Well-intended, yet disastrous, public policy proposals

The road to hell is paved with good intentions. Add to those two more by Hussain Nadim in his article, “An open letter to Shahbaz Sharif” (January 24). He has advised the Punjab chief minister to force retail outlets to close early and restrict enrolment in schools to neighbourhood children. If the chief minister’s economic and urban advisers were to be consulted, they, as well as I, will advise thinking through Mr Nadim’s well-intended, yet ill-advised recommendations.

Writing in these pages, Mr Nadim, who works for the Federal Planning Commission, is rightly concerned about the unmet demand for electricity. He has proposed to restrict retail and business operations between 9.30am and 7pm. This, he believes, will reduce the demand for electricity. Mr Nadim’s recommendation is counterproductive on several levels. First, such a move will further concentrate the peak demand for electricity in a narrow interval. If businesses and retail outlets are forced to operate during reduced hours, the peak demand will rise, thus further exacerbating the challenge of powering the faltering economy. When the working hours are spread over a longer period, the demand is also distributed over a longer interval, thus resulting in a lower peak demand. This principle is also the fundamental tenet of transport planning where peak demand for travel is reduced by spreading the travel demand over a longer time interval.

Second, the reduced operating hours will have a devastating impact on the retail sector that employs millions in Pakistan. The very high temperatures during the summer months restrict consumers to their homes during daylight hours. It is only after sunset, when the temperature drops, that consumers can leave homes for essential or discretionary shopping trips. Furthermore, many workers now work until 5pm or later, which further restricts their ability to interact with retail. It would be prudent to monitor the foot traffic in retail outlets that peaks after sunset. It is quite likely that the peak sale period for retail and restaurants is in early to late evening.

Any reduction in retail sales will not only reduce sales taxes, but it will also result in a massive increase in unemployment. Retail clerks are paid by the hour and not by the retailers’ volume of sales. Reducing working hours will consequently reduce the wages for part-time retail employees. This will create a bigger economic challenge than the inability to meet the electricity demand.

Mr Nadim has rightly identified the problem, but the proposed solutions will have unintended consequences. A better approach will be to allow the retailers and businesses to stay open as long as their business models necessitate. The government, however, should price electricity according to the demand by increasing the tariff for the hours when demand is high, and reducing it when the demand is low. In Canada, where I live, smart metres do the same. Our utility tariffs are demand sensitive. We, for this reason, do laundry in late evenings to benefit from cheaper utility rates.

To manage the power shortage and to generate additional revenue, the state should rely more on smart metering to implement demand-sensitive utility tariffs that will allow retailers and businesses to optimise their operations in response to demand-sensitive utility tariffs.

In the same light, Mr Nadim identified yet another legitimate problem, i.e., the excess travel demand generated by trips to and from schools, but has prescribed a solution that can again have unintended consequences. He has recommended that all students should be allowed only to register in the neighbourhood schools to preempt the excess travel demand by private automobiles. This recommendation requires a complete rethink. First, before the Punjab, or any other provincial, government haphazardly enforces such restrictions, the state has to ensure access to quality education at the neighbourhood level. Such quality and access thresholds do not exist anywhere in Pakistan.

Let me illustrate this point with an example from Canada where education is the purview of provincial governments. The District School Boards here provide public schools at the neighbourhood level. The catchment for each school is duly demarcated, and the school-aged children within the school’s catchment are guaranteed admission to their neighbourhood’s public school. Mr Nadim, though, has put the cart before the horse. The state must first provide decent quality public schools at the neighbourhood level before it may restrict education choices for the constituents.

I am currently visiting Punjab. I walk for miles every day to document public sector amenities, i.e., schools, waste disposal, public transit stops and sidewalks, at the neighbourhood level. It is evident from my limited experiment, and the GIS-enabled databases of educational institutions available with the Planning Commission, that there is a serious undersupply of public sector schools of any quality at the neighbourhood level across all districts.

Lastly, one should not overlook the fact that restricting children in low-income neighbourhoods to attend the neighbourhood schools, whose quality reflects the poverty that surrounds them, will perpetuate their misery. The ability to attend better quality private sector schools in other neighbourhoods creates excess travel demand, but it also provide children in low-income neighbourhoods access to quality education so that eventually they may break the cycle of generational poverty.

Local governments may want to consider creating toll-based cordons around schools where cars generate excess traffic to cope with car-based school trips. The toll will not only generate additional revenue for the local governments, it will also force parents to consider public transit alternatives, i.e., jitneys, to transport their children.

In full disclosure, I must state that I am an ardent supporter of Mr Nadim and the young team he has assembled at the Planning Commission. They are full of enthusiasm and dedication. What they need is some experience and exposure to systems thinking to prevent the unintended and hazardous consequences of good intentions.

Published in The Express Tribune, January 30^th,  2015.

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