Today in weird economics we begin with the first thing that annoys me when I leave the house. Bored of traffic? Here’s how to understand it.
Kenyans subscribe to the capitalist spirit of ‘time is money’ and are therefore severely annoyed when they find themselves stuck in gridlock. Firstly, an economy is measured through the total value of final goods and services produced within its borders; therefore, an economic view of traffic congestion should be within the perspective of its effects on economic measure.
Who benefits from traffic?
Oil companies are one of the major beneficiaries of traffic congestions as a significant amount of fuel is consumed during traffic congestion. According to KRA the government has witnessed a 2.8% and 8.3% cumulative increase in revenue from petroleum and diesel taxes respectively. There also exists informal traders within the gridlock and the rise of traffic update websites and businesses.
Time is money?
Kwame Owino, CEO of the Institute of Economic Affairs, estimates 58 Million shillings lost per day due to unproductive hours in traffic. Well you can’t lose money you never made. As for Time, it has recently been deemed an economic resource and studies have been conducted on its allocation as a factor of production. It is an important assumption that the average capitalist Kenyan applies more precedence in the allocation of work time as compared to leisure time. This is because the during leisure time (or resting time) the individual does not take part in the consumption or production of goods and services and therefore ceases to be an economic agent. Work time is barely affected by traffic congestion as leisure time will ultimately take the brunt. By reducing the amount of leisure time and consequently increasing the period the commutor becomes an economic agent the economy becomes a major beneficiary.
So, is the government content with traffic congestion?
Yes and no. Pressure to alleviate traffic congestions originates more from political motivations as traffic efficiency is a regular among the campaign promises club, not to forget the corruption perspective. But from an economic point of view, rapid economic growth corelates with heightened traffic congestions as can be seen with all high GDP cities. Increased congestion beyond a limit wades as into the subjective waters of welfare economics where quality of life of individual within the commute is adversely affected and economic growth is decelerated.
Matthias Sweet, an assistant professor at Ryerson University suggests that it is not economically efficient for a government to invest in infrastructure unless this limit has been surpassed. As it is a nearly impractical task to completely isolate the impact of traffic on job growth, only casual estimates can be made. Sweet however puts the figure at four and a half minutes past the free flow of traffic. The average time in which a commuter in Nairobi takes to get to work or school is 55 mins with the average distance of 18km. This is way past Sweets estimated threshold and promotes the argument that investment in roads and othertraffic related infrastructure has been long overdue. It is crucial to note that there is no level of congestion that outright halts economic growth.
How much money should be spent on infrastructure?
World bank report as of February 2019 stipulates that 4.5 percent of GDP should provide an adequate infrastructural budget for developing nations. A further 2.7 percent dedicated to operations and maintenance. Nairobi county budgetary allocation towards public works transport & infrastructure stands at an estimate 19.34 percent of its budget. I understand the need to close down the infrastructure deficit but it seems to come at the cost of other projects with greater potential to boost the cities economic growth rate. An example is the amount allocated to trade, commerce, tourism & cooperatives which stands at 2.798 percent of the counties revenue. This represents a classic scenario of misplaced fiscal priorities.
We may need to remind ourselves that economies existed and thrived long before the invention of automobiles and the inconvenience of commuting through automobiles remains just that, an inconvenience. To put it simply, we have bigger fish to fry.
