Culture Matters: Pakistan’s Electric Power Problems

From the NYT:  Pakistan Faces Struggle to Keep Its Lights On


 I think I found the problem

From the article:

Electricity shortages, bad for years, have reached crisis proportions. Lights go out for at least 10 hours a day in major cities, and up to 22 hours a day in rural areas. As the summer heat pressed in suddenly last week — touching 118 degrees Fahrenheit in the eastern city of Lahore — Pakistanis again took to the streets to protest the chaotic state of the country’s power delivery system.

How hard can it be to keep the lights on for more than a few hours per day?  Quite hard, as it turns out, when culture conflicts with the requirements of public infrastructure.

Here’s the recipe for dodgy power:

1.  Electric power production requires large amounts of capital and ongoing maintenance.  Somebody has to plan ahead and husband resources.

2.  The marginal cost of producing a KiloWatt-hour approaches zero, so every individual can argue they shouldn’t have to pay for it.

3.  It’s easy to steal power, and there are few consequences, other than getting free power.

4.  Billing usually occurs after consumption, so payment and consumption are not strongly coupled.

5.  Politicians look unfavorably at cutting off customers for non-payment, further distancing payment from consumption.

6.  The long tradition of corruption in the private power sector siphons off much of the public investment.

In short, providing electric power requires large public infrastructure spending but Pakistan suffers from the free-rider problem, the tragedy of the commons and public works corruption.  The result is a crippled economy and even those who want to pay for reliable power cannot.

Of course, the rich, with a lower discount rate, route around the failing public infrastructure by building their own private power generation, further reducing the constituency for public infrastructure, but now even these private efforts are feeling capacity constraints.

Everybody loses, and the lights and air conditioning are out, but at least you don’t have to pay an electric bill.

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