Jan 15 2008
Behold the Nano - “the people’s car”
Published by Jason Welker at 9:50 pm under
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WikipediaThe Nano comes with its own moral dilemma. - By Anne Applebaum - Slate Magazine
Tata Motors of India recently launched the world’s cheapest automobile, the Nano.
“…meet the Nano, possibly the most significant new car of the decade. Small, cute, and snub-nosed, it fits four people and a duffel bag, has a single windshield wiper, travels at 60 mph, and it’s all yours for the princely sum of $2,500…”
Tata plans to build and sell 250,000 Nanos this year in India, spreading production to Africa, South America, and Southeast Asia. Clearly the company is targeting not the traditional auto markets of Europe and North America, rather the regions traditionally thought of as poor and thus not associated with auto sales.
What is the meaning of this “car for the masses”? At first glance, it looks like the perfect solution for bringing millions of the world’s poor (if not super-poor) closer to the dream of achieving a quality of life previously only accessible by the world’s middle class and rich. Great, so what could possible be bad about fulfilling the dreams of so many of the world’s poor? The answer? Externalities…
“Though the small Nano uses less gasoline than many larger cars, the enormous potential numbers could mean an equally enormous environmental impact. Since it will be a long time before Nano drivers will be able to afford the $20,000-plus hybrids now on the market, let alone a Honda FCX Clarity, the prototype experimental hydrogen car thought to be worth as much as $10 million apiece, that means an exponential rise in carbon emissions as well as other kinds of pollutants. The United Nations’ top climate scientist, Indian economist Rajendra Pachauri—chair of the Intergovernmental Panel on Climate Change, which shared the Nobel Peace Prize with Al Gore—has said he is already “having nightmares” about precisely this scenario.”
Herein lies the moral dilemma of the Nano: where does society’s desire to improve the lot of the world’s poor come into conflict with society’s desire to to improve the environment and minimize the impact global warming?
What do you think? Do the social benefits of a $2,500 car exceed the social costs it will likely impose? Does the Nano’s $2,500 price incorporate the full costs that its existence places on society and the environment? Should we jump for joy at the thought of millions upon millions of the world’s poor finally having access to the convenience of automobile transport? Or should we pause with uncertainty to contemplate the effect on the environment and the social costs that millions of cheap cars will impose on the world?
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About the author: Jason Welker is a teacher at Zurich International School in Switzerland, where he teaches Advanced Placement and International Baccalaureate Economics. Jason was an international school student in Malaysia before studying economics at Seattle University then earning his Masters in Education. He calls Seattle and Northern Idaho home. In addition to maintaining an economics wiki and this blog for economics student and educators, Jason also gives presentations on using Web 2.0 tools in education at workshops and conferences around the world. His economics wiki won the 2007 "Best Educational Wiki" award from the "EduBlog Awards". 
In a way, the $2,500 is a great improvement for the lesser developed countries because now, the poor people can have a easier way of traveling. However, this car would be emitting a while lot of pollution into the air each minute it is being used.
Although I can see the great environmental concern, every single product that people use and probably will ever use are going to have some sort of externality. I don’t think that just because this car would be polluting the air, they should stop manufacturing it. The Nano might be polluting the environment but it is certainly helping a lot of poor people. Maybe the company should set a limit as to how many cars it can produce and sell and compare that number with the amount of pollution that the cars will give off. Then find a balance between the two so that the poor wouldn’t completely suffer for the health of our planet. Even though pollution is an extremely dangerous issue at the moment, we can’t also completely disregard the poor people.
In China, we see a lot of people who cannot afford cars to be riding bikes or those scooters. So, if all those people buy cars, I would think many negative externalities would arise. For one thing, pollution will definitely increase because there’s more cars in the roads and those cars replaced the bikes and scooters that emmitted less fumes than cars. Also, the roads would probably have a lot more traffic due to the fact that more people are able to afford cars and drive them.
I agree that companies should set a limit as to how many cars it can produce and sell. In cities, like Shanghai though, I would think it’s best for the government to provide convenient public transportation like more subway lines or bus routes; I’m not sure whether or not the pollution caused by the subways and more buses is the same, less, or more than the pollution caused by the potential number of cars in the streets due to the availability of the Nano, but it would definitely decrease the potential traffic in the streets.
Obviously, nearly every “good for the poor” program or technological advance has its positive and negative sides. In this case, as said, the pollution added into the atmosphere would increase by a huge degree because so many more people could afford the car, especially in countries where the majority of people are unable to afford cars now. Also, the traffic on the streets would be incredible. Right now, it is already ridiculous with the majority of shanghainese people riding bikes and scooters. Imagine if they all transfered to cars. No one would be able to get anywhere.
