Category: Society

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Books & printed materials Economics Society

[3014] Michael Sandel’s What Money Can’t Buy and the limits of the market

There is a feeling that traffic offenses in Malaysia are generally not taken seriously by road users or the authorities, unless somebody dies or gets hurt. The fines are low and if you wait long enough, it will get discounted generously. It also gets discounted heavily if you pay it quickly. There are threats of court action or towing in cases of illegal parking of course but this almost always never happens due to the hassle it involves. For the authorities, offering discounts to offenders is far simpler and cheaper. But there is a terrible cost to this approach. That cost comes in the form of changing expectations and the cementing of the wrong behavior.

These traffic fines are meant to discourage behaviors that affect the public space negatively (for instance, parking at the junction is illegal because it may cause collision between other road users). But today, these effective fines are too low that instead of functioning as deterrent, they are now an enabler of bad behavior. The fines become fees.

What this means is that instead of a person paying fines to make amends, now that person pays fees to allow him to commit wrongdoing. So, people now are paying fees for the permission to break the law.

Fine as fee is among the subjects of Michael Joseph Sandel’s What Money Can’t Buy. The subtitle is more descriptive: The Moral Limits of Markets. Sandel is a political philosopher who is perhaps best known for his Justice lecture series.

Fine as fee is only a specific example of a general set of cases where incentives designed to discourage certain behavior end up encouraging it instead. More precisely, (some) market-based incentives have the capacity of corrupting individual behavior by making previously frown-upon actions acceptable, which in the end makes the experience of public space sharing less desirable. There is a hint of the tragedy of the commons here.

There is one real world example I would like to cite from the book. It revolved around child-care centers in Israel that had difficulties with parents who were always late in picking up their kids. To discourage late pickups, the centers introduced a fine. In theory, this should encourage parents to pick up their children on time. But it became a perverse incentive, a concept undergraduates learned in their introductory microeconomics classes. Instead, it changed parents’ behavior for the worse, who now see the fine as a payment for late pick-up service. Incidence of late pick-ups rose afterward, as parents were more than happy to pay for the convenience. The lesson here is that that fine (a market-based solution) changed the expectations about late pickups: from something that reflects irresponsibility to just another non-judgmental service.

But this example and more are not a Freakonomics kind of entertaining read that opens up the world of economics to lay readers. Sandel attempts to convince us that market-based incentives change norms, unlike the typical economics assumption that these incentives itself are valueless and only reflects preexisting preferences.

Sandel’s ultimate thesis is that we have evolved from having a market economy to becoming a market society, where market mechanism has pervaded throughout all aspects of our life. He is worried that such proliferation is crowding out non-market norms and that the outcome is for the worse. Some of these norms are the egalitarianism (for example, lining up as opposed to express lanes where you pay to get ahead), the sacredness of human life (as opposed to paying for human organs or babies), honesty (as opposed to paying for friendship or dates), empathy (as opposed to auctioning immigration rights to refugees), civic mindedness (as opposed to paying to pollute or simply be a litterbug) or in general, the inculcating of the public spirit or civic duties which the market more often erode.

What Money Can’t Buy can be seen as an anti-market work but I think that is an unhelpful way of looking at it. Instead, it should be seen as a warning that not all realms of life should be opened to market mechanism or solutions. We should not bribe our kids with cash so that they eat their greens or clean their rooms or get an A at school. Sometimes should be encouraged through non-market means. There are social and moral limits to markets and there is wisdom in acknowledging those limits, even if one is—especially if one is—as I am, generally a pro-market person.

This brings back to our Malaysian case of traffic offences and fines as fees where people pay to commit offences. The possible solutions (apart from the market ones that involve more severe non-discountable punitive pecuniary penalties) appear to be a non-market one: towing, driving license suspension, lengthy court cases and even jailing.

Yet, most of these non-market solutions require government enforcement and enforcement requires funding, i.e. tax revenue. This goes back to the contributory factor behind the proliferation of market mechanism in our life: shortage of public funding means a retreat of public service, and that empty space gets filled up by private enterprises.

