The Special Case
By Kevin
Gotta Come Down
For those students of A Levels Economics who still have no idea how asset bubbles form and why the classical theory of economics suggests that bubbles are unlikely might like to read the recent Buttonwood. A Special Case highlights why the properties of goods that are classified as assets are fundamentally different from the rest of the goods in the economy. This is not only about financial assets but those other goods that are treated as assets. During the tulip mania, the tulips were treated as assets briefly before the entire frenzy collapsed.
When price information feeds back into the demand of a good, the Law of Demand no longer applies and the demand curve of the goods starts sloping upwards. We never seen this sort of analysis done mathematically because it is an imprecise analysis and the equilibrium found is not meaningful (think about 2 positive gradient curves intersecting). George A. Akerlof and Robert J. Shiller brings in various other explanations for the emergence of depressions from disciplines like psychology in their Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism I just manage to borrow it from the library and hopefully I'll be able to finish and review it soon.
The Rising State
By Kevin
Which would you pick?
After countless years of experimentation, consensus on economic policies have not been quite useful in application because of acknowledgement of vast differences between individual economies and the fact that different cultures would have an influence on the reaction of the economy to a government policy.
Industrial policy usually seems pretty attractive as a means of guiding the growth of an economy. Singapore is an attractive example and our success too often is related to some sort of plan, policy or programme by the government that we almost forgot that the economy and people plays a huge part as well. The Economist is not exactly in favour of industrial policy. In the article, it highlights the trouble with industrial policy, and how the success claimed by it relied heavily on privatization and the free market.
Nevertheless, we must acknowledge that government does play a part in helping to brand the giants and create the necessary initial conditions and connections that the industries need to thrive subsequently. The industrial policy, is thus about giving the right industry the right aid or initiating the right investments and then moving out at the right time. In this aspect, Singapore has often done exceptionally well, recognizing when to deregulate a market, and also introducing competition.
The Economist highlighted an important point in its conclusion about industrial policy though:
[...] rather than the failed policy of picking winners, governments should encourage winners to emerge by themselves, for example through the sort of incentive prizes that are growing increasingly popular.
Another article elaborates more on the core arguments about industrial policy. Indeed, the industrial policy should not be able 'picking winners, saving losers'; it should be designing an incentive structure that will lure winners to emerge. That is the power of the market and the government should help out with this rather than interfere with the incentive system.
Multi-polar IT
By Kevin
The Duo
For a long time, the IT market was dominated by just 2 firms - Microsoft and Intel. Dubbed 'Wintel', the alliance of sorts had all the OEM computer manufacturers under their foot in the 1990s, Apple Computer was a struggling footnote of the PC wars of the 1980s. When I was kid and first started using the computer, it was the DOS prompt that I remember seeing, and the Windows 95 that seem to hang so frequently my reset button was a little damaged from heavy use.
For a long time we didn't expect anyone could topple the 'monopoly' of Wintel. Microsoft was releasing new Windows Operating Systems every 2 years or so. Of course, it turned out that such speedy development was not sustainable in a closed computing giant. Eventually, market space was distributed to old competitors who persisted. Linux and Apple have both been in the PC market but sidelined by the couple. The Economist traces this part of history and tracks how the couple have been driven apart and will continue to drift away from each other.
It concludes that the entire IT industry is becoming more vertically integrated with multiple giants. This is probably the result of the convergence between consumer, corporate and industrial technologies. Cloud computing, which was originally more research and industrial have been adopted by consumers and corporations. Personal Computers became powerful enough to be 'workstations' and therefore used by corporations. Moreover, the demand for working on the go means that most corporations prefer to supply laptops rather than desktops for their workers. The computers chosen by corporations are increasingly choices made by the users-to-be and not some IT department staff.
Nevertheless, a multi-polar IT world is not exactly one that might be fiercely competitive. With vertical integration, consumers are likely to be more locked-in. Users using the products of one particular company may be hesitant to switch, for fear of the work required to learn a new system. For ages, that was how Windows dominated and at present, there are still users who are not keen to switch to Mac because they are afraid it'd be 'difficult to use'. For Apple, iPod was a very Mac-user sort of device until they eventually launch iTunes for Windows. It is the adoption of iPod by the mass market that helped them to accept and embrace iPhone when it was produced. That is to say that in long run, companies may likely produce products that appeal to their original user group and may not want to be aggressive and try to penetrate other market segments.
Regulators, look out.