While this might sound exceedingly hypocritical, this car is a blessing to the poor in the short run, but an abhorration to everyone in the long run. The more cars people can afford, the more gasoline we will consume. More gasoline = more pollution = the quicker our world comes to a demise. Also, the negative externality includes time as traffic is bad enough in places like Paris or Shanghai with relatively cheap cars. With this new Nano car, people will never be able to get ANYwhere due to traffic jams.
The problem lies in the fact that people cannot really condemn this car. On one hand, people are talk about the negative effects on global warming due to these massively available cars, but on the other hand, no one has been condemning the “rich” people who have been driving polluting all along. So where is the equality in this? If the poor are not allowed their cars, then neither should the rich. How to find the balance?
I think that the externalities of this car clearly outweigh the benefits that it brings to society. It’s easy for one to think that it would be great for everyone to have a car. Upon further thought, however, I think what everyone really means is that it would be great for themSELVES to have a car. When the image of every single person in already overcrowded and poverty-ridden India driving on the streets comes to mind, it comes along with a picture of terrible traffic jams, pollution and general chaos on the streets. Is it really worth it just for the sake of more people being able to get a car right now? I think not. Why not just keep working and saving until you’re able to afford a better, safer, more dependable and environmentally friendly car with better features, and until then help society out by taking public transportation? If you’re only able to afford this nano car, then you probably don’t need it anyways, based on the assumption that wealthier people travel more.
This poses a very interesting problem and is difficult to approach from an unbiased point of view. I, for one, believe everyone has the right to drive. Certainly an obstacle would be the fact that a $2500 car probably does not have an efficient engine. If anything, it would spew out carbon monoxide like crazy. A quick appraisal of the possible externalities would result in the realization that if ONE BILLION or more people each get a car with a lousy engine, the world’s life is doomed. We have witnessed firsthand in Shanghai the results of the masses being able to afford cars; that is, overcast skies and a funny smell in the air. I really, really don’t want to sound like a hypocrite because I will one day buy a car for myself, but giving so many people cars is a terrible idea. What WOULD work is the implementation of cheap electric bikes or cars; China has already developed the former. Then we can bring the joy of speeding on public roadways to everyone!
I agree with the six comments above that a car that cheap on the market is a negative extrenality. This will lead to more people buying cars which will thus create for carbon dioxide emissions, which will further doom the world. The car’s price, at a scary price of $2500, would be more affordable to many people in more poverty-stricken areas such as China, India, and Southeast Asia. To some people who don’t know about the detrimental effects of carbon dioxide, they will probably think a cheaper car is a good idea and that more and more people are thinking about them. To a person who is better educated, this cheap car presents another obstacle to the ongoing fight against global warming. Another problem with this car is that it probably lacks sufficient safety features which would cause huge problems with potential wrecks and deaths. This car might be beneficial in the short run but will prove disastrous in the long run.
Well, it looks like cheap cars help realize poor people’s dream and they need even less fuel than larger cars, sounds perfect. However, launching this new, cheap, less-consuming car will create negative externality in perspective of environment. Low price of the car will attract millions of people to buy this car and the number of drivers will increase. Even if this Nano consumes less fuel than larger cars, sum of the fuel used by increased drivers will cause even serious pollution. In social perspective it might look beneficial, but in economical perspective it is negative externality.
Yeah, i agree with the other comments. Although providing transportation to the masses may be good for some, in the long run, externalities such as pollution, and increased traffic will ultimately lead people to find a new way to get around the city. Just like the pie store analogy, increased use of a former higher class good will result in high costs for those users which should cause more people to exit the market for cars and end in equilibrium in the long run. Since there is little chance for the banning of this car, we can only hope that the time it takes for the market of the cars to equilibrate is not so long that the environment gets damaged.
Although unbelievably cheap cars on the surface seem beneficial to allt he poor third world countries out there, we must also incorporate the potential environmental disaster it can bring on. This cheap price will attract even MORE drivers to buy cars and as a result, the cars running on the street will increase. And what does that mean? More pollution, of course.
wow! I want to have it. cheap and.. use less fuel… the point for me is the price.. ^^
I think this is really good idea, I think this should target whole world rather than undeveloped countries. price of the fuel is increaseing and not for china and america but for Korea too many cars in small country, it is causing huge problems. America and china should use this car for using less fuels but for Korea this is really good in two ways so.. I think it will be better to target Korea!!
