Categories
Economics

[1614] Of free water and personal responsibility

The Tragedy of the Commons could be seen as a story of personal responsibility. Or rather, the lack of it. When consumption of finite resources is not associated with its relevant cost, individuals will overuse it with gross disregard to scarcity. In the end, individuals will exhaust the resources and leave none behind. The Selangor state government will have to brace itself to face this scenario sooner or later.

Selangor under the new Khalid administration recently announced its intention to provide the residents of the state with 20m3 of free water supply. The intention is noble but the sustainability of the policy is in doubt. While Selangor does indeed experience water abundance, drought is not uncommon. Last year, water levels at various dams throughout Peninsular Malaysia, including Selangor, were something we all should be worried about. In fact, the previous administration has projected that the Klang Valley will experience severe water shortage beyond 2010 and to overcome the projected problem, the federal government has rolled out a plan to transfer raw water from rivers in Pahang to Selangor.[1]

In Malaysia where drought is closely linked to high temperature, water reservoirs face a combination of factors that contribute to water shortage. In the upstream, absence of rain prevents reservoirs from replenishing its supply while high temperature encourages evaporation. In the downstream, in fighting the heat, consumers would demand large volume of water to cool down. With higher rate of output compared to input rate, it is not hard to imagine what the ultimate consequence will be. Any inefficiency that exists within the local water distribution system only makes matter worse.

There is not much we can do to fight drought from appearing from time to time at the moment. I do not believe that we have the knowledge to consciously manipulate the climate effectively. What we can do however is to encourage conservation by instilling responsible usage of water. Responsible water usage does not come through slogans and songs unfortunately. It requires a system of carrot and stick that promotes conservation and the market does just that. By enforcing free water policy, the state government not only interfering with market mechanism, the state also goes against everything that is associated with conservation.

By providing free water, the state breaks the link between action and responsibility. A person is free to utilize water for whatever reason without considering its effect on the society. What makes the detachment between action and responsibility possible is the elimination of prices as signals.

Prices signal scarcity. Flexible pricing mechanism will fluctuate according to demand and supply. When demand increases relative to constant supply, prices will go up to signal scarcity; when demand goes down relative to constant supply, prices go down to signal abundance. Higher prices will demand greater appreciation of the resources from consumers; it encourages consumers to be more thoughtful when consuming resources.

Without prices as signals, many consumers will be unable to appreciate the very real idea of scarcity. Even in dire times when water should be priced as high as gold but offered free instead, do not be surprised to find somebody washing their car or watering their lawn. News of impending shortage will not change his behavior because he does not feel the pain. He does not or unable to read the signal of scarcity clearly because he has been insulated from the real world.

Under free water policy, the state effectively transfers the responsibility of conservation from individuals to the state. Individuals will not practice responsible usage of water because of the reason mentioned earlier. When the ultimate signal comes — water shortage — it may be already too late to begin to conserve. With the state taking the responsibility of conservation away from individuals, the state effectively creates a commons as described in the Tragedy.[2] Thus, the course is set.

Without a good pricing mechanism, the only way to overcome the Tragedy of the Commons from reaching its sad conclusion is to ration water at one stage or the other. Suffice to say, I do not think highly of any policy that leads to rationing when flexible pricing mechanism offers better solution.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — KUALA LUMPUR, Nov 21 (Bernama) — The project involving supply of raw water from Pahang to Selangor is expected to be completed on schedule by the middle of 2013, the Dewan Rakyat was told Wednesday.

[…]

Shaziman said it was anticipated that the project would be able to resolve the problem of raw water supply which Selangor would begin to face over the next five years. [Pahang-Selangor Raw Water Project Ready By 2013. Bernama. November 21 2007]

[2] — For further but brief explanation of the Tragedy of the Commons, see Wikipedia.

