Is Economics a Science?

my friend garreth clued me in to econtalk.org; hosted by Robert ....

The debate these days in the economics field, at least, is about whether or not, econs is a science.

When a field of study is labelled as science; it carries with it a whole bag of connotations.

When its a science, its measurable. Quantifiable. Understandable. You can render it in so many numbers and capture its essence in formula and greek. The field of study is suddenly tame. People feel safer when they are told that a method's scientific when in truth what they mean by scientific is that the tests are repeatable. That a theory formed on the basis of past data can then be verified via experimental data.

I majored in econs. In my fourth year, I got deeper into it and got into public economics debate. The questions of grand social welfare - of how to make either all of us happy or none at all or at least indifferent - I barely scratched the surface of that field and found myself pondering semantics.

To do econs, is an exercise in logical representation of reality and human behaviour in response to needs and wants. The math's just shorthand. The math summarizes all the working parts and forces you to study and define the problem within the spartan framework of algebra so as to get at its essence. It ought to be experienced. Econs that is. Have someone sit in front of you and debate the public policy options and you start to realize that without some kind of framework of thinking. Econs has a lot of tools that it can use to dissect tricky problems. And the world produces our experimental results which proves or disproves the theories.

Lessons I learnt from Romance of Three Kingdoms

textpad entry; TUESDAY, 5 MAY 2009

It was an impulse buy. I had gone to the bookstore with the intention of picking up Daywatch but found myself browsing the Chinese Literature section. Something drew me to a copy of Romance of Three Kingdoms. Surreptitiously, I slipped the thick paperback out of its plastic sleeve. I read the first few lines and was sucked into the world of ancient China.

Awestruck by the emotional and intellectual depth of the characters. The machinations and schemes. The alien sounding names threatened to overwhelm me.

I ponder. No matter how pure the intentions began, compromises are soon made. Three different rulers exhibit three different methods of leadership and command. One led by fear. Another led by compassion. The last out of desperation.

In their lifetimes, they managed to carve out a slice of history. And spent the bulk of their waking lives countering each other's actions.

In the end, I asked, what does it matter?

Rule a state with an iron fist and live forever with fear?

Or rule a state like a benign leader and live one's honorably. A life free of guilt. Which path promises greater happiness?

On the people's desire to know more.

Mr Hardy feels that Singapore's Sovereign Wealth Funds have done a good job. So far no news of any financial scandal other than the Shin Corps debacle. Just like any investment sometimes we make losses. That's a fact of life, all returns come with risk. (and don't get me started on the appropriate amount of risk. There's a calculation for it.)

But what Mr Hardy feels is lamentable about Singapore is that some people like to make these losses an issue because they just want to make life difficult for PIP. Make life difficult nevermind, they also don't know their economics or finance, just anyhow whack only.

For this people, Mr Hardy can only say, "their mouth their wish lor."

Whenever, Mr Hardy hears commentary on how they think Singapore Government should allocate their funds, or whether they should give back some of the returns etc, Mr Hardy believes the real agenda - or the angle the lay citizen is coming from is that they want more transparency.

Essentially, they are concerned and want to know if there's been mismanagement or if the choices made were the wrong ones.

Concerned citizens by right are entitled to know.

Mr Hardy's only complaint about GIC and Temasek Holdings is that they need to be more transparent. I don't think there's a problem with GIC and Temasek Holdings releasing more information - maybe can release an annual statement or better still, open themselves up and sell equity shares to individual singaporeans so we all can 'huat' together.

The real issue is can we trust the average Singaporean with that kind of information. Are we all sufficiently motivated to research, and think and be responsible for our actions?

Don't get me wrong, Singapore's not the only one with this kind of problems. Even in developed countries they all bitch and gripe about the government in power. And they are a very opinionated lot as well.

Maybe what we need is to to just keep talking and for the teachers amongst us to guide and those consensus builders out there to help integrate thoughts and ideas together.

More information on these government affliated wealth management funds can be found at swfinstitute.org

GIC and the risks they take

Errata: GIC didn't buy Shin Corps. Temasek Holdings did. Mr Hardy's mistake. I'll retain the original post here for integrity's sake. (good lesson, next time I'll have to check my facts!)

******

KTM, over at kwayteowman.blogspot.com posed 3 questions. One of which was on GIC and the risks they take to earn their returns and whether or not we have a say in things. Thus far, Singapore government has treated GIC like a fund management company with government links and resources and to some extent an obligation to preserve capital and be productive.

