Category: Economics

Categories
Economics Environment

[864] Of Coase theorem and global warming

Global warming deniers have lost the debate. However, recognizing the problem and arresting it are two different things . An article by Sunstein at WaPo talks on one of the obstacles of combating global warming:

The obstacle stems from the unusual incentives of the United States and China. As the world’s leading contributors to climate change, these are the two countries that would have to bear the lion’s share of the cost of greenhouse gas reductions. At the same time, they are both expected to suffer less than many other nations from climate change — and thus are less motivated to do something about it. And while the international spotlight has rightly been on the behavior of the United States, China will soon present the more serious problem.

This is of course, like what Prof. Mankiw said, is relevant to the Coase Theorem. Coase Theorem is also related to the transboundary haze in Southeast Asia.

Categories
Economics Politics & government

[858] Of minimum wage and unemployment rate debate in Malaysia

According to the New Straits Times on August 9, there’s a plan to introduce minimum wage “for three categories of workers“.

KUALA LUMPUR: Minimum wages are on the horizon for three categories of workers, a little over 25 years after the initial attempt failed largely due to flaws in the system.

A total of 250,000 private security guards, private clinic assistants and casual farm workers will soon be the first people in the country to enjoy a minimum wage.

If all goes well, they are expected to take home guaranteed monthly wages by the end of the year.

The article focuses on the benefits of minimum wage but it fails to be neutral by highlighting the other side of the coin. The article in fact only quotes bodies and individuals that are for minimum wage – labor unions and politician within a government that already have strong interventionist tendency. Therefore, allow me do a public service by raising the ugly side of minimum wage.

In a free market, prices and wages – for the sake of simplicity, let’s call prices and wages as simply prices – are the points where demand and supply coincide. That prices are at equilibrium. If we impose a price ceiling below the equilibrium prices, according to the law of supply and demand, supply will decrease while demand will increase. Artificial shortage will occur and this describes the current artificial sugar shortage in Malaysia. If the ceiling is above equilibrium prices, chances are, nothing will happen as the ceiling doesn’t affect the market. Remember, price ceiling simply means the “less or equal than” operator.

Price floor on the other hand is the “more or equal than” operator. So, if we impose price floor below the equilibrium points, nothing will happen because the restriction doesn’t affect the point itself. However, an introduction of price floor above free market prices will artificially decrease demand and increase supply. This last scenario is very relevant to minimum wage.

In other word, less employers will want to employ more workers while more employees will want to work. Hence, higher unemployment rate, ceteris paribus .

There are already talks of high unemployment among Malaysian youth. Despite that, unemployment rate of Malaysia as of the first quarter of 2006 is 3.8 according to Malaysia Department of Statistics, which is quite respectable in my opinion. Germany and France are used to around 10% unemployment rate while the US and most European nations currently suffer above 5%. Regionally, Brunei has 4.8% (2004), Cambodia 2.5% (2000), Indonesia 11.8%, Laos 2.4%, Myanmar 5.0%, Singapore 3.4 (2005 by Singapore Department of Statistics) and Thailand suffers 1.8% unemployment rate according to 2005 The World Factbook by CIA.

As for me, I oppose minimum wage. I prefer the market to decide on it, as long as market failure doesn’t occur.

Regardless of what I think, the introduction of minimum wage will reignite public discourse in youth unemployment as unemployment as a whole will go up with imposition of minimum wage above equilibrium wage.

Categories
Economics Liberty

[856] Of censorship of blogs and its possible impact on web hosting industry

I bought a hosting plan from a Malaysian web host provider a year ago and it’s going to end later this month. I don’t plan on quitting blogging any time soon. Furthermore, I’m pretty much happy with the current service that I’m receiving; I don’t have too much complaint against my provider. So, it makes sense for me to renew my contract with them. However, with talk of censorship of blogs abound, I’m having a second thought; I’m thinking of relocating my server out of Malaysia.

As I’ve said again and again, I’d like to recognize myself as a libertarian. I hold liberty close to my heart. I will disagree to any infringement of my liberty and censorship is an infringement of my liberty. Therefore, it’s only natural for me to scorn the idea of censoring of any kind.