Categories
Economics

[1603] Of liberal Malaysia, welfare-based Selangor

The liberal Malaysia:

PUTRAJAYA: Consumers can expect major changes in the demand and supply mechanism, including doing away with controlling the prices of essential goods, said Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad. [Price controls may go. The Star. March 25 2008]

The welfare state Selangor:

In his first Press conference as Selangor Mentri Besar today, Tan Sri Khalid Ibrahim made two key announcements: the first 20 cubic metres of water is free to all Selangor households from April, and the eve of polling day water treatment plant deal between Puncak Niaga Holdings Bhd and Selangor Government is lopsided to the concessionaire’s advantage. [Khalid announces free household water and lopsided water deal. New Straits Times. March 17]

It is tough being a libertarian in Malaysia. On one hand PKR is liberal in its social outlook and BN sits on the conservative seat. On the other hand, PKR is running on left-wing-based economic policies while BN adopts the more liberal (read: better) ones, the NEP notwithstanding.

Libertarians living in the US also face the same problem: PKR is analogous to the Democratic Party while BN is similar to the Republican Party. One pseudo-idiom may help: the American eagle needs both its left wing and its right wing to soar.

Bah! What we need is a libertarian party to party — Lionel Richie, anyone? — all night long with cool gun-wielding chicks! Enough of dilemmas and lame llamas. We do not need them.

Categories
Economics Humor

[1597] Of do not move your money out of Bear!

Too good for me not to post it.

[youtube]niVjE5m4v2o[/youtube]

Via Creative Destruction, via Brad De Long.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

p/s — so, okay. Hold your breath now: Via Creative Destruction, via Brad De Long, via Megan McArdle, via CrossingWallStreet.com. Happy now, dear John?

Categories
Economics Politics & government Society

[1595] Of flawed policy, not flawed implementation

While I am happy with a new path made possible by the recent general election, I am slightly disappointed at the way DAP and PKR are dismissing the outmoded New Economic Policy. Prior to the election and the campaigning period, I was impressed at how the two parties leaders were rejecting the NEP at the policy level. During the campaigning period however, there was a subtle change in reasoning. Suddenly, the NEP is being rejected because of its flawed implementation.[1] While obviously annoyed at the change of approach, I kept mum throughout the contest; there is time for a debate and there is time to bite one’s tongue. When there is an enemy in front of oneself and the situation is pressing, one does not conduct a debate with one’s compatriots on how to outmaneuver the enemy. Instead, one pulls his knife out and march forth. But now with the enemy vanquished, the time for the debate has arisen yet again.

The NEP is an outdated policy because it fails to adapt itself to new reality of freer global market. At one time given the landscape of the 1970s, it was a suitable policy but now, it is clear that the NEP is one barrier the Malaysia must overcome to realize a freer market and achieve greater prosperity. Another reason is that there are better policies out there that seek to eradicate of poverty or more realistically, provide social mobility compared to the NEP. The NEP assumes that only the Malays are poor whereas in fact, the Malays are not economically homogeneous and neither are other ethnic groups in this country. In other words, the NEP is a blunt policy. A better policy with the intention of providing social mobility and equality of opportunities are the ones that are conscious of socio-economic indicators — meritocracy.

The NEP is being exploited exactly because it is a blunt policy. With its flawed or outdated assumption that all Malays are economically backward, the well-off Malays are undeservedly receiving aid despite the fact that they can effort to live comfortably without any kind of affirmative action. Due to the way the policy is designed, benefits meant for the poor are now enjoyed by others. This rationale parallels the thinking that fuels the awfully badly designed fuel subsidy policy in Malaysia.

Observe how the flaw is at the policy level and not at the implementation stage. When the policy is flawed, its innate handicap is merely being executed at the implementation stage.

Rejecting the NEP because of its flawed implementation is a flawed thinking. Economist Mahani Zainal Abidin said several days ago something to the effect that if the implementation of the NEP is flawed, then policy should be retained with only its implementation processes modified to make it more effective. She is absolutely right.