Indeed it’s a moral issue we are dealing with. The creation of the NANO has both spillover costs and benefits, millions of people driving the NANO and creates CO2 which would damage the Earth and contribute to the global warming, or on the other side, it helps all the poor people to get around the world easier. This is a great dilemma, which people will have to rely on government to act upon it
The introduction of the cheap NANO is definitely a negative externality, as the whole world would have to suffer as a result of the people in Africa, South America, and Southeast Asia gaining access to automobile transport. Although I highly doubt this would ever happen, I think the NANO should be banned. The world has finally come to realize the detrimental effects of carbon emissions, yet a new automobile that only costs $2,500 is about to doom the world. Shanghai is already suffering from too much traffic and pollution due to a relatively small number of cars on the street… what would happen if everyone in Shanghai started drive..?
Responding to Jeewon’s comment on that “NANO is definitely a negative externality.” Personally, i agree to what Howard said. NANO invention is a spillover benefit for the society among the pooors; cars become more affordable, allowing more convenient transportations, thus allowing the pace of this economy to speed up even more. However, on the other said, as people mentioned, it contributes even further to global warming. Therefore, if possible, they should create smaller vehicles or automobiles that doesnt burn much fossil fuels. I mean, it is good to solve the living condition problems for the poors, but overall i think the cost is exceeding the benefit here.
I believe that this “NANO” is both can be viewed as both having positive and negative impacts. For the positives this cheap $2,500 definitely helps citizens of underdeveloped and developing nations to have an easy access to both cheap and convienent transportation. However like mentioned in the posts above me, this alternative to cheap transportation has a cost, primarily in the environment. With more people instantly being able to purchase an automobile now the gas outputs globally would only increase dramatically, and the burning of fossil fuels will continue to rip up our ozone layer causing global warming.
I have never really thought of two equally important movements having a clash with each other before. As of me, I support both causes; economic development is an essential goal in many countries that seek to reduce world poverty. But at the same time global warming and pollution is also a huge issue that is currently spreading throughout the world. This might sound ambivalent but I believe both are equally important issues and I can’t really choose between them.
Reading this article from an economist’s perspective, the production of Nano will greatly increase the economy of poor countries. Like it is stated in the article, modern means of communication and transportation will eventually make the poor richer and world poverty will be no more. Although the idealistic balance of wealth is impossible, at least the production of Nano will shorten the tremendous gap that exists between the rich and the poor in the world. And the demand for the car will be incredible! Just imagine; all the poor people in the world will start dreaming of this car. The demand curve will shift…. I don’t know… OUT OF THE GRAPH!!
But from an environmentalist’s point of view this sounds disastrous. Further opportunity for transportation means more carbon emission and air pollution in the world. I also doubt that Nano will be an environmentally friendly product. In order to reduce cost to make up for the low price of the Nano, it is possible that the production of the Nano itself is harmful to the environment. Nano is yet to be popular in the world of the poor and its effect on the environment is yet to be known. Normally what happens with an environmentally unfriendly product is the demand curve of the product will decrease because consumers understand its impact on the world and will start boycotting the product. But in the case of Nano, poor people are given the first time to ride a car of their own! SCREW THE ENVIRONMENT!! It lasted for more than a century after industrialization, it can wait a few more years!!
Wow, now that I think back, Nano will leave a huge scar on the world, despite its positive effect on the economy of many countries. I guess what one can only do at this stage is hope for a car that is both CHEAP and GREEN to be on sale soon before the earth too starts dying of cancer.
Further note: smoking is bad for you. It destroys you and the world.
As an economic player, Tata Motors’ actions are understandable. It sees that its benefits are greater than its costs and so it targets the countries that are longing for cheaper cars, with the illusion that having cars will make them “modernized”. However, the cheap prices on these Nano cars are only numbers and do not take into account how much these cars will harm the environment. It can be argued that cars will create more efficient transportation, but will more cars on roads really make transportation quicker? Cars are more readily accessible, but traffic jams don’t seem efficient to me. If a price tag were put onto the car’s harm to the environment, the benefits of the Nano car certainly would not outweigh its costs.
Personally I think this scenario might be unworkable because, as we know, fossil fuels are dwindling, so if these new cheap cars bring millions of new drivers on the roads, the gas price will rise to such an extent that the poor can’t afford the convenience of a car anyways. If it takes that much trouble to bring ‘convenience’ to those masses of poor people, I say why not improve the railway system or buses instead. Eventually, these cars will just end up in a junk yard because of a shortage or overpricing of fossil fuels.
