Categories
Economics

[1663] Of food? Fuel? Dilemma?

Not all dilemmas are really dilemmas. Open up the lid and upon closer inspection, the dilemma unravels without much investment in effort. One such apparent dilemma concerns the production of food and biofuel. There is really no dilemma between food and fuel however. Free price is the scissor to cut the fake Gordian knot.

In explaining the current food crisis, the production of biofuel has been named as one of the culprits which forced food prices to go up. Some sources typically harvested for food are now being turned into fuel as a solution to high crude oil prices and to some extent, as a solution to an environmental concern as well.

With all that, the food sector suddenly finds it is competing with the fuel production industry for supply; cross-elasticity of demand ensures that. Cross-elasticity is basically a fancy way in economics of saying changes in prices of one item affect the quantity demanded for another item. This happens when a product could substitute another dearer item. Coming back on track, as crude oil prices continue to rise, so too demand for alternative fuel. In this case, it is biofuel.

Price is essentially a signal of scarcity. Price reflects all available information about the associated good. In a market free of state intervention, all market participants will face prices that reflect the true situation of the market.

With free prices, market participants including producers will base their decisions on the true market situation. Within the context of food and fuel production, when there is relative scarcity of one item to another, production of the scarcer item will see an increase.

In the end, there will be a dynamic equilibrium between food and biofuel production closely matched to the reality on the ground.

With deeply statist policies in place however, information about the reality on the ground does not get relayed to market participants. Through subsidies, prices floor and ceiling and other mechanisms set in place for purposes ranging from welfare to environmental and development of new technology, prices are unfree. From there on, prices stop acting as a signal of scarcity. As market participants, consumers and producers alike choreograph their decisions based on these flawed prices, their actions will not approximate the true situation of the market.

The larger the effects of statist policies, the harder it is to estimate the true situation of the market, setting the stage for a painful fall. An extreme scenario would lead to a violent collapse of the state as the market would eventually overwhelm the state.

To a statist and even more to a populist, the question of food and fuel production is a dilemma. Price increases of food and crude oil require a hike of production of food and biofuel. Yet, there is a trade-off of production between the food and biofuel.

A statist in the end sits at his desk, trying to think which is more important to the society or in most cases, to the stability of the state. He has to devise a model, whatever the model may espouse, to decide on the matter.

An adherent of free market principles would deal with the question with an ease that would insult any statist. The free market solution is simple: let the market decide for itself.

Before that can happen, the prices have to be set free, especially from policies which suffer deadweight losses. This includes most if not all of welfare-based policies. As for policies on externalities and development of technology which could push the supply curve outward, it should be judged on a case-by-case basis. Let prices with true reflection of the market reach all market participants without unnecessary friction.

Once the market is free, the dilemma will dissolve into oblivion.

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

p/s — a version of this article was first published at The Malaysian Insider.

Categories
Mudslinging Politics & government

[1662] Of in all seriousness Mr. Khoo, huh?

Khoo Kay Peng wrote at his blog:

If Dr Mahathir is serious about his current move then why aren’t his family members following him out? [Mukhriz Taking a Hedge. Straight Talk. May 20 2008]

While his entry in general is reasonable, the last paragraph, reproduced here, sounds absolutely odd.

Does the former PM need his family members to follow his footstep in order to be serious? Am I missing something here?

Categories
Economics Humor

[1661] Of barbarian at the what?

The ever amusing editors at The Economist.

Some rights reserved. By Mohd Hafiz Noor Shams.

Categories
Politics & government

[1660] Of a phoenix for UMNO

After a relatively disastrous election result in its history, UMNO is in crisis.  As its members try to rejuvenate the old lady, strong voices from inside of the party calling for the resignation of various party leaders could be heard. In their eagerness to follow through their loud calls, dissatisfied party members are demanding for a more democratic process to be implemented within the party. Regardless whether the calls are based on sincere belief in democracy, the restoration of democracy in UMNO will strengthen the party.

Many have derived many conclusions from the result of the recent general election. The Malaysian blogosphere has been hailed as the instrument which brought UMNO down to earth. A perceived weak Prime Minister has been thrown into the kitchen sink of conclusions along with the mysterious Fourth Floor team. One grand conclusion involves the transformation of a race-conscious Malaysian society into an issue-based one. There are several other factors which are believed to have caused BN’s less than stellar performance but pundits say this and pundits say that and the sink is overflowing. Now, allow me to add another plate into the sink of punditry.

Voters voted the way they did because they were tired of UMNO and BN leaders in general. If I must find a word to describe why it was so, then arrogance is the word and this arrogance evolved from the confidence built in the 2004 general election.  After receiving an overwhelmingly strong mandate in 2004, confidence of the Abdullah administration and its supporters was at an all time high.

