Anecdotes Archives - Page 14 of 25

End of oil II

After penning the End of Oil, I was bothered by my switch of camp. In some sense I had become a new kind of neo-Malthus but yet I resist the analogy. I think the struggle we have today with carbon emissions is different from the issue of resource conservation like in the case of land or other commodities. And the reason has to do with the market system and price signals.

In the past when we are thinking about resource constraints such as agricultural land, we know there is a price on the resource. With subsidies they get over-utilised but overall, because the market system rewards greater productivity of those resources, all the micro-decisions in the economy will encourage discovery of more of the resources or greater efficiencies in utilisation. The economics is working against Malthusian ideas.

Nevertheless, with the carbon emission challenge of today, most emissions still remain unpriced. They rightfully require a negative price but tax systems and enforcement aside, governments around the world are reluctant to even design regulations to create proper carbon pricing. Without this pricing, economics will keep working against the climate change problem, and we can only rely on goodwill or sustainability marketing as motivation which will never be enough.

Rainfall & showers of blessing

It’s been a really wet Lunar New Year season. The downpour was incredible and yet it did not flood. My expat friends were quite impressed by our drainage systems.

Well, we have had episodes of “ponding” which were pretty severe before. And the government agency PUB had stepped up on drainage management. Things have obviously improved since and to be really fair, we are really capable of continously improving the system as long as we are not complacent about what we have achieved.

We often take these things for granted here in Singapore because problems are either solved even before they occur or done for us such that we don’t even notice. The difficulty is that we are no longer capable of dealing with the problems when they do come. For example, our contingency plans for transport disruption is atrocious partly because we had been able to keep things going well.

In the next stage of our development, we need to develop resilience not through anticipating challenges but learning to live through them and deal with them. Otherwise, we are developing a fragile population.

End of oil

Many years ago when I first thought about the study of Economics, there was the prevailing concern about oil reserves running out and the world running out of fuel. It was 2005 and the economist even had an issue where the cover page was showing the reflective colorful swirls of oil. The economists would argue that the world will never run out of oil because towards the last drop of oil left, the price of oil would be so high no one would want it. And perhaps many other alternative technologies which were not commercially viable would have become so before oil runs out.

Those were days when we technically already know about greenhouse effect and the global warming potential of carbon dioxide. And I was particularly fascinated with the recurring debates between the Malthusians (and neo-Malthusians) and the others weigh on the hope of technology (and possibly economics).

It is funny how more than 17 years later, I’m in a career to try and reduce (and eventually end) the dominance of oil. Not to promote an alternative technology, not to rail against the political power of oil but to create a future that we all want to step into. Because climate change is an existential danger for us all and the planet as we know it. And because I believe our current economic system can be superceded by one that works for the future and not the tradition notions of wealth and fