Sunday, September 06, 2009

Economics @ Home © Volume 1 Issue 7

Policonomic Ideals

Economists are not very creative people. I mean, they came up with terms like utility to mean satisfaction. I am about to continue that trend. While Political Economics relates to studies regarding the politics of economics; policonomics, I regard, as being related to the the economics of politics. The intertwining of terms may seem confusing and probably allude to the fact that I have created a new word just for the fun of it. But then again, if it isn't fun, why do it?

First of all, political economics is related to the decision making by authorities regarding the allocation of resources. Basically, it studies the the government's actions regarding the country's economic decisions. Without going too much into detail, political economics dwells on the role of the government in allocating resources in an economy.

What I will discuss today is probably not so different from that, rather, I will focus on the economics of the decisions of policymakers, more specifically,what are the policonomical ideals and how we may achieve them. Once again, I won't pretend to know how to run a country, but I think it suffices to have the ability to analyze the costs and benefits of an action or the outcomes of an action.

Anyone who has kept himself (without loss of generality in terms of gender) abreast with regards to the issues surrounding Malaysia will find it too easy to criticize the government and call for action or change or whatever it is. While many realize that the delapidated state of our country today is not a result of today's government but the leaders of the past and their mismanagement (to put it mildly) of the country, I find it disturbing because what these people are doing can be compared to blaming a son for his father's crimes. I will leave this topic at that and go back to what I intend to cover, that is what are our policonomic ideals and how we can achieve them.

I am not about to analyze every single policy in detail. I would like to focus on three key areas: education, healthcare and security. I chose these three specific areas simply because they tend to have positive externalities that extend the furthest. The benefits of developing these areas will naturally spillover to other areas and because of this, we can afford to assume that it is quite possibly the most efficient way to spend the people's money.

I touched a little bit on education in Volume 1 Issue 1. To recap, I asserted that the way to promote quality education was to significantly hike the salary of teachers and the trainers of teachers. This may seem absurd at first, but the idea behind it is rather simple. In fact, I recommend the policy of increasing wages significantly in these three key areas. Let us examine the effects on them one by one.

Of course, many people can argue that a sudden surge in pay of teachers is unwarranted and most definitely undeserving. Many teachers today are not only unable to teach science and mathematics in English, they sometimes impart the wrong facts to the students. I consider that a minor flaw. What is worse is that the students are taught the wrong attitude. Factual errors happen all the time and can be corrected by reading exposure. Teaching a student the wrong attitude is like baking a cookie with the wrong mould. Once its baked, it's almost impossible to reshape it. Because of this, it is clear that education is a vital sector to focus a country's efforts on.

We don't like to admit it but we all know that money is one of the greatest motivators. I am actually crazy enough to advocate a simple increase in the wages of teachers. As far as I understand, the government wages are paid based on the number of years people spend studying in university. So, doctors get paid more because they spend at least five years in university. Similarly, keeping teachers in university longer can only be beneficial. The standard of teachers today simply call for more training. Of course the teachers of teachers have to be competent as well. The best way to attract competent people into an industry is simply to offer attractive wages. The most obvious examples today are Real Madrid and Manchester City. The message is loud and clear: money is king!

Because of the increase in wages, more qualified (truly qualified, not just on paper) people will strive to become teachers. After all, being a teacher is a noble profession. No one is going to look down on someone because he is a teacher. The only reason bright students steer away from teaching and go into medicine, law and accounting is simply because of wages. I mean, seriously, why would anyone become a lawyer? The cause and effect is clear as the blue skies.

I don't need to elaborate the importance of healthcare. It is sufficient to note that better quality of living can only improve productivity and all the other nice things about any country.

As I said, the case is similar in healthcare. We all know how well-paid doctors are. However, doctors are not the only people who work in the healthcare industry. The often forgotten and unsung heroes, the biomedical scientists need to be given much better incentives. While the government has provided (or tried to provide) state of the art infrastructure everywhere, it fails to see that these facilities are clearly underutilized. Our country is great at boasting of having the most high tech corridor in the world and what not, but we forget to ask, what is the point of a corridor that no one uses?

Similarly, to attract great medical talents to Malaysia, our country must not be stingy on research grants to pull in the talents from all over Asia. Singapore is benefiting greatly from its generosity to sponsor research personnel. I am very certain that a stone's throw would be sufficient to pick out eager and talented researchers from China or India or some other "poor" country who can only cry about the lack of opportunities. Our selfish pea brains often ask, "Why invest in world class infrastructure and let foreigners use them?". First, it is obvious that giving an ordinary driver an F1 car is not only dangerous, but irresponsible. We simply do not have the expertise to fully utilize the infrastructure our government has strived to offer. Second, what our government always overlooks (or pretends to) are positive externalities. A simple question such as, "Why do we try to send our children overseas?" would lead us to the conclusion that we NEED foreign expertise. All this talk about how we MUST develop local talent and we choose to ignore the simple truth. Why not bring the foreign talents here? If Malaysia can establish itself as a healthcare hub of the world, the spill-over benefits for locals will be forgone conclusion.

Security is a very controversial issue in Malaysia. But I guess this is the case in every part of the world these days. I will not delve into the intricacies of the balance between regulation and freedom. Just like the indifference curve, there are many points on the balance that can provide the same amount of utility that can be derived from the security for a particular country. The issue is to maximize this utility. In this case, the cure happens to be the problem. Underpaying security personnel is like prescribing an incomplete schedule of antibiotics. Not only does the illness not go away, but in many cases, the bacteria become stronger.

Imagine yourself being a police officer who is underpaid. While it is all good and right to argue from the moral perspective but if your family or survival depended on money, would you not accept bribes if you could get away with it. Some people can even justify that it is only right.

There are three very strong benefits why increasing the wages of security personnel. First and similar to the previous two cases, we will get more competent personnel in the industry. It is only beneficial to have efficient workers in the police force. Imagine having bright detectives who solve crimes at unequalled success rates and police officers that are actually strong and brave enough to overpower the hoodlums that control our dark alleys. Will crime still be rampant in Malaysia? Second, paying security personnel high wages will force bribe offerers to up the ante as well. Imagine offering a bribe of RM50 to a police officer who earns RM10 000 per month. While money is still money, sometimes RM50 is not worth the risk. This brings us to our third point. By having high wages, the police will have too much to lose if they are caught receiving bribes. Now, their survival instinct will work in the people's favor. With a family to fend for, is wasting a perfectly noble and high paying job worth the risk? It is clear that the wage increase should not be limited only to the police force. I will leave how a wage increase can benefit the security industry as whole to your imagination.

Finally, I would like to reiterate why I chose to focus on these three areas. The positive externalities of having world class education, healthcare and security are practically unlimited. World class students bring world class brains and productivity across all industries. World class health care provides an enviable quality of life that will inevitably attract foreign investment. World class security and corruption standards entail the ease of conducting business in Malaysia. We often hear the Prime Minister preach about thinking "first world". Well, here is first world thinking for you. Please stop throwing money at useless submarines and other ridiculous mega projects and focus on what's most important for our country. There is no need for cute catchy names like 1Malaysia to label our people. Let's not be sidetracked about the issues that cloud the real matter at hand. Focus, and we can all prosper.

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