In an undemocratic environment which approvals from the top matter more than that of the grassroots, the strong showing of UMNO in 2004 created an atmosphere of invincibility. After all, if undemocratic process prevails in a democratic system, it paints the picture that an undemocratic system is able to produce outcomes endorsed by democratic processes. Somehow, it created an assumption that if the Prime Minister approved a person, so would the grassroots.

As UMNO politicians’ perception of invincibility ballooned, their statements and actions became far removed from concerns of voters. Some of the statements and actions made in response to issues of public concern were so outrageous that the only thing that made it all the more outrageous was how they could say it with a very straight face while real problems raised by voters were dismissed nonchalantly. These politicians had become unaccountable to whom they were supposed to serve.

The situation was ratified on March 8, the day which top-down and organic approaches clashed.  Only after it was too late did many incumbents realize that they were not invincible after all and that the Prime Minister could not save them from the guillotine.

The outcome of March 8 would not possible had happened if a more organic approach was taken by UMNO. With democratic processes in place, the more savvy and capable leaders more presentable to the Malaysian voters would face the general election. As the convention goes in democracy, or at least in meritocracy, the cream would rise up to the top.

Furthermore, those closer to the grassroots would know better the sentiment on the ground than those at the top.  That itself is the reason why organic politics is better than top-down approach.  Undemocratic practices in UMNO however pushed the cream down at the bottom while elevating the unfaltering crust to the top.  The Prime Minister was way too detached from the earth, sitting on his throne in the desolated but lavishly decorated Putrajaya.  He could not see the graffiti drawn around the Central Market or listened to the talks at various kopitiams across the country.

The weakness of top-down approach was compounded by the fact that Malaysian politics is party-centric and party-centric politics is a fertile ground for generalization. When ministers associated with UMNO repeated outrageous statements over and over again, it reflected badly on his party and it gave the Pakatan Rakyat more ammunition against UMNO. As we saw on March 8, the generalization worked: good representatives like Shahrizat Abdul Jalil were voted out along with those with penchant for insulting statements such as, if I may name a name, Zainuddin Maidin.

Restoration of democracy in UMNO will allow better leaders to rise up to replace the old guards. The change of guards will improve the party image and with infusion of more capable blood, old image will wear out to be replaced with more admirable generalization.  The President of UMNO recently wanted the members of UMNO to prove to all Malaysians on how that the party is not arrogant during the 62nd anniversary celebration of the party a number of days earlier.  If he made that call in earnest, he should begin with the reintroduction of organic politics in the party.

Finally, as much as I dislike communal politics, I do not believe that race-based politics has met its maker. After all, the question of race could still be heard easily in public domain. A majority of the Malays is still concerned about Malay privileges. Even during the election, the Pakatan Rakyat’s success has much to do with issues surrounding the Indian community. In Perak and Selangor, the issue of race riddled appointment to high public offices. All in all, I believe it may take another election or two to truly prove that our society has truly transcended communal politics.

Until then, race-based politics will continue to be the hallmark of Malaysia. And if UMNO begins to respect organic wishes, it has an opportunity to tread the path which the Phoenix had treaded.

Categories
Photography

[1659] Of I won! Yeah!

I just have to brag:

Dear Sir/Madam,

Greetings from Malaysian Nature Society!

Last March, in conjunction with RWW 2008, MNS, in partnership with Nikon and CLICK! Magazine played host to the Wildframe Competition in which participation was indeed encouraging! Out of the 100 entries, the top three for each category, have been selected by our distinguished panel of judges. Hence, we would like to congratulate the following winners:

Nature

1st Prize – Choo Chi Yen
2nd Prize – Sanjitpaal Singh
3rd Prize – Hafiz Noor Shams

I never had the confidence to say I am good at photography. Now, I can say, I am that good.

Whoa. Watch out ladies, a big head is on the move! Haha. I can not wait until somebody pops up my balloon.

Concerning the competition, I do not remember what I won but I hope I would get another digital camera. Since Nikon is the sponsor of the competition, it should be a CoolPix model. I would like a new digicam because my Fuji has become unreliable lately for some reason. There is something wrong with the transmission of power. Sometimes, it does not switch on when I switch it on.

Do not get me wrong. Despite that, I love my Fuji and it has been faithful to me ever since I was a freshman at Michigan.

Anyway, I do find having a digital point and shoot camera extremely handy. As I have learned, DSLR and point and shoot camera are not really a substitute to each other. There are times for each type: DSLR is good when you are out there determined to get good pictures in a challenging environment; a digicam is just for “oh, that is interesting” and you just want a picture and not really a Pulitzer Prize-worthy piece.

I used to bring my camera every I go when I was in school at Michigan. I want to do that again but a DSLR is just too bulky for that purpose.