During my time navigating the vibrant streets of Lagos, I often found myself observing patterns that defied conventional economic wisdom. What initially appeared as disorganization or inefficiency hinted at something more complex, a hidden logic beneath the surface-level ‘wahala.’ It was there, amidst the bustling markets and intricate social dynamics, that the idea of ‘wahala economics’ began to take shape for me – a lens through which to understand the underlying, often unconventional, economic forces at play in such environments. It’s about recognizing that what looks like chaos might actually be a rational, if not always optimal, response to a unique set of constraints and incentives.
Consider the real estate market in Lagos. An outsider might observe seemingly high property prices, perhaps juxtaposed with visible signs of economic hardship. Scratch a little deeper, and you might hear about the lucrative returns some are making through platforms like Airbnb. This visible success, even if enjoyed by a relatively small fraction of property owners, can act as a powerful signal. The perceived profitability of short-term rentals creates an impression of high returns across the board. Consequently, buyers and investors, perhaps lacking granular data on actual Airbnb occupancy rates and profitability across different properties, may bid up prices, not just for Airbnb-suitable apartments, but for real estate more broadly. What appears ‘irrational’ – higher prices even for properties less suited to short-term rentals – becomes a rational response to the distorted incentives created by the highly visible, though potentially unrepresentative, success of some Airbnb ventures.
This phenomenon in the Lagos real estate market isn’t an isolated quirk. Across ‘wahala economies,’ you often find that the incentives themselves are skewed in ways that would seem counterintuitive in more conventional settings. What might appear as irrational behavior – individuals making choices that don’t maximize standard economic utility – often becomes rational when you understand the distorted incentive landscape they navigate. For instance, in environments where trust in formal institutions is low or where scarcity is pervasive, seemingly ‘inefficient’ behaviors like hoarding resources or prioritizing immediate gains over long-term investments can become logical responses to the prevailing conditions. The actors aren’t necessarily irrational; their rationality is simply calibrated to a different, often more challenging, set of incentives.
Beyond the immediate distortions of information asymmetry and skewed incentives, another layer of understanding in ‘wahala economics’ comes from the perspective of ‘infinite games.’ Unlike finite games with clearly defined players, rules, and an end goal, infinite games are about continuing to play. In environments marked by uncertainty and ongoing challenges, actions that appear ‘inefficient’ in the short term might be strategic moves within a much longer, undefined game. Consider a seemingly convoluted or time-consuming negotiation process. From a purely transactional viewpoint, it might look like a waste of resources. However, within the context of an ‘infinite game’ – where building relationships and establishing trust for future interactions is paramount – that extra time and effort might be a crucial investment.
Ultimately, ‘wahala economics’ invites us to look beyond the simplistic metrics of efficiency and immediate transactional gains. The seemingly chaotic dance of these economies often reveals a deeper, adaptive logic rooted in navigating information gaps, responding to skewed incentives, and playing the long game in environments where trust might be localized rather than widespread. The ‘inefficiencies’ we observe on the surface can be understood as the emergent strategies of actors responding rationally (within their context) to the particular ‘wahala’ they face.
What examples of ‘wahala economics’ have you observed in your own experiences or travels? Share your insights!