And yet, non-market norms where it exists can be cheaper than market norms. As Sandel writes, and I agree with this:

“[f]rom an economic point of view, social norms such as civic virtues and public-spiritedness are great bargains. They motive social useful behavior that would otherwise cost a lot to buy. If you had to rely on financial incentives to get communities to accept nuclear waste, you’d have to pay a lot more than if you could rely instead of the residents’ sense of civic obligation. If you had hire schoolchildren to collect charitable donations, you’d have to pay more than a 10 percent commission to get the same result that public spirit produces for free.”[1]

[1] — The mentions of nuclear waste and donation refer to an earlier real world examples in the book.

On nuclear waste: Switzerland needed a site to store nuclear waste. In a survey, when residents of a village were asked whether their would accept the government constructing a nuclear waste site at their location, 51% said yes out of sense of civic duty and the common good. But when the same question was asked with cash compensation added in, the result changed. Now, only 25% would agree, with the rest felling offended that they were being bribed.

On donation: two economists did an experiment involving high schoolchildren going door-to-door solicitating donations for certain cause. These children were divided into 3 groups. The first group was given a motivational speech about the worthiness of the cause, the second was given the same speech while getting to keep 1% of any donation collected and the third was also given the same speech while getting to getting to keep 10% of donation collected. The result? The first group collected 55% more donation than the second group. Meanwhile, the third group did better than the second, but worse than the first. Lesson: doing it for free out of civic duties leads to better results, but if you want to pay, it has be to a lot.

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Books & printed materials Society

[3012] The contemporary relevance of Syed Hussein Alatas’s Intellectuals in Developing Societies

While reading Syed Hussein Alatas’s Intellectuals in Developing Societies recently, there was one question that kept popping in my head. Is the book still relevant to contemporary Malaysia?

Some rights reserved. By Hafiz Noor Shams.

Published in 1977 but written earlier, Syed Hussein Alatas asserted that developing countries such as Malaysia (and more generally, throughout Asia) did not have an intellectual class. There were a few intellectuals but they were so few and far between that they were powerless and could never function as a class that could exert influence on the elites and the society as a whole.

He attributed the lack of the intellectual class in Malaysia (really, his focus was Malaya/Peninsular Malaysia but the claim is also relevant to the Borneo states) to the massive colonial immigration. In his own words, “the population of Malaya was composed of immigrant groups, devoid of intellectual interest, many of them from the lower economic class in their country of origin.” Meanwhile, the colonial education system was designed by the British purely for vocational reasons and avoided the nurturing of intellectual interest. In short, the whole population was more concerned with economic and other immediate practical factors instead of intellectual pursuits.

The economic focus with limited intellectual development continued beyond the colonial period. Here, Syed Hussein Alatas blamed the Alliance/Barisan Nasional government for failing to create the intellectual class. He reasoned the peaceful nature of the country (relative to the more turbulent revolutionary history such as in Indonesia, the Philippines and Vietnam) had made governing a routine business. Such routines gave way to the rise of the managerial politicians and technocratic class where they functioned to keep the social machine running, instead of manufacturing new machines that intellectuals would do. The lack of need to create new machines meant the lack of need for intellectuals. Only crisis would demand intellectuals and Malaya and Malaysia had little, or so that was the claim.

While that might be true, surely there is an intellectual class in Malaysia today. Syed Hussein Alatas himself had influenced a whole school of thought that is alive and well in Malaysia. And there are other intellectuals of different persuasion who are thriving in the country now. In fact by the 1970s, it does appear to me there was an identifiable intellectual class with Syed Hussein Alatas himself a giant. Furthermore, the events of 1969 were a crisis for Malaysia and to follow his own logic, the times demanded intellectuals, which the society then did provide.

This counterpoint of mine shifted my mental mode. Instead of reading the book as something of contemporary relevance, I began to view it as a material giving insight to the 1950s-1970s society. After all, the author was fully engaged in the 1960s-1970s political debates, with commentaries/examples on less-than-inspiring results from government policy and policy implementation in Malaysia then. He reserved some venom for the Cabinet under the leadership of Tunku Abdul Rahman, which Syed Hussein Alatas described as lacking rationality and filled with unsuitable happy-go-lucky personalities. (There are several chapters on fools and bebalisma but I have a feeling this segment of the book was steam-blowing ranting against the then-government disguised as an model—essentially it is about calling other people stupid without actually doing so. Syed Hussein Alatas had a political career in opposition to Tunku Abdul Rahman and Tun Razak’s leadership.)

Perhaps, something does not change after all.

