic-safety-sensor-door hitting their purse as YOU try to close the door.”  In China, the “door close”  button works, everywhere, and it works great.

Market fundamentalism works.    Is there demand for the door to close?  Ok, close the door!   No waiting and speculating about how someone’s feelings might be hurt.   Satisfy the demand.

Now I will admit to different operating conditions in China.   There are four times the number of people as in the US, and between 8:45 and 9:00 on a weekday morning, probably half of the Chinese population is trying to get on the elevator to go to work.   And one cannot design the market system to handle the peak demands.   I mean, even at the heavily regulated parking in suburban US shopping malls, there is sometimes no place to park on those peak days before Christmas.   Sometimes, the market just does not clear in a reasonable amount of time, even with government supervision.

And perhaps my experience is unusual, having lived here for only three years and really used, repeatedly, elevators in only about four different buildings.    I can’t claim operating experience in a statistically significant sample of Chinese elevators.   So don’t treat this as a scientific study;  it is anecdotal, only.   Caveat emptor.

But in China, elevator floor selection software is clearly written with the free market in mind.    Yes, the “door close” buttons work;  but it is far more market-friendly for the elevator cab than that.   Supply makes the rules.   No wishy-washy Keynesianism for the elevator cab.    You want me to provide supply for your elevator demand?  Play by my supply rules.

I have figured out the basic operating principle for free market elevator service in China.    It is, in fact, the Marshall Field dictum – the customer is always right.   The current customer, that is.    The customer you have now, in front of you, inside the elevator, is always right; anyone pushing a button on some other floor is only a potential customer;  you don’t know when demand from that customer will just fade away, and you stop and there is no one there.   So, stick with the customer you have, and don’t worry about the future.    Short termism.     That future customer might decide to go to the bathroom while waiting, and you stop, and the demand is gone.  In the meantime, you are delaying your current customer;  don’t do that.    That potential future customer could do something else – walk up or down a floor, and not tell you, the elevator operating software, about their changed behavior; or they could decide to take the elevator in a different building, or something.    No.  Don’t respond to speculative demand.   Dance with who brung you.

US government regulation would probably require some balancing of demand, and consideration of the feelings and the waiting time of the potential customers, and more such.   So there would be more stopping, and more weighing of the demands from future customers.   Not here.

So let me tell you about getting to my regular Wednesday morning location, the architect/engineering office GA in Hangzhou.    Today was a bit unusual, but not so much.

Went to Starbucks early, got some coffee and looked at some blogs and email.  Left for GA.   It took about 20 minutes to get to the GA offices, in heavy traffic about 8:30.   Distance of the GA offices from the Starbucks, about a mile.  But, rush hour traffic,  Ok.     Traffic in China is also free market oriented, but that is another story.

Parked in the basement garage of the office building where GA is located.   Parked on the B2 level, the lower basement, since that is where the unassigned parking is.    Usually, I get to park in one of the surface spots just adjacent to the main building entry, but today, at 8:50, the parking spots outside the building were filled with people (demand) waiting to get on one of the 5 elevators (supply).    In a sign of creeping government regulation in China,  the building manager has changed the way in which elevator demand at the first floor is satisfied.    In the good old days of a few months ago, when markets ruled, the appearance of supply (an elevator door opens) meant a wild dash for the door.   A hundred people would rush the door, and the strongest and closest to the door when it opened would have their demand satisfied.   (People getting off the elevator are former customers of the elevator, so they are old news.   Screw ‘em.   They have to fight their way out from the people rushing in.   Sometimes, I think people wanting to get off just don’t make it.   Not nimble enough for the market. The same is true, of course, for people getting off the subway train.)

Now, the building management has put in red velvet line control ropes, and everyone has to queue up, one by one, to get on the next elevator.   Hence, in the good old days, with survival of the fittest demand satisfaction, all the demand could fit in the elevator lobby in tight balls of humanity.   No one dared stand more than an inch from the person in front of them, or someone would use the free market to cut into the crowd in front of you.  Now, probably with government regulation creeping in, everybody in long straight lines, the demand at the first floor spills out of the building lobby into the parking lot spaces outside, where I would normally park.

GA is on the 11th floor.   I park in the subbasement.  I have 13 floors to go.

I push the elevator button on the B2 level, and wait.   For a while.  

As an American, conditioned to regulation,  I know elevator demand is being satisfied upstairs, I should wait my turn, so some delay is unfortunately necessary.

After about ten minutes, now about 9:00, I get a stirring.   Some long hidden, free market impulse comes over me.    I can play this game.   I am going to outsmart the market.   I will walk up, not to the first floor, where demand is still heavy, but to a different floor, say the 5th floor, where I can guess that some people will be leaving, and upward demand will be pretty close to zero.    Floors 2, 3, or 4 might not be high enough to ensure that some demand will be getting off, but by the 5th floor, I am pretty confident of getting my demand satisfied.

Now that is 7 floors, but in free market China, that is not a problem for most people.  I have seen 7 and 8 floor walk up apartment buildings, so I don’t feel too bad being part of the market demand. 

At 5, I get out of the stairway, and confidently wait for the elevator to satisfy me.   And, sure enough, an up supply elevator soon stops.  Success!

But, you know, the free market isn’t free.   Even in China, there are weight limits to elevator cabs, and when the weight limit is reached, the bell rings, and the elevator won’t move until someone gets off.   And Chinese are actually rather remarkably good about the last person who gets on taking responsibility for getting off, if the elevator cab decides that she weighs a kilogram too much.  Social mores.  And the elevator cabs, knowing that they are the only source of supply, can be pretty finicky about the weight limits.

But we have to keep in mind that market for elevator service works in favor of the elevator, not the customers.   Even free markets have rules, and the rules are written by the friends of the elevator cab, not the customers.  

The pretty full elevator cab stops for me at the 5th floor, and the door opens, but no one gets off.   I try to get on, but the bell rings, and I step off.   Have to wait for more supply, later.

But sometimes, the elevator cab decides that even with no one getting on, it just seems all a bit too much, and the supply chain breaks down.   I don’t get on, but the elevator weight limit bell rings anyway, and the elevator won’t move.   So a girl who probably got on at the first floor gets off, to ease the load on the poor overworked elevator cab.   But the cab is still not happy, and the bell rings again, and the cab won’t move.   So another girl gets off, and the cab is happy, and the door closes.

We now have three of us standing on the 5th floor, waiting to go up.   It is about 9:15 by this point, but demand is still heavy.

The first girl is smart, and finds a way around the market.   She pushes the down button, and supply appears, and she and I ride down to the first floor.  Our other 5th floor companion declined to join us, and waited on 5.  At the first floor, the horde tries to get on.   But we are on the elevator, so too bad for them.   A few of them make it. 

The rest of the ride is uneventful, except on the way up, we stop at 5, for the girl who did not join us on the ride down.   She tries to get on, but the weight bell rings.   Her demand will have to wait until even later to be satisfied.    You have to be quick-witted to survive in the elevator market.

So there you have the glory of market fundamentalism.   Supply tries to satisfy demand, and the market eventually clears, but those most willing to pay, with shoulder pushes and quick wit, still have an advantage over the “queue up” government regulators.    And I now have the advantage of morning exercise, walking up seven floors.   It really is the best of all possible worlds.

Got to GA about 9:25.   Took longer to get up to the 11th floor than to drive to the building in heavy traffic.    But I am happy, because I feel I was able to outsmart the elevator floor selection software design market fundamentalists.

I can play this game.