I certainly believe that this is a situation where global warming is much more important to protect rather than the poor’s needs. Don’t get me wrong, I don’t have anything against them, but if these automobiles are capable of being mass-bought like the company making these Nano’s claim, then there is no doubt that carbon dioxide emissions, and therefore pollution in general, will dramatically increase. On the other hand, by NOT doing this, society will be saving their own world, one where the pollution has not yet reached incredibly high levels. This clean enviornment is also a benefit to the poor people. So in both ways, the poor do not get harmed.
As everyone probably already stated, the negative externalities of this car greatly outweight the benefits in the long run. There are many ways to help the poor get around, including improving public transportation, there is no need screw up our environment more than we already have. The poor having been getting around before the nano, and they can continue doing it without it. As cruel as that sounds, if it comes to the point where the environment is so beat that the natural system comes to a halt, that’s not going to make anyone happy.
I think the cost of this car definitely exceeds the benefits. Even though it improves poors’ living condition in poor countries, but it clearly increases the pollution in the world. Now, we all concern about global warming, so first thing is to solve its problems but not make more troubles. However, increasing numbers of people having cars definitely worsen our global warming task.
aw cute! I would want to have one of those cars. Cheap and cute =) Anyways, back to the discussion question. I think selling cars to the poor people in a massive amount is a dangerous thing to do. The profits only go to the creator himself and the indsutry workers, whereas the whole negative externalities go to people in the whole entire world. I am thinking, why would they want to sell automobiles to the people who did not need cars for the whole century till now? They are creating the opportunity costs, negative externalities just to fulfill their own benefits. Although what Im thinking might sound pretty extreme, I think this is just making the whole entire world filled with smoke due to the gasoline coming out of all cars around the whole world. By starting the sell for the poor, due to the determinants of demand the will to buy would increase among all of these countries, and the demand will more and more increasing resulting in a chaos! I think this is a very dangerous idea. I hope they rather sell this car to the already auto associated countries such as Europe and other rich or middle-class(?) countries.
They aren’t going to be selling millions and millions of cars this year. They are going to be selling 250,000 cars. The United States alone has around 243,000,000 passenger cars registered. An increase of 250,000 cars is negligible (around a 0.1% increase). Considering that they probably have patents on the Nano, this means that entrance to the really really cheap car making industry is blocked, and Tata has a monopoly.
We learned in econ that monopoly’s tend to underproduce their products, so even if 1 billion people can buy it, that doens’t necessarily mean that 1 billion people will own it.
What a dilemma…but for the sake of global warming, I would say that the cost of millions of the underprivileged driving in cars outweighs the social aspect of the Nano. Yes, it is true that now many more people would be able to own cars, but there are still lots of others ways to get around that are inexpensive and better for the environment. I agree with Rebecca in that the government should be improving mass transportation instead of having most of the population drive cars (think about the traffic and pollution!). And the countries where the Nano will be released are countries that are less developed and centers of manufacturing for the world - more cars would mean more pollution…as if there isn’t enough already. Even though the Nano might emit less exhaust than your average car, the fact that it’s very inexpensive (thus many will be able to afford and probably purchase) will mean that the Nano will be sold to a larger population than normal cars in a given location; the pollution emitted by Nanos could eventually even out with the pollution caused by normal cars.
Yeah, lots of cars means lots of pollution and the fact that its super cheap doesn’t help a bit. It probably will be a successful car in terms of number of sales, but its still just a really small car, not a hybrid or electric battery operated environmentally friendly car or what not. I think the use of such a car is limited by the fact that its tiny, therefore the engine is tiny as well, therefore it probably wont do very well in driving cross countries in Europe and America, etc. Also it seats four and a duffel bag…sounds roomy and how safe is it? from what I can see, it looks like if this thing hit an object or vise versa, it would be obliterated.
Being that I’m half Indian let me give some insight. This car will not be the solve all solution to all Indians. It is simply an upgrade from the already horrendous “auto-rickshaws” currently existing, which put out much more CFC’s than currently exist. There are already many cheap cars in India. if one ca afford a car one can afford a car this car is not that cheap that so many people will be opened up to cars, instead it simply allows for more cars to be used in less time. For now we are safe, hey maybe the roads will get more clean,and the traffic will move better, but in the long run we should be careful that more cars aren’t put on the road. But this particular car will not cause the world to explode.
Personally i think the creation of NANO has both positive and negative sides. It’s positive because now more of the lower class people will be able to afford buying a car, it somehow helps raising the poor people’s living standards. However, on the negative side, as more and more people are driving, the pollution will become worse and worse. Oil will become more expensive when more people are demanding it; one day the poor people won’t be able to pay for the high oil price, so what’s the use of having a car?