And perhaps, the existence of an intellectual class does not entirely remove the relevance of Intellectuals in Developing Societies to contemporary Malaysia.

Here, the lack of need for intellectuals during the early days of Malaysia had led to the education system focusing on developing technical expertise without inculcating a ‘philosophic spirit’, an idea borrowed from Egyptian intellectual Muhammad Abduh and a long line of other intellectuals. This gave rise to what Syed Hussein Alatas called the dualistic man where outwardly the person accepts, enjoys and wants the conveniences of science and technology but inwardly, believes in the supernatural in direct contradiction to the sciences. The person wants to be the consumer of science but the science behind the product can be magic for all he or she cares. This can easily describe our post-modern reality that might get worse with the proliferation of mindless artificial intelligence usage within our society.

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Books & printed materials Economics Politics & government Society

[3010] Reviewing Abundance and thinking about the abundance agenda

One of the central themes of The End of the Nineteen-Nineties (by yours truly) is that a robust and widely shared economic growth is a prerequisite to Malaysia’s civic nationalism that comes in the form of Bangsa Malaysia. I argue that the loss of growth momentum caused by the late 1990s Asian Financial Crisis is the primary reason behind why civic nationalism is struggling to have itself centered in Malaysian politics. If you sympathize with the argument, then it is natural to buy into the overall abundance agenda.

Ezra Klein and Derek Thompson are two champions that have popularized the idea of abundance through their recent 2025 book Abundance.

However, Abundance is a US-centric work. Some parts of the book sound like a boosterism for the Biden agenda: build, build, build. The support for the CHIPS Act is apparent throughout the book.

If you are living and working in Asia, problems raised by Klein and Thompson such as reluctance to build more housing, slow renewable energy progress and the general weakness in infrastructure spending might sound like an alien concept. In this part of the world, infrastructure spending is something we have learned to take for granted. Oversupply and overcapacity are more the buzzwords than scarcity is.

Nothing highlights this more by the differing reactions to a recent clip of the US President convoy driving along a Malaysian highway during the recently concluded Asean Summit in Kuala Lumpur: some US audience were amazed by various aspects of the highway while the Malaysian reactions included pride (thank you for noticing!), indifference (what’s the so special about the stretch road?) and smugness (welcome to the first world…). And this is just Malaysia, not China with its ultramodern out-of-this-world infrastructure and industrial might that is just hitting the ball out of the park.

Yet, the implications of Abundance have relevance to this part of the world too.

For one, policy priorities do change but change does not come easy. In fact, policy momentum often come in the way of new challenges. The authors go some length to explain why it is hard to build in the US: there was a time during the 1960s-1980s when development went too far that other concerns such as pollution, health and road safety were ignored. Since then, public pressures and court cases have put in place various legislations and bureaucracies to address these issues. These restrictions were relevant then, but they are now in the way of addressing new challenges. Example includes laws that used to restrict pollutions and preserve the environment are now preventing progress towards clean energy deployment that is necessary to combat climate change.

This can be true for Malaysia too in multiple areas. One area I can think of is Malaysia’s set of incentives, which a majority of them are geared towards the industries of the 1990s but not of the 2020s. Many of these incentives are now irrelevant but continued to be given by the government for various reasons, which is now taking resources for emerging concerns. Another policy is simply the petrol subsidy: we would like to push the country towards greater electrification but the subsidy is clearly in the way.

Another important lesson is that scarcity, oftentimes, is a choice. Sure, the physical world can only serves us so much but policies in many cases are the cause behind scarcity. Bringing the idea closer to home in Malaysia, our collective reluctance to raise taxes is the reason behind capacity and quality challenges we face in the health and education sectors. We choose the scarcity, and then we fight among ourselves to win stupid prize in that stupid games we created.

The greatest lesson perhaps is this: growth is not the only thing that matters but do not take it for granted. In fact, to put it more strongly, degrowth is not the way. This should be obvious with the various social pressures caused by deindustrialization faced by not just the US, but especially Europe. In Malaysia, for those still holding on to the idea of Bangsa Malaysia, growth is a must.

