Every science has its greatest thinkers, and, in economics, Nobel Prize winner Paul Samuelson was one of them. Famously asked what economics had ever given the world, he plucked out the theory of comparative advantage, which shows that if we all do what we do best, and trade, we all end up richer and with more in total.
It’s thinking that has changed our world, driving the World Trade Organisation and the thinking of every single regional trade organisation. However, in that one example, Samuelson actually shone a wider light on what economics has given us, as its analytical frameworks. For, when we think like economists, the science of wealth will usually lead us to wealthier outcomes.
In this, perhaps the very foundation of delivering a developed economy is the cost-benefit analysis. If we are to make a change, what are the costs and what are the benefits? Or, as business journalists generally apply it, who will be the winners and the losers? Well, let’s look at traffic into our Central Business District.
Recently, we saw traffic changes announced for our city centre. On Wednesdays and Saturdays no traffic will be allowed into CBD. Instead, the streets will be left open for hawkers.
I may have misunderstood this, but what I imagine this means is that every Wednesday, we get in CBD a huge, winner-takes-all kind of city market: an open zone for street trading.
I imagine it won’t be a free-for-all, and that the Nairobi City County rules will be applied to hawkers’ licences. Thus, a first winner will be City Hall. The implementer gets a revenue boost.
Or does it? As it is, parking charges are Nairobi’s largest earner by a long way. Moreover, CBD is an empty place at the weekend. So I am sure a first analysis by the county government was of the funds that will be lost in dropping a fifth of its CBD parking income.
The county government must be sure that the surge in hawkers’ licences will more than offset the drop in parking revenue.
But what drives hawkers to pay for a place? Sales, and that means foot traffic. And what defines foot traffic in CBD? Well, the number of businesses there.
Now, all those businesses also pay rates to the city. But that Wednesday traffic stop is going to hurt them somewhat. No couriers. No deliveries on Wednesdays, except to the edge of CBD? No outward-bound dispatches. Many are paper-based businesses, and increasingly electronic in their invoicing, transfers, and document delivery.
But as the CEO walks across town to his office, in what may be his first and longest CBD walk this decade, and keeps doing it Wednesday after Wednesday, that CEO might gain a new love for Upper Hill, or Westlands, or really anywhere that doesn’t lock out his vehicle every Wednesday.
As it is, CBD, once the most glamourous quarter of our city, has been likened, at times, to Johannesburg’s CBD, which emptied to peripheral business areas, until it became so empty that former office blocks were used for the homeless. Our own CBD is far from becoming our ‘run-down inner city quarter’. It still holds some financial prowess.
But start knocking 20 percent off business activities galore, and adding more inconvenience and hassle, and there are other areas with allure. Does it matter if CBD empties commercially? Not so much. The county government gets the rates from Upper Hill and Westlands too – unless businesses relocate to Tatu City or other sites in Kiambu, and then the win is Kiambu’s.
So did the City take a look at the business impact – let alone the traffic impact every Wednesday after our day of traffic chaos some weeks back?
But of course it did, so it will be fine. Kiambu will have no extra cause to cheer at Nairobi hurting its own heartland, and we won’t all of us suffer new traffic horror every one day in five, and the council will do fine without the parking income, and our CBD-based CEOs will get fitter and renew their connection with our city streets. All good. So that’s how cost-benefit analyses work. Pretty much.
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