Category: Economics

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Economics Liberty

[1021] Of handicrafts: the next controlled item

For those that support price control on essential items such as sugar and gas, they’d argue that such control is essential to prevent suppliers from manipulating prices at consumers’ expense. They’d say, the control mechanism is there to protect us, the consumers. Well, today, in the name of protecting us the consumers, handicrafts might be the next essential item:

RAWANG: The Government may consider introducing a price control list on selected local handicrafts to prevent profiteering.

Culture, Arts and Heritage Minister Datuk Seri Dr Rais Yatim said several parties had complained about the vast price differences in certain handicrafts and therefore it was time that the Government looked into the matter seriously.

Let’s see if there would be handicraft shortage in the market…

Yes, I know. If shortage does occur, it’d be almost absurd.

Allow me to anticipate the next controlled items. I bet your would be favorite cup, you would be smelly pillow, your teddy bears, action figures, chocolate, cherry, your would be favorite t-shirt, your life…

Categories
Economics

[1020] Of flood, aid and economics

While relief effort is underway amid criticism, the government announced yesterday that flood victims are to get monetary aid:

Fair use. The Star. December 24 2006. Scanned by Mohd Hafiz Noor Shams.

Between food or other typical aid — henceforth, I shall refer to as commodity — and cash, which actually is the best to offer?

First, assume that there’s a constant amount of amount of cash and commodity for aid throughout this blog entry.

In circumstances where commodity supply is relatively stable, aid in cash might be the best. The reason is, every person has his or her (for simplicity’s sake, let me use the pronoun “he”. For all the feminists out there, I still love you guys! Or rather, girls) own preference. A person most of the time knows what he wants or needs the best. In economics, a person’s well-being could be measured by utility function. A utility function according to Wikipedia is “a measure of the relative happiness or satisfaction (gratification) gained by consuming different bundles of goods and services“. While utility is a basic concept in economics, it’s something hard to measure by a third person and usually, the person himself knows his utility own function the best. Through the person’s own preference, he, assuming rationality and complete information, will maximize his own consumption under relevant constrictions accordingly.

In emergency where shortage is widespread however, cash aid might not be the better mean of relieving victims of any disaster. This is especially so if the cash value isn’t large enough to purchase sufficient food and other necessary survival materials such as blanket, clothes, etc. During severe shortage period, prices will be higher than during peaceful times and with a specific amount of cash, a person will be able to buy less amount of food and other things that matter vis-a-vis during stable time.

A commodity-type aid is superior to cash-type aid if and only if the cash value of commodities is greater than cash value. Cash-type aid is superior to commodity-type aid if and only if the value of cash is greater than the value of the commodities. In short, the superiority order of the two kinds of aid depends on the value of the an aid relative to the other.

It must be noted that this comparison ignores the fact that monetary aid has considerably less logistical problem attached to it compared to the other aid type.

Regardless the two scenarios, an aid beneficiary could achieve higher welfare given any aid endowment if the beneficiary could trade with, of course, other people.

Categories
Economics Politics & government

[1019] Of Krugman is ditching Rubinomics for realpolitik

The Republicans and the Democrats are the yin and yang. They balance each other in many ways. Yesterday, Paul Krugman suggests that the Democrats should stop playing a balancing role (reg. req.):

Now that the Democrats have regained some power, they have to decide what to do. One of the biggest questions is whether the party should return to Rubinomics – the doctrine, associated with former Treasury Secretary Robert Rubin, that placed a very high priority on reducing the budget deficit.

The answer, I believe, is no. … Rubinomics made sense in terms of pure economics, [but] it failed to take account of the ugly realities of contemporary American politics. …

In a saner political environment, the economic logic behind Rubinomics would have been compelling. … Since the 1990s were an era of peace, prosperity and favorable demographics…, it should have been a good time to put the federal budget in the black. And under Mr. Rubin, the huge deficits of the Reagan-Bush years were transformed into an impressive surplus.

But the realities of American politics ensured that it was all for naught. The second President Bush quickly squandered the surplus on tax cuts that heavily favored the wealthy, then plunged the budget deep into deficit by cutting taxes on dividends and capital gains even as he took the country into a disastrous war. And you can even argue that Mr. Rubin’s surplus was a bad thing, because it greased the rails for Mr. Bush’s irresponsibility.

The Economist’s View has a copy of the article.

Jugding from Stiglitz’s writings, Stiglitz would probably support Krugman. In the Roaring Nineties, I think, Stiglitz isn’t too supportive of Rubinomics and advocate instead more spending and investment on intangible and tangible public infrastructures. His rationale is that the returns from investment would be large enough to justify the cost.

Regardless, what Krugman says does make sense politically, but economically, I feared the worst if the Democrats choose to disturb, if I may say so, the balance in the “Force”.

Categories
Economics

[1014] Of property prices set to go up

The government has eased up restriction on trade. In particular, within the property industry. In the NST today:

KUALA LUMPUR: Foreigners can now own or invest in as many houses costing more than RM250,000 per unit as they want in Malaysia.

In a statement yesterday, the Prime Minister’s Office said effective today, foreigners can buy residential units costing RM250,000 or more without seeking approval from the Foreign Investment Committee (FIC) under the Economic Planning Unit of the Prime Minister’s Department.

What will this liberalization do?

Foreign demand for local property will increase total demand for property in Malaysia. That will increase property prices, while holding supply constant, with all else being equal. It might also add more liquidity in the property market.

Today might be a good day to invest in properties, if supply is unable to cope with the future demand surge.

Categories
Economics Environment

[1001] Of a better and humane alternative to crows culling

Several of weeks ago, I had a meeting with a few people — Shin and Khalid Jaafar were two of them — at Bangsar. While committing myself to an impossible search for a parking space there, I saw a Kuala Lumpur city hall squad shooting down crows. There were countless of crows hovering the area at that time, producing annoying noise. It’s easy to hate the crows for that. While I agree that the noise is a nuisance, I completely disagree with the scourge. The city hall was, and very likely, is, attending to the symptoms, not the root cause. Therefore, there’s a better way to deal with the crows, as a friend advised me during the meeting.

First of all, it’s important to realize that crows in urban areas are scavengers. Despite the negative connotation the noun scavengers brings, scavengers, crows included, play important role in our ecosystem. Scavengers are practically cleaners, breaking down our food leftovers. As scavengers, crows are attracted to the leftover, essentially waste. Our environment as a whole would be a very bad place to live in without scavengers.

It’s highly likely that the reason why the flock of crows hover Bangsar, or any area of that matter, is the presence of waste. Hence, if city hall is really interested in solving the problem, city hall should clean up the waste produced by Bangsar, which is an affluent area. Or better yet, if the population and visitors of Bangsar wants to solve the problem, they will need to clean up.

The culling is barbaric, regardless whether it happened in Kuala Lumpur or Singapore. This is on top of the fact that the culling is ineffective and wasteful exercise, by the very fact that the act of culling attacks the symptom, not the root cause.