Incentives

Incentives.

Let's speak about them, and how they are (mis)applied in public policy. I promise to try and not be boring.

One. The powers-that-be have decided to, yet again, spend billions of shillings on a new traffic light system for Nairobi. This is after hundreds of millions of shillings were spent in the last few years for traffic lights that are routinely ignored (and actively countermanded by traffic police officers). Why haven't the different generations of lights not succeeded in controlling Nairobi's traffic? Why are grossly underdeveloped economies able to have traffic lights that work? Incentives. If you obey traffic lights in Kenya, you will be a) hit by other motorists b) run over if you're a pedestrian c) get insulted by a police officer, or worse. Since the incentive is to not obey traffic lights, then it follows that investing more in the lights will simply be a waste of money, and traffic will not improve.

Two. The government this week, yet again, launched pre-paid commuter cards. They have been launched multiple times, including when the President famously (and photogenically) took a matatu and paid for it with a pre-paid card. Companies as astute and wealthy as Safaricom and Google got involved, but it still didn't work. Why? Incentives. While policymakers claimed to have spoken to and involved all stakeholders, they did not involve the most important ones - matatu crews and commuters. They spoke to matatu owners (who obviously have an incentive for transparency in fare collection), the government (which will be better able to collect tax) and technologists (who will sell and maintain the systems). Matatu crews, on the other hand, have an incentive to continue working with cash. They can cream off the extra, they have money for bribes, to katia schoolgirls with, and the like. When they were forced to adopt the system, the results were obvious - they sabotaged it. But policymakers have gone back, yet again, to launch the cashless system for commuter transport.

Three (and a positive one this time), on page 6 of today's Business Daily. Members of Parliament have proposed that famine relief be given in the form of cash. On the face of it, we can be very cynical about it (especially the potential for abuse). However, the way famine relief works nowadays is for the government to buy (or beg for) food in bulk (tenerpreneuring, anyone?), with little cost or quality control. Often, the food ends up being controlled by a bureaucrat who can abuse their responsibility (show us your voter's card, or party membership card, before I give you a gorogoro of maize; or even worse). Additionally, studies have shown that relief food landing in an area destroys local markets, and pauperises local farmers and food traders, even when the weather situation improves. When relief is done through cash, there is an incentive for local food producers to improve local markets and access.

Four. Nairobi is currently facing water shortages in its taps, purpotedly because of the ongoing drought. At the same time, though, the blue water bowsers are in business, distributing (guess what) water. When I asked how they can still be in business on Twitter last week, I was told that they draw their water from boreholes. What no one said was that boreholes tap into groundwater, which is a shared resource (think of a vast underground lake). When people draw on it willy nilly (flower farms, fancy new estates, water bowsers) without a reflection of the true cost to all, the water table collapses. Ask residents of the Ngong' area in Nairobi how far down they have to drill now for water, vs. what it was a few years ago. People cleverer than I have called this the tragedy of the commons. I'm not very clever, so I'll call it what the theme of this whole discussion is:

Incentives.