The Wave
By Kevin
Receding Tide
Apparently Google decided to cease development of Wave (but maintain the site at least for the remainder of the year) because users have not exactly found good uses of the product and thus adoption and usage is not exactly ideal. After the initial fanfare and hype about Google Wave, I didn't quite use it. I personally think that the recorded typing might be useful under certain circumstances but not always and so users should be allowed to easily disable it. The arrangement of the discussions should also be in reverse chronological order so that you don't have to try to scroll down a really long discussion.
I discover these main ills because I did use it for a collaborative project I did recently. The system is useful for us in general but there were times when it was down. Seeing your friends type in real time might be fun but without a powerful computer, it lags and you might be tempted to reply when your friend have not finished what he wants to say. The good thing is that almost everything is recorded and we can always check back when necessary.
Yet the 'failure' of Google Wave represents the success of Google; by working on many different projects, Google manages to explore multiple ideas at the same time. While different amount of resources and efforts are dedicated to different projects, they are willing to terminate even a high-profile, hyped project show that their model is successful. The ability to create such a 'market-based' testing is immensely useful to the firm. Much must have been learnt from failed experiences and we really should celebrate all that.
Hong Kong Experiment
By Kevin
The Economist viewed the introduction of a minimum wage law to the Hong Kong Economy as an end to its free market experiment that was touted to be 'Milton's Paradise'. The article traces the historical background that resulted in the Laissez-faire capitalism that Milton Friedman so love.
Is mandatory caning necessary for convicted vandals?
By Martin See
Who did the painting on this MRT train?
Michael Peter Fay, a mischievous American teenager, shot to worldwide fame after he was given the taste of Singapore's rattan rod (hint: it is not one of those Singapore delicacies). After being convicted of two charges of vandalism in 1994, he was sentenced to a total of four months' imprisonment and six strokes of the cane. Even a plea of clemency by the then US President Bill Clinton could not save Fay's bare buttocks (although it did reduce the number of strokes from six to four by the then Singapore President Ong Teng Cheong).
Following Fay's sentence, Singapore became internationally recognised as the country where chewing gums are banned and people are caned for vandalism. Even "Sue Sylvester", a fictional character from the Fox musical-comedy series glee, came out to say "You know, caning has fallen out of fashion in the United States. But ask anyone who safely walked the immaculate sidewalks of Singapore after winning an international cheerleading competition, and they will tell you one thing: Caning works! And I think it is about time we did a little more of it right here... yes, we cane!"
This issue has been brought to relevance by the recent vandalism of an MRT train committed by a 32-year-old Swiss national Oliver Fricker and his accomplice Dane Alexander Lloyd, a 29-year-old Briton. Both men slipped into the SMRT train depot in Changi, a protected place, under the cover of darkness and decorated an MRT train with the words of 'McKoy' and 'Banos'. While Lloyd remains at large, Fricker was sentenced to three months' imprisonment and the minimum three strokes of the cane after being convicted of the vandalism charge.
These two cases beg the question, is mandatory caning necessary for convicted vandals? Before I delve further into this question, it will be helpful if I educate our fellow readers on the relevant laws.
Under section 3 of the Vandalism Act, Cap. 341, "any person who commits any act of vandalism or attempts to do any such act or causes any such act to be done shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $2,000 or to imprisonment for a term not exceeding 3 years, and shall also, subject to section 231 of the Criminal Procedure Code, be punished with caning with not less than 3 strokes and not more than 8 strokes". Under section 231 of the Criminal Procedure Code, such convicts cannot escape the rattan rod unless they are "a) women b) males sentenced to death c) males whom the court considers to be more than 50 years of age".
Apart from the provisions stated in the earlier paragraph, "punishment of caning shall not be imposed on a first conviction under this [Vandalism] Act in the case of any act falling within (a) paragraph (a) (i) of the definition of “act of vandalism” in section 2, if the writing, drawing, mark or inscription is done with pencil, crayon, chalk or other delible substance or thing and not with paint, tar or other indelible substance or thing; or (b) paragraph (a) (ii) or (a) (iii) of that definition". For the references to the paragraphs, you will have to read the Vandalism Act.
As stated in the preamble, the Vandalism Act is "to provide for exemplary punishment for acts of vandalism". But why is exemplary punishment necessary for such a non-violent crime? To answer the question satisfactorily, we have to understand its legislative intent. During the trial case of Michael Fay, it was put forward that the "original legislative intent behind the provision for caning in s 3 of the Vandalism Act was directed at suppressing those violent political elements which existed in Singapore in the 1960s and which wreaked havoc throughout our city by, inter alia, inscribing anti-national slogans in public places..." and subsequently, the then Honourable Chief Justice Yong Pung How also clarified, in his written judgment, that "the legislature was simultaneously concerned with containing anti-social acts of hooliganism." But these reasons do not answer why caning is to be of a mandatory nature.