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Books & printed materials History & heritage Politics & government Science & technology Society

[3009] Reviewing The Peasant Robbers of Kedah 1900-1929 and then a modern thought

Central to Cheah Boon Kheng’s 1988 book The Peasant Robbers of Kedah 1900-1929: Historical and Folk Perceptions is the idea of theft as an informal wealth redistribution mechanism during a time of distress in rural Kedah. The thefts are framed as a guarantee for some kind of minimum welfare standard for the rural folks in general and in important specific cases, as a response by the weak against those in authority.

The result of 12 years of research and writing actively influenced by James C. Scott (the author of Weapons of the Weak), Cheah (who died in 2015) painted a picture of petty crimes being a constant concern in the 20th century rural Kedah. The historian reconstructed the conditions of Kedahan kampongs through interviews where written records failed. Written records are wholly inadequate because the Kedah Sultanate, both under first Siamese and later British influence, had limited effective control beyond major towns: the state elites had worries other than recording the lived experience of peasants, at least until they began to exert greater control throughout the state.

In that reconstructed picture, I get the idea that almost everybody engaged in petty crimes. Chickens reared regularly disappeared without a trace. The prevalence of theft however did not mean the lack of shame. In one page, the author wrote that the offending party would quickly slaughter the birds they had stolen, had it cooked immediately and then consumed as soon as possible so to not get caught. Proving such crime was next to impossible while reporting it to the authority was such a hassle that it was not worth the effort to do so. In a rural setting where the jungle was nearby, everybody was a suspect, policing was absent, the state was non-existent and the border was porous, the criminals might as well be a snake or a ghost with an appetite for white meat. The spread and frequency of petty crime worsened during difficult economic periods as distressed households resorted to pilfering for survival. Or as Cheah put it, it was a system of self-help.

Crucially, all this was an intraclass conflict. The rich lived far away from the kampongs in towns and protected by law and order. But the rural normality of crime set the stage for organized banditry at the state level and soon, interclass conflict.

The rising banditry was fueled by a weak state capacity, a changing power structure (from distributed native power to colonial centralized control) and general corruption among rural leaders.

Kedah then was more a mandala than the state we know today: strongest at the capital center but its influence dropped disproportionately fast the farther away a person traveled into the jungles. But even in that weak state structure, Kedah still had representatives in the form of village heads or similar positions. As the British expanded its bureaucratic reach outward beyond towns and centralized all authorities in the state capital Alor Setar, these local rural actors lost power and wealth.

To preserve their influence amid a feudal society, they resorted to criminal activities. They fought the erosion of their power by recruiting local thugs who carried out theft in a bigger way. In this way, the rural elites amassed muscles and capital.

But the local elites needed the local thugs as much as the latter needed the former. The thugs needed the local elites as a shield from Alor Setar, or at least some kind of legitimacy within a feudalist framework.

Here, the idea of wealth redistribution from the rich to the poor becomes tenuous as the local rich preyed upon the poor even as the rural elites did this in rebellion against growing colonial authority (and it should be mentioned, against the sultan too).

As events would have it, the alliance between the rural elites and the thugs employed and protected would not last. Quarrels happened for whatever reasons and the latter turned against the former, stealing for rural and urban elites alike. The victimized peasants celebrated this and this is what Eric Hobsbawm called social banditry: actions taken as illegal by the law but carried out by the oppressed groups as a form of resistance. Some in fact shared their spoiled with poor, making them as Cheah Boon Kheng called them as the Robin Hood of Malaya. Such appears to be the case with the peasant robber Panglima Nayan (and several others) who was eventually killed by the British-Kedah authorities.

But not all cases (in fact most cases) could be labelled cleanly as Robin Hood kind. Stories about these individuals are contradictory and there are forgotten aspects about their cruelty to their own, with their benevolence exaggerated. It is a complicated truth, unlike popular folk tales told in Kedah.

Cheah the historian understood this but still came out to defend his thesis: it does not matter what the truth is. What matters is the perception of the peasants. That perception and stories from the peasants told are their way of rebelling against the authorities. These stories are the weapons of the weak.

Cheah’s defense of the thesis is acceptable and solid in fact. But I am troubled with the brushing off facts in favor of perceptions, if we transport this lens to analyze contemporary issues. Here, I am referring to social media which has inundated everybody with information (regardless of truth) so much that everything become perceptions with increasingly no bearing to facts. Would the employment of perceptions regardless of truth by fringe extremist groups (by definition non-mainstream and so… ignored/oppressed/suppressed/disenfranchised?) qualify as weapons of the weak?

