Time to come clean on the state of Kenya’s public finances

We currently have a serious case of the common pool problem as far as the management of our public finances are concerned. Different departments within the national government operate wastefully without centralised supervision. The county governments are dens of corruption, with even mid-level staff now claiming allowances far greater than their official salaries. If we do not staunch the haemorrhaging of public resources we risk serious fiscal troubles in the near future. But because of the nature of common pool problems, it is not a guarantee that the elite will fix the situation before it is too late.

Let me explain why. An example of a classic common pool problem in economics is one in which different fishermen try to extract fish from a lake. The resource (fish) is only sustainable if each fisherman extracts only a reasonable amount of fish and allow for the resource to naturally replenish itself. Under these circumstances, the effect of excessive fishing by a single fisherman may be unnoticeable. Without any system of sanctions against overfishing, individual fishermen will be incentivised to overfish, at the margins. This may not be harmful if only a handful of fishermen do it. But the combined overfishing of all the fishermen produces a bad result – a permanent depletion of the natural resource.