Why not give the judiciary the discretion of sentencing them to caning instead of maintaining it as a mandatory punishment? Let the court consider the factual matrix and severity of each case before deciding on the appropriate sentence. In this way, it would give the court more flexibility in varying the sentence while deciding on the most appropriate punishment for the convicted vandals. After all, acts of vandalism are mostly non-violent and its damages usually non-permanent. At this point of time, I want to stress that I do not condone acts of vandalism and that these convicted vandals do deserve some sort of punishment. However, to impose mandatory caning on these convicted vandals, without considering the facts and circumstances of each case, would be too harsh a punishment.
What do you think?
Opening Up
By Kevin
Deal!
The recent Lexington on The Economist gave a pitch on the merits of openness, to migration and trade; and then analysed how far US has come. His analysis on America emphasize the inclination towards isolation and warned how dangerous it could be while urging support for greater openness. Singapore's openness to migration appeared particularly alarming to locals in the recent years and prompted our government to take steps to distinguish the privileges between Permanent Residents and Citizens as well as take more social action to aid the needy citizens. Personally, I think the over-embrace of foreigners here is often disturbing for those who cling to Singapore as home; ironically, that's actually the people whose support the government really needs.
Nevertheless, the arguments for openness were great, I particularly like the anecdote used in the first paragraph.
A LONG time ago, the rising seas turned Tasmania into an island. A few thousand inhabitants were cut off from contact with the Australian mainland. Their technology regressed. They forgot how to make bone tools, catch fish and sew skins into clothes. It was not that they grew less intelligent. Their problem was that they no longer had many people to trade with. It took a lot of effort to learn how to carve needles out of bone. So long as there were plenty of people with whom to swap needles for food, it made sense to acquire such skills. But in a tiny, isolated society, there may have been room only for one or two needle-makers. If they both fell off cliffs, the technology died with them. When the first Europeans reached Tasmania, they found natives whose only shields against the winter chill were seal-fat smeared on their skin and wallaby pelts over their shoulders.
Innocent Prisoner’s Dilemma
By Kevin
Speaking for those trapped...
You've heard of Prisoner's Dilemma in Economics and Game Theory; but Professor Daniel Medwed of Utah identified and came up with the concept of 'Innocent Prisoner's Dilemma.
It's interesting and if you could imagine yourself in the shoes of those 'innocent criminals', you'll find it really frustrating - much like the good old Prisoner's Dilemma of game theory. Thanks to Justin, I discovered that The New York Times produced a really good video on it, discussing the case of a black man who was jailed for 29 years being wrongly convicted of murder and robbery, now free only on parole. Essentially the life of the man is ruined by the system that serves to trap him within a mistake that was made by others.
Lawyers-to-be, especially those interested in criminal laws should really give this a good thought.
Economist Special Reports
By Kevin
Water. Anyone?
The Economist have special reports frequently in their weekly issues and often they go in depth into topics that we'll get in touch with at some point of our lives. Most importantly, for academic, students and teachers, these reports are opportunity to get a clear picture of topics you've always wanted to read up more on and be updated on that field.
Very often you'd also find them cross-disciplinary, covering economics, geography, science and definitely General Paper. Take the recent report on Water for example. It raise natural water issues studied deeply in geography but also propose policy (economics) and technological (science) solutions. It is also great that nowadays these reports are available for download free because they are sponsored by some big company. This are materials that anyone can access, even those who are not subscribers of The Economist magazine.
The Economist is not always about economics and you just got to get in touch with the content they offer to understand how good it is. I'm glad they've came up with an economic solution to offer their content to a wider audience.
The Bad Side?
By Kevin
Democracy Working
After all the 'hype' about the resilience of the emerging economies, The Economist seem to have featured some of our South East Asian countries is rather bad light in one of the recent issues. While talking about Philippines' recent elections, they hinted at the economy's untapped potential and the lack of political will to do something about it. And then they presented a skeptical tone towards the current Thailand government's ability to garner the support of the country.
Finally, the drama in Malaysia drew some criticism and sarcasm once again. In many sense, these articles have a 'When will they grow up?' attitude, suggesting that the events in each of the countries are all too familiar. Indeed, in some cases it is difficult to be hopeful that things would change. When it comes to politics, the region is still immature in the conduct of democracy and economic development may have increased but the fruits of prosperity not as well distributed as one would like.
Catching up on economic growth is an extremely important step towards altering the politics although it is not always a guarantee that this would occur. Yet we should not think of any particular political system as an ultimate destination. Our experience with evolution is that several models of existence would sustain; the changing circumstance will continue to push these models and systems to evolve.