I have not read Weapons of the Weak and I will try to read it soon with that specific question in mind.

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Economics Politics & government Society

[3004] Expanding the tax base requires rationalization, sequential approach and public buy-in

The ongoing exercise to expand Malaysia’s tax base (the most popular discussion is the expansion of the sales and services tax, but there are other taxes at play too) has got me revisiting several relevant issues. There are multiple factors to think about in making the policy a success: tax regimes, tax types, distributional effects, redistribution policy, subsidies, etc. These factors cannot be looked at in isolation. Yet, it is possible to talk of them individually as long as we do not lose sight of their interconnectedness.

In that spirit, the five items I have been pondering the most in recent days are:

  • the needs for base expansion
  • political constraints
  • rate of expansion (gradualist versus abruptic approach)
  • spending goals
  • policy sequencing and communication

The needs are clear. The expansion of the sales and services tax is a necessary step towards fulfilling the inevitable requirement for greater public expenditure in multiple fields. The areas are especially healthcare, education, infrastructure (for the purpose of energy transition, data, public transport and climate adaptation) and defense. I have a (partial) list of challenges that Malaysia faces that necessitate greater public spending.

Yet, nobody likes to pay taxes regardless of the legitimacy and benefits of the tax-funded spending. The time horizon mismatched between the benefits of greater public spending and the cost of higher taxation does not work well with voters who mostly more attuned to short-term concerns over long-term considerations (instant gratification factor), and private challenges over public objectives (the tragedy of the commons-like tension). Add concerns for corruption and leakage into the mix (reflecting a low-trust society), this makes any tax hike sensitive to the domestic political stability (or perhaps more accurately political longevity) of a government that functions within a working democratic framework.

Given these constraints (the political sensitivity of tax hikes and the need for greater tax-funded public spending), how fast could the government hike taxes?

The current government is choosing the gradualist approach and it is defensible in many ways: sudden large tax hike would be too disruptive to most people in the immediate terms with welfare-diminishing in the short-term. The last large tax hike was in 2014 when the GST was implemented without flawed tax return mechanism, although it came with cash transfers to mitigate the welfare-diminishing nature of the tax. That was absolutely unpopular and poisoned the otherwise tax regime that is better than the current SST. And Malaysia had taken the abruptic approach before during the Abdullah Ahmad Badawi administration (with Najib Razak as the Finance Minister) through the drastic liberalization of petrol subsidy. That too was massively unpopular.

But the drawback of a series of gradual tax hikes is the expectation-building among the voters, even if it makes the welfare-diminishing aspect more manageable. Surrounded by tax hikes, they would associate the party-in-power with continuous tax hikes (and possibly feeding into inflationary expectations). That is a tough association to live with in an electorally competitive democratic environment.

Most government would like to stay in power and in our democracy, such unpopular tax policy requires a buy-in from the population. Any buy-in must be preceded by a policy and messaging that explain the greater need for public spending and the subsequent taxation.

The sequence must be right: one does not put taxation above spending (and far too many politicians tend to confuse policy sequence too many times, which reflects incomprehension of the issues at hand and the need to take short-cuts for quick gains. Many challenges that Malaysia faces are of long-term in nature resembling a complex sequential puzzle: most of the times, the temptation to pick low-hanging fruits is a mistake in a world of quickly shortening attention span.

Those spending goals must be explained clearly to the electorate. The government must outline the goals (W% of GDP for health by certain year, X% of GDP for education, Y% for defense, Z% for social transfers, etc) in a simple and coherent manner. Explain the benefits and requirement the government seeks to fund. Just as important, these goals must be harmonized a single readable document. And then, the goals have to be sold to the public as seriously as trying to win a referendum (or better yet, an election).

Bit-size documents. Social media posts. Roadshows. Carnivals. Posters. Pamphleteers at shopping malls like how candidates gives out pamphlets at wet markets or food bazaars. These efforts must follow. It is a referendum after all: a referendum of a future of Malaysia that we might want.

At the moment, some of these goals exist but they exist disparately, set in silo buried and in thick unread policy documents. And most government documents are readable only by experts despite being public documents. Worse, sometimes these goals are delivered in arrogant, unsystematic and confusing ways, which wins no allies. That is no way to sell a tax hike necessary to address great challenges Malaysia faces in a fast-changing world.