Monday, December 14 2009 – the _

[2130] Of sugar prices today and 20 years ago

Sugar price per kilogram in Malaysia in 1989 was RM1.20, according to the Food and Agriculture Organization of the United Nations (FAO).

Sugar price per kilogram in Malaysia today is RM1.45.

If sugar were the only commodity in the world for Malaysia, it would suggest that average annual inflation rate for the past 20 years was no more than 1%.

Based on consumer price index obtained from the International Monetary Fund (IMF), average annual inflation rate for Malaysia within the same time period was slightly above 3%. It is probably safe to assume that salary, over the same period grew at the same rate, with mobility of a person with respect to the so-called corporate ladder fixed.

If every assumption stands, it is clear that sugar has been growing cheaper in real price terms. Since it is subsidized, it has been growing artificially cheaper in real price terms.

I wonder what is the total size of sugar subsidy bill for the past 20 years. According to various articles in The Star, last year’s bill stood at RM720 million. It has to be in the realm of billions. How about in present value? In terms of opportunity cost?

It should be a mind-busting figure.

What a wasteful policy.

[2129] Of dedication to Paul Samuelson

One of the greatest economists of this century, and perhaps of all times too, died yesterday.

Paul A. Samuelson, the first American Nobel laureate in economics and the foremost academic economist of the 20th century, died Sunday at his home in Belmont, Mass. He was 94.

His death was announced by the Massachusetts Institute of Technology, which Mr. Samuelson helped build into one of the world’s great centers of graduate education in economics.

In receiving the Nobel Prize in 1970, Mr. Samuelson was credited with transforming his discipline from one that ruminates about economic issues to one that solves problems, answering questions about cause and effect with mathematical rigor and clarity. [Paul A. Samuelson, Economist, Dies at 94. Michael M. Weinstein. New York Times. December 13 2009]

I would say, his contributions to economics are as great as Leon and Walras’, who, back in the 19th century, together with other marginalists, first used mathematics in a big way to advance the field of economics.