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.