Category: Economics

Categories
ASEAN Economics

[1273] Of a tit-for-tat with a happy ending

In game theory, tit-for-tat is one of the most common strategies utilized with cold effectiveness. Recently within the realm of ASEAN, Thailand played such tactics on Malaysia due to the latter’s protectionist automotive policy. Accusing that thee Malaysian approved permit system acts as a non-tariff barrier, Thailand refused to grant ASEAN Free Trade Agreement tariff on Malaysian vehicles. Malaysia later relented, probably realizing that a better outcome could be reached if the two cooperated with each other to lower down trade barrier. Defection is a sad strategy, no matter how efficient it is.

Thanks to such sensibility, Thailand has agreed to lower down the barrier its imposed on Malaysian automotive goods:

The Thai Cabinet agreed on Tuesday to slash the country’s import tariff on Malaysian cars in line with the ASEAN Free Trade Area (AFTA), an assistant government spokesman said Tuesday.

The move came after Malaysia had abolished its own trade restrictions protecting its automotive sector, Mr. Chotechai Suwannaporn said.

The reciprocal moves are recognised both as gestures of goodwill within ASEAN, but also as tangible steps on the part of both countries to work towards an integrated regional trade area.

The former Thaksin administration delayed implementing tariff cuts for Malaysian cars, arguing that the neighbouring country had been implementing trade measures that were the main obstacle keeping Thai-built cars from penetrating its market. [Thailand to cut tariff on Malaysian Cars. Bangkok Post. June 27 2007]

Ah. A tit-for-tat with a happy ending. Hip hip hooray. More free trade please and let us tore down the wall of protectionism!

Categories
Economics Humor

[1267] Of tricked by a miser

From Marginal Revolution:

Paddy O’Brien died and as is the Irish custom the mourners were throwing money into his coffin.  The town miser, whom everyone despised, cried out “I loved Paddy O’Brien.  Whatever anyone else puts into the coffin, I will double!”  Thinking the miser a little bit drunk the townspeople took this as an opportunity to teach him a lesson.  Gathering all their money they showered the coffin with $3012 in bills and coins, more than had ever before been given at a funeral.  The miser then gathered the money, wrote a cheque for $6024 and threw that in. [Hell Money. Marginal Revolution. June 20 2007]

Categories
Economics Environment

[1263] Of new waste management bills

Finally, on the surface at least, sensible new policies:

People who waste more will have to pay more and every household will have to start separating recyclable items from other waste.

These are two of the implications of the Solid Waste Management and Public Clean-Up Bill, which the Housing and Local Government Ministry expects to table in parliament in two weeks. [Start sorting out and recycling your waste. NST. June 17 2007]

To be honest, I have not read the bills. The website of the Parliament is not so helpful and its search function is not working at all. Therefore, I am quite unclear what the bills are specifically seeking for other than the establishment of a government-owned centralized waste management entity. It is hard to form some sort of opinion without proper information.

I am unsure how the service providers are going to enforce that pay-as-you-go system. Under that model, the providers would need to identify which trash belongs to whom. It is easy imagine that waste owners would try to dump their waste at public space and then disown the trash to escape the need to pay for trash collection altogether. The property rights of the waste must be properly enforced to ensure the success of the model.

Another matter concerns recycling. The bill wants to make recycling mandatory but I prefer to provide consumers with incentive to recycling rather than coercing them. A good system would reward those that separate their trash by charging them less. In other word, offer them discount and this discount should include the cost of waste separation.

Those that failed to do the same should pay a premium. This premium would include the cost of separating the trash and some sort of penalty.

I wonder though if a waste management service provider has the economies of scale and the technology to separate trash at least as good as that being done by the consumers. If it does, perhaps it makes sense to do the separation on the other side of the equation rather than on the consumer side.

Apart from the payment schedule and recycling, another issue is this:

Along with the bills, the interim agreements between concessionaires of solid waste management facilities, which were arranged under the national privatisation of solid waste management programme, would be turned into concession agreements.

However, once this was done, the concessionaires would be subjected to strict key performance index and have to meet standards set by the government. [Better solid waste services once bills passed. NST. June 13 2007]

I am surprised that these waste management service providers are operating without any proper contract!

The introduction of contractual relationships would indeed improve the situation for all of us because with contracts, the service rendered by these management firms could be used to assure fund providers of repayment for any borrowing made by the firms to strengthen their business.

Categories
Activism Economics

[1261] Of distributive justice in free market

Institute for Policy Research, better known locally among restricted circles as IKD (Institut Kajian Dasar) organized a small forum on the New Economic Policy a couple of hours ago. As it turned out, the forum focused on the weaknesses of the New Economic Policy but throughout the forum, the most interesting point was raised by Dzulkefly Ahmad and later followed up by Khalid Jaafar.

Dzulkefly Ahmad, the director of PAS Research Centre, mentioned the phrase distributive justice. I quickly recognized this as another word for equitability. In my head, I was quick to point out that mainstream economics does not deal with equitability but rather, stresses on efficiency. Nevertheless, there is a mechanism to achieve a perceived efficient equitable point; the Second Fundamental Theorem of Welfare Economics provides for this. In layperson’s term, the theorem proves that any efficient outcome could be achieved through a lump-sum wealth redistribution. Through the new allocation of endowment, the new efficient outcome is attainable through market forces.

While I was thinking in technical term, Khalid Jaafar came up with a more meaningful question: who would be responsible for the redistribution of wealth?

My bias wants me to say the market. After deeper casual mental masturbation however, I am struggling to answer the question of how would or could the market reallocate individuals’ endowment?

The tougher questions are these: what is an economic efficient equitable outcome? Could the market recognize that efficient equitable outcome?

At 02:40, my eyes are heavy and my brain is shutting off.

Unlike me, all speakers — Rajah Rasiah of Universiti Malaya, Dzulkelfly Ahmad of PAS and Tony Pua of DAP — prefer the easier path which requires government intervention. That endowment reallocation is of course done through taxation.

Categories
Economics History & heritage

[1258] Of the fall of Suharto

Do you remember this?

Copyrights unknown. Fair use. http://academic.evergreen.edu/H/hahnj/

The Asian Financial Crisis is an embarrassing episode in our history; the mighty tigers turned into sick kittens. This photo is the epithet of that period. The mighty Camdessus looked on the broken Suharto, reminiscing the old days of colonialism.

Throughout the next week or so, if time permits, I wish to revisit the fall, or hiccup, of Southeast Asian economies, including Malaysia, in the late 1990s. Please stay on and we will learn together what went wrong and answer some what-if questions.