If the NEP is to be rejected, its rationale has to be deeper than mere flawed implementation.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

[1] — Demikian penegasan Menteri Besar Selangor, Tan Sri Abdul Khalid Ibrahim mengenai pendiriannya mengenai pelaksanaan Dasar Ekonomi Baru yang dikatakan akan dihapuskan di bawah pentadbiran DAP di Pulau Pinang.

“Apabila tahun 1990-an, kita dapati DEB telah disalahgunakan yang hanya mementingkan segelintir masyarakat Melayu dan segelintir masyarakat Cina dan India yang mempunyai hubungan dengan Umno,” katanya dalam sidang akhbar yang diadakan di Kediaman Rasmi Menteri Besar, di sini, hari ini. [“DEB disalahguna, diselewengkan” – Tan Sri Khalid. HarakahDaily. March 17 2008]

Categories
Economics Politics & government Society

[1588] Mengenai tanah yang lebih subur

Walaupun bertahun sudah berlalu, teringat lagi bagaimana rasanya pertama kali melangkah ke dalam Kolej Melayu. Institusi itu menjanjikan satu masa hadapan yang cerah kepada mereka berpeluang menjejakkan kaki di situ. Peluang bagaimanapun memerlukan satu perubahan pahit yang perlu ditelan. Untuk mencapai bintang-bintang di langit, segala kebebasan dan kemewahan yang dinikmati sebelum ini harus dilupakan. Masalah untuk menyesuaikan diri timbul; perasaan gementar menguasai jasad. Setiap hari baru dimaki hamun, hari yang dahulu dikenang. Apabila tibanya masa untuk meninggalkan Kuala Kangsar, tanpa disedari air mata berlinang di pipi.

Perkara yang sama berlaku apabila diri ini pertama kalinya merentasi Lautan Pasifik yang luas. Sekali lagi perubahan berlaku dan rutin kehidupan dimusnahkan tanpa belas kasihan. Ketakutan menyelubungi tubuh memikirkan apa yang bakal didepani. Amat berbeza daripada Kuala Kangsar, di Amerika adalah satu masyarakat asing tetapi jauh lebih matang dan moden, tatkala dahulu terbiasa dengan satu dunia di bawah tempurung, di mana kita kononnya tuan. Terkeluar dari tempurung, langit biru dan sinaran matahari mencabar pemahaman sempit dan seterusnya memaksa pengarangan falsafah baru untuk menyelesaikan masalah baru. Tetapi diketahui, di sebalik perubahan itu wujud satu peluang tidak terhingga untuk dikecapi. Perubahan itu harus ditempuhi demi kejayaan.

Lebih 50 tahun selepas Tanah Melayu bebas daripada tangan penjajah, Malaysia sekarang melalui satu perubahan yang layak dicatat di dalam buku sejarah. Kawan dan lawan semuanya terkejut akan terbukanya satu laluan baru ke arah matlamat agung.

Untuk mencapai kegemilangan, pengorbanan diperlukan. Pintu terbuka dan kelihatan satu denai ke tanah yang jauh lebih subur; kekabut dibersihkan oleh sang angin dan hala tuju kini jelas. Akan tetapi, denai itu mendaki gunung-ganang dan merentasi hutan belukar; usaha dan kecekalan diperlukan.

Untuk yang bercita-cita tinggi dan yang berkeyakinan, halangan itu bukanlah satu masalah. Kepada yang lain, mereka takut untuk mencuba walaupun satu takdir yang jauh lebih hebat daripada apa yang berada di sini menanti di sebalik banjaran. Bagai dipukau dengan dongengan, denai dijauhi. Bukan sahaja mereka takut, malah mereka menghalang yang lain daripada meniti denai itu. Mereka takut jika yang lain berjaya, dongengan itu akan musnah. Bagi mereka, dongengan itu terlampau suci untuk dicabar. Bagi mereka, jika dongengan itu dikapankan, mereka terpaksa mendaki gunung itu. Mereka risau mereka perlu mendaki gunung-ganang itu jika mereka tidak mahu ditinggalkan.

