Categories
Economics

[2406] Better food stamp and the wider context

The Malaysian government may introduce what seems to be a non-tradable food stamp program to combat high food prices. The goal behind it is noble. While that is so, it must be noted there are at least two ways to improve the outcome of the program. Moreover, the issue of high food prices should be assessed more holistically.

First, tradable food stamp will likely improve recipients’ welfare more than mere non-tradable arrangement can. Tradability will widen the recipients’ choice set and give them the opportunity to smooth their consumption. Furthermore, they may not always require subsidized food. Tradable stamps will allow the recipients to exchange the stamp for other items of need or even cash. Such exchange tradable stamps will widen the welfare-improving effect of the program by implicitly covering those who are not explicitly covered by the program. Whatever the price of sale of the stamp, it is will be lower than the face value of the stamp for otherwise, the stamp will be worthless. This essentially means the uncovered purchasers of the stamps will also be subsidized.

Second and perhaps the natural expansion of the first option is a direct cash transfer. From public finance perspective, this is likely to be the most efficient solution within the restrictive goal of enhancing the welfare of specific group of individuals.

Regardless of the costs and benefits of food stamp, high food prices in general is a wider issue. The wider context is important.

One context is the fuel versus food debate. Government policy on biofuel may have inflationary effect on food prices. As reported by Reuters in March 2010, the biofuel policy was supposed to start in June 2011.

The other more pressing context is monopoly of foodstuffs in Malaysia. Exclusive monopoly and quota granted to specific entities on various foodstuffs cause the very problem that the food stamp program aims address.

There are plenty more examples demonstrating contradictory and convoluted government policy.

Perhaps the problem of high food prices is better addressed by undoing unproductive government interventions in the food market. These interventions benefit only specific parties instead of the wider public. Without these interventions and with a little bit of luck, the rationale for food stamps might disappear. More importantly, public welfare can be improved without spending too much public money.

Categories
Economics

[2405] The end of the world? Not today, Galvatron

Now that we are staring at the possible end of the world — or rather, the possibility of the US defaulting on its payment — I am an optimist (hey, the yield rates are still low. That gotta mean something). In any case, a default would likely be temporary. Never mind that the US can still prioritize its payments to prevent default by suspending some relatively non-essential government operations.

Even if it would be more serious like the one in Greece, I have made my position known: the market can live without government bonds. The short run would be ugly. But in the long run, we will be fine.

Categories
Sports

[2404] So far, shitty offense, shitty defense but great goalkeeping

Any Malaysian who identifies with Malaysia will be watching the Malaysia-Singapore soccer match right now. It is not really about Malaysia trying to qualify for the next round of the 2014 World Cup. It is just Singapore.

The first leg was electric although the Malaysia defense was disappointing. The second leg so far is just disappointing, with the exception of the spectacular Khairul Fahmi Che Mat. I am at a loss at why he was not fielded down for the first leg.

The first half of the ongoing game can be summed up in 6 words: shitty offense, shitty defense but great goalkeeping. Like I said, Khairul Fahmi Che Mat is spectacularly marvelous. If this were Championship Manager, he could get a rating of 8 out of 10, with others between 4, 5 and 6.

I hope the second half is different. Malaysia needs at least 2 goals, given in the first leg, Singapore won 5-3. The only good news are that Malaysia has 45 more minutes, obviously, and is enjoying away-goal advantage. The team better make good use of that.

Categories
Economics

[2403] The world has gone crazy

“…Treasuries have become a form of insurance against their own downgrade.” [Chris Reese. Bonds climb with safety buying as stocks dip. Reuters. July 26 2011]

Categories
Conflict & disaster Economics Liberty

[2402] The cost to the Beijing development model

The rapid and successful economic development of China so far has been presented as the superiority of central planning over the approach taken, for example, by India. It is the Beijing development model as some would say. Authoritarian top-down approach gets things done, unlike the messy democratic means from the bottom up. All those criticisms weigh things down needlessly.

The recent high-speed train disaster that killed nearly 40 persons[1] should give advocates of the authoritarian approach a considerable pause the next time they try to sell the Beijing model over democratic ones. Reports are coming out that these infrastructure projects were rushed for the 90th anniversary of the Communist Party.[2] Results do not look good for the Chinese government.

The Beijing way of doing things has become controversial, especially after the accident.

How much of infrastructure projects all around China suffer from abuse of power or corruption in general? Was the accident a symptom of a rotten system?

Between authoritarian and democratic states, the former lacks real mechanism to make the state accountable. It will be hard to answer the questions even in democratic states, much less in ones like China’s.

Typical of authoritarian governments, the Chinese government is trying to muzzle investigations into the incident.[3] This is amid angry allegations of corruption with respect to these projects and specifically, the high-speed train system. That is an example how there is little accountability in China. Any reprimand is for public show only. Such reprimands have proven to be inconsequential. In Malaysian parlance, small fish.

Even before the train disaster, the system was already suffering from service interruptions, barely weeks after its official opening. Something must be wrong when so many glitches happened so frequently so soon.

Something is rotten in the state of China. That rottenness is the cost of the authoritarian model. There is a cost to absence of check and balance, of accountability, of freedom. It is a shame somebody has to die to learn that.

While India suffered from embarrassing criticisms before and during the last Commonwealth Games due to perhaps their incompetence in meeting deadlines, at least we knew the problems before it was too late. Remedies were taken. For China, there is a guessing game: which one is the facade and which one is real. As the train disaster showed, we found out about the rotten apples way too late.

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

[1] — BEIJING—The first high-speed train passed through the tracks where a deadly train collision occurred in eastern China, as authorities sought to soothe public concern over safety and the handling of the accident as well as jitters about the future of its prized high-speed rail system. [Norihiko Shirouzu. Beijing Seeks to Soothe Train Jitters. Wall Street Journal. July 26 2011]

[2] — China’s high-speed rail line between Beijing and Shanghai has been beset by glitches in the two weeks since it opened to great fanfare on the eve of the Chinese Communist Party’s 90th anniversary celebration. [David Pierson. China’s high-speed rail glitches: Racing to make errors?. Los Angeles Times. July 16 2011]

[3] — BEIJING — China has banned local journalists from investigating the cause of a deadly high-speed train crash that has triggered public outrage and raised questions over safety, reports said Tuesday. [Allison Jackson. China seeks to muzzle reporting on train crash. AFP. July 26 2011]