First my main points:

1. The number one rule for investment is that you should only invest what you can afford to lose and GIC this time were forced to sell their shares in Shin Corps for the sake of political reasons. (If Singapore was more belligerent we could do what the US do. Say f*ck it and assume you are right anyway.)
   
2. The point of setting up a GIC is to preferably deliver better than risk free rate of return and if possible beat the market rate of return.The only benchmark for performance is a track record of delivering returns given global risk parameters. So long as money grows, well done.
   
3. Ultimately, the only thing we should be concerned about is if GIC invests in things which are not profitable, do not make good financial sense and are super risky with infinite liabilities which jeopardizes the entire portfolio and reserves.
   
4. We should be concerned about overall portfolio returns and risk and not the isolated event.

Other than that, there's really no issue for the citizens.

Next, I'll state my case here.

Let's say we got an investment company, GIC which manages a Trust fund. The proceeds of this Trust fund is pumped back into the coffers of the Republic of Singapore to build schools, to train soldiers, to provide for any number of welfare improvements and initiatives.

Every year, GIC gets money to invest on behalf of the Republic of Singapore.

The fund managers of GIC come up with investment ideas and plans. They look for good long term investments which suits their risk profile. Then they give to the Government to approve and justify the acquisition of shares or investment in companies.

Kway Teow Man, argues that the Government of Singapore has the obligation to set limits on the risks GIC takes. And I am sure that the GIC is shackled with certain restrictions due to geopolitical considerations.

KTM wants to know what's the appropriate return for the risk GIC undertakes. My answer is straight out of the textbooks: its a function of the risk-return trade-off. More accurately, they should aim for a return better than a passive portfolio index. (the Morgan Stanley World Index for example)

KTM wants to know if we can impose rules on what GIC can and cannot invest in for political reasons. My response: Is yes they may but ultimately, fall back on the risk-return trade-off and then re-evaluate to see if its still a good value buy.

All Mr Hardy can say is that the only rule GIC should abide by is Profit Maximization where the Risks taken are commensurate with the Returns.

Also, for each investment, only a certain portion of the funds allocated for investment are used to fund the acquisition and that the maximum downside risk should not wipe out the entire portfolio.

These are all stock standard finance textbook response.

When GIC moved to acquire shares of Shin Corps, they bought into the shares of a telecom's company based in Thailand. (This is a good value investment by the way, b'cos this telcos are cash generating and are in the black) They were blindsided by the coup or at least overestimated Thaksin's ability to govern Thailand. A coup ensued, GIC made to sell Shin Corps back at a loss.

This time Singapore was 'suey' lor.

A response to Catherine Lim's fears of disconnection between the government and the people.

Novellist Catherine Lim has blogged about the ramifications of Mas Selamat's escape and her opinion that there's an "increasing disconnect between the Government and the people". Link: http://catherinelim.sg/2008/04/27/more-comments-on-the-mas-selamat-scandal (accessed 11 May 2008)

I disagree with her view that:

The disconnect is due mainly to the PAP government’s failure, or refusal, to understand the importance of the affective component in a government-people relationship. Indeed anything outside their sternly pragmatic, rationalist, functionalist framework is viewed as just so much unnecessary emotionalism or ideology.

It is precisely because people are emotional that the government has to be "pragmatic, rationalist and functionalist". Strong emotions hinders people from making good and considered decisions.

The correct response is not a knee jerk response of sacking the chief of home affairs just because a political prisoner escapes or the public demands it. The correct response is to make long term, institutional changes - to vet the security procedures, to put in place monitoring systems and the like.

It isn't the time for scapegoat(s).

Ms Catherine Lim's agenda is to say that the people's feelings have been neglected. I say that the people's feelings have nothing to do with the crisis. A man suspected of a terrorist plot escaped. So the government's correct response is to 1) find the guy and 2) make sure it doesn't happen again.

We're one goal down and you want the government to take a pow-wow and sayang-sayang us a bit more? fuck that. 

This is Singapore.

Deal with the immediate problem first then let's talk sentiments.

Its cool to be Malay, Indian, Chinese, Singaporean, etc.

Ash wants to know how I got around to be proud of being Malay.

I had a good think, and spoke to a couple of people (well, at least one) and we figured that its better not to be proud of being Malay, or Chinese, or Indian, or whatever.