If the Malaysian government is going to censor blog, I’d like to preserve my liberty. It seems to me that the easiest way to preserve my liberty is to move my server out of the Malaysian authority’s sphere of influence. That means moving my server out of Malaysia and thus physically removed the threat of censorship off me. Australia sounds like a good country where free speech is relatively guaranteed. They speak English – well, sort of – and the time difference between Malaysia and Australia isn’t too perturbing.

I’m sure I wouldn’t be the only person in Malaysia to think of this. I’m sure if censorship of blog becomes a reality in Malaysia, many would move their server out of Malaysia. This would mean, less business for Malaysian web hosting providers.

What I’m trying to say is that censorship of blogs would hurt Malaysian web hosting industry with all else being equal. Government intervention would reduce the growth and probably the size of the industry .

Categories
Economics Environment Liberty

[854] Of the Malaysian Big Brother

For those that have read and understand Eighteen Eighty-Four by George Orwell, today’s front page of the New Straits Times should remind you of an Orwellian future . This is an adaptation by BBC, taken from page Eighteen Eigthy-Four at Wikipedia:

Fair use. Copyrights of BBC, from Wikipedia

The New Straits Times presents you the Malaysian Big Brother. He will watch out for us all:

Fair use. New Straits Times. Scanned by Mohd Hafiz Noor Shams.

Remember when Winston Smith was in his home, trying to write a diary despite the fact that was an offense? And that there was a camera in this home that transmitted everything the camera caught and send it back to the Big Brother?

It’s a tragedy that the opportunity cost of security is liberty and vice versa. A real tragedy. But does it have to be like that?

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

p/s – Kuala Lumpur is introducing congestion tax? From New Straits Times:

In planning to introduce an area road pricing scheme as a means to discourage private cars from entering cities, the framers of the National Urbanisation Policy are travelling a path that has been traversed with considerable success by London. But charging drivers a fee to enter the city centre would not exactly be a popular move and the authorities must be prepared to navigate the flak from a hostile public. But with Kuala Lumpur choking in traffic, despite new expressways, street widenings, one-way streets and yellow boxes, there is every reason to follow in London’s footsteps. Motorists need to get used to the idea that there is a price to pay for free-flowing traffic. Congestion pricing can no longer be ruled out as a solution.

This is a progressive policy and usually, I’d support it. But, like what the article later said:

If motorists are to be priced out of their cars, however, they also need to be served by an extensive, speedy and reliable network of rail and bus services every bit as efficient and accessible as the one that London provides – and which the city keeps on improving through funds augmented from the charges collected. Unless there is a viable alternative to the car, there is very little point in pursuing the idea of road pricing. The bottom line is that a broad array of other strategies, a proper transport plan and an integrated approach to urban planning is needed. This would require more thought, discussion, planning and better inter-agency co-ordination and collaboration with the local authorities.

Two days ago, I made a passing mention of Stockholm’s congestion tax trial. Read about it here.

Categories
Economics Environment

[853] Of sustainable forestry comes to Malaysia?

Malaysian government is partaking a project that will promote environmental and economic sustainability . With delight, more at The Star:

MIRI: Six states have been identified for a RM200mil project to turn logged areas into forests again.

Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said an initial 250,000ha had been identified to be converted into forest plantations for the purpose.

The plantations are expected to generate some RM2bil in timber revenue for the Government.

The project, to start by the end of the year, will greatly help to conserve the nation’s primary forests by limiting the need to log in new areas.

The states are Sarawak, Sabah, Pahang, Selangor, Terengganu and Kelantan.

This is probably the first time such project has seen a nationwide effort. Earlier in 2000, Staedtler and two other government agencies experimented similar initiative in Pahang. From the look of it, it seems that the result was positive.

The concept is not new. In fact, in Europe, there exist “tree farms” and these farms are sometimes maintained by the pulp and paper industry. If I’m not mistaken, Staedtler itself has tree farms for its pencil production in Europe. I remember reading that a long time ago. Unfortunately however, I’m unable to provide a source to prove it.

Regardless, hurrah for the government. It’s nice to know that at least there’s something good going on at some front. Again, thumbs up.