If we’re going to stop the production of cars anywhere, it should be in the developed nations. There should be international laws that put a cap on the number of models that can be produced by one company each year or every several years. To have new cars be made each year and bought by developed nations is a waste of energy when they have perfectly functioning cars in the first place. I think that the nano should go on the road, but I also think that legislation from the international community should be jointly created to add heavy taxes or even create legislation that puts a cap on the number of cars that can be sold in developing nations every year. I think that the nano should go on the road because there are people that need it, and they deserve to have the right to drive a car that they need and contribute to carbon emissions, because since their world is being ruined by the developed nations of the world, they might as well indulge in some of the “fun” too.
Overall, I think the social benefits of buying a Nano exceed the social costs. For one, it gives poorer people a more efficient form of transportation. Just imagine all those bikes in Shanghai being replaced with these minicars. But more importantly, these new cars are environmentally friendly. Global warming is obviously a huge issue, and these cars would be a step toward solving the problem. It will be interesting to see how the Nano does in the near future. This is the first car I have ever heard of from India..
Many think that the launch of the Nano would be beneficial to the economy, especially for India, where everyone storm around the city road on scooters. It is believed that cars can help everyone travel faster and thus more efficient.
But the situation isn’t quite the same. I personally been to India before, and I have to say, the traffic is just horrendous. The roads are too narrow for the amount of traffic; there are no line indicating where the cars should ago; people on scooters going all over the place like a bunch of bandits. It took us like an hour just to travel 4 blocks. It is bad enough already, so I assume it will be even worse after the launch of the Nano as the road will be even more pack than ever.
I think India should build more public transportation such as subways to reduce the usage on public road. As far as I know about India, more cars wouldn’t do much on the economy at all. It also creats negative externality such as pollution.it’s going to be bad since India is so populated but only a small fraction of them own a car.
It is certainly wonderful that an affordable, small, and smart car has been developed. The only problem is that the car probably came out at the most dire time period when all of the “socially conscious” individuals are worried about the consequences of global warming. Even oil companies, namely Shell, are advocating efficiency, green energy, and eco-friendly products.
(sorry, my previous post was cut off) Thus, it is clear that there will be strong opposition against the launching of this car. However, one should also take into account the hypocrisy of individuals who criticize developments of cars that will, whether they are fuel efficient or not, provide means of transportation to countless people around the world. Do all environmentalists ride in hybrids, carpool, and remove all plugs when not using them? Probably no. Thus, it is clear that NANO, despite its flaw of not being eco-friendly, should be commended as it has its own merits. Like the article says, it will bring those who have only dreamt of driving in their own cars, “closer to the dream of achieving a quality of life previously only accessible by the world’s middle class and rich.” However, I do realize that the prominent flaw will also lead to exponential increase of pollutants. Thus, I believe that the socially optimum choice would be to create more efficient public transportation to satisfy those who need transportation as well as to meet environmentalists’ demands.
Now that “the nano car for the masses” is produced, it is good that more people are going be enjoying the benefit of having their own vehicle. But there is one problem in the invention of this affortable car, which is pollution issue. Even though the sale of this nano car will produce benefit for many people who didn’t have car, but it will also create negative externalities on the society by creating pollution of air. And we really do not know whether the MB of producing the car exceeds the MC of increased air pollution. So the better way to solve this problem, as many people have suggested above, is to create more public transportation, which will satisfy the need of transportation for the public and eliminate the potential damage of air pollution.
all your comments are selffish. if any of you drive a car whos to say the next man cant, lets make cars more expensive bye decreasing production. this whould skyrocket demand and of course prices whould not be cheap. even for the middle class. in detroit people buy 500 dollar cars and drive them. why. cause our public transportation system is a joke. people NEED to get to work to feed there family and pay the rent. and detroit isnt a bike friendly area. i know, no sidewalks in half the areas, and hell no you want to peddle your bike on the street, thats almost suicide in some places
plus at 2500 not all the poor will drive them. the lower-middle class might drive them. but the lower class is stuck paycheck to paycheck to feed and house. and if they can get to work on a bike they whould damn well do it even with the car option there., untill the cities become less bike friendly with odd roadwork.
the price of oil and to fork over 2500. ha i doupt most the poor could afford THAT. if they are driving its a beater, and replacing that beater with a smaller new beater whould essentially be better.
but still if everone held true to this “not everyone can have a car” idea. is like saying the poor have to exsist to make the rich richer, and trickle down to the middle class. and we should keep the poor, poor.
perhaps a 2500 dollar electric powered 2 seater whould work much better. lightweightness whould be a plus, downside whould be you whouldnt whana be hit bye any car or truck. thats instant death