Ribuan tahun menetap di kampung, realiti dunia juga mula dilupakan. Dunia berubah tetapi dia tetap dengan caranya yang kolot dan tegar. Dia tidak mampu memahami perubahan lalu dia menolak realiti baru sebagai tidak relevan. Dengan dunia sebagai tidak relevan, dia meneriak di dalam tempurungnya tentang betapa hebat dia di dalam alam kecilnya. Kesian tetapi yang sedar tidak mampu untuk menunggu mereka yang tidur.

Dunia sekarang jauh berbeza dari dunia 1970-an. Jika dulu kita memperkatakan tentang Vietnam, sekarang kita berbincang tentang Iraq. Jika dahulu kita masih lagi berdebat tentang jenis hak pemilikan harta, kini pasaran bebas telah membuktikan kegagahannya. Pada masa yang sama, telegram memberi laluan kepada internet. Dan jika dahulu rakyat masih mempunyai prasangka buruk terhadap mereka yang berlainan warna kulit, sekarang satu idea mula didokong untuk menyatukan semua tanpa mengira agama dan kaum.

Dasar Ekonomi Baru dibentuk berlatarkan satu suasana yang asing kepada generasi baru. Suasana itu adalah satu situasi di mana ekonomi-ekonomi masih berdiri secara berasingan. Modal dan buruh terkongkong lalu kekayaan dan kesejahteraan boleh dibina di atas sebidang tanah yang dikelilingi tembok tinggi. Apabila Tembok Berlin tersungkur, arus globalisasi mula terpasang. Pasaran mula menjadi bebas, modal dan pakar-pakar mula mencari pulangan terbaik tanpa mengira sempadan.

DEB gagal mengambil kira akan perubahan ini. Tembok yang membolehkan DEB berjaya telah dilanggar dan kemudian diranapkan oleh gelombang globalisasi. Tanpa tembok ini, kaedah DEB tidak berkesan. Sekatan dan diskriminasi yang dikenakan oleh dasar lapuk itu hanya menghalaukan modal dan pakar keluar dari negara kita; DEB adalah antara sebab mengapa Malaysia mengalami kehilangan kepakaran secara berterusan. Jika dasar ini berterusan, Malaysia akan tertinggal berbanding negara-negara yang mengamalkan polisi yang lebih bebas yang mengambil kira keadaan semasa. Kita perlu menarik yang terbaik ke negara kita, bukan menghalau mereka dan kebebasan adalah satu faktor yang berkesan untuk menarik pelbagai sumber yang produktif.

Tambahan lagi, DEB gagal kerana dasar itu tidak mengajar kumpulan yang ingin dibantunya tentang cara untuk bersaing dengan sihat. Apa yang pada mulanya satu usaha untuk mempercepatkan kematangan kini menjadi dadah yang menguatkan ketagihan.

Setelah sekian lama berada bersama DEB, ramai yang sudah ketagih dengannya. Ramai lagi yang bersedia untuk mempertahankan dasar lapuk itu walaupun rekahan mula muncul dan mengacam untuk merobohkan menara yang terbina, seolah-olah DEB itulah segala-gala. Seolah-olah, DEB itulah kebenaran untuk sepanjang zaman seperti konsep kewujudan ketuhanan tanpa permulaan dan pengakhiran.

Kita sebagai masyarakat perlu prihatin terhadap perubahan. Tanda-tanda di sekitar kita perlu diambil kira; tumbuhan yang dulu menghijau kini layu dan kuning; bumi yang kaya dahulu kini kering kontang. Untuk mengelakkan kejatuhan tamadun, satu penghijrahan diperlukan. Kita perlu mengatasi ketagihan kerana ketagihan membawa kepada kejatuhan. Ayuh kita bergegas ke tanah yang lebih subur sebelum terlambat.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

p/s — satu versi tulisan ini telah diterbitkan di Bolehland.