More accurately, we don't think being proud is a good attitude to have. Its like thinking you're of a superior breed just because somebody else who happened to share the same genetic expression as you achieved something noteworthy.

We (as in my fiancee) and I think that its much cooler to just be ourselves. We learnt to accept the colour of our skin and that sometimes people might have preconceived notions of us which are mostly wrong but sometimes right. (Mats still sit under the void deck playing guitar at 1 am in the morning, until I call the cops to tell them to perform ID checks on the buggers.)

I'll state it here, I'd rather be Singaporean Malay - and accept all of my flaws, implied or otherwise, rather than pretend to be someone I am not or be unsure of who I am.

For the record, I believe the moment when I started standing up for my race was when I went overseas for training and I felt really lost. It was my first time abroad for an extended period of time and I must say that I had my share of racist comments and confrontations while I was over there.

As a red blooded male with a good understanding of the context and history of my predecessors and what we had to put up with I guess I prefer to fight for my right to be recognized as a human being entitled to the same rights and capable of doing more than my fair share.

Skin colour and outer appearances are a product of genetic expression and environment variables.

"There's no gene for the human spirit." - Gattaca (1996), a film by Andrew Nicols.

A theory as to why Singaporean bloggers are so "bo liao" (loose translation: insipid and inane act)

Trawling tomorrow.sg is like my way of remaining connected to the 'real' Singapore.

As I scan through and read the posts, I'll start to plug-in to the real world angst and misery that my fellow citizens put up with on a daily basis. After a while you'll get a general impression that the actions of rude Permanent Residents, offensive Singaporeans, perceived personal slights and unjust behaviour of People in Power (i.e. corporate Singapore, government, etc.) takes up a lot of our cerebral processes. We sound like really angry people.

For the record, I do read xiaxue.blogspot.com. I get a real kick out of reading her blogs. Its so bad, its actually quite good. I am an apologist by nature, so pardon me if I defend the attention seeking tart. But xiaxue has succeeded in carving out a niche for herself as a shock (schlock?)/celebrity blogger. Her online persona is her brand. The cost is that for better or for worse, I can never take her seriously. Its a choice that xiaxue's going to have to live with for the rest of her life.

Sometimes I ask myself, why do Singaporeans whine so much? Is Life really that bad?

Are we blind to the fact that Singaporeans today enjoy the highest levels of healthcare, one of the world's most admired social security networks, easy and readily accessible education and training centres in South East Asia. A committed, cohesive government. Not to mention, a GDP per capita which is on par with some European cities.

Singapore's problems aren't life threatening. Our neighbours don't threaten with missile strikes or rail against us. They are envious of our wealth and good fortune however, but in general, we're not that bad. Most of our real problems are caused by affluence - rising cost of living, unequal distribution of wealth, falling birth rates, etc.

So where's the beef, Singaporean? Or is it all bull?

Maybe Singaporeans whine so much is because in general we're disappointed with the way life turned out for us. And so we fixate on our problems so much so that all we see are our miseries.

Perhaps, we're a society so addicted to stimuli, we nitpick and tear ourselves and others apart for a problem to solve, some dilemma to resolve.

I would like to think that the overall noise we get in blogs, media and newspaper is a sign of people actively seeking channels of communication. The real signal is that Singaporean bloggers represent the people who want to talk but want to do it without attracting too much real-world attention to ourselves. (If we entertain or approach random strangers and talk about this or that problem, they would probably think you mad or at least delusional; but its ok online cause really, you read it cos you wanted to.)

Whenever Singaporeans such as myself 'blog', we're actually throwing a carefully crafted and opinionated message in a bottle in the hopes of reaching the ears of some distant and faraway reader. That's the intention - what the message is, and the form it takes is dependent on the writer's taste, preferences and indulgences. Thus, we get two extremes in blog posts - high quality, well crafted posts from erudite, mature bloggers (which are kinda hard to appreciate, and even harder to find) and big shock, high entertainment value, mass market oriented, attention seeking harlots.

Which leads me to believe that Singaporeans are in fact lonely people with too much time. You write because you are bored and that you want to communicate but no one's listening at 3 am in the morning. When viewed as such, for all our wealth and good fortune, we're actually quite sad. Next time you read xiaxue, or find some revolting piece of blogging material, see past the anger and bile and rage and recognize the fact that its just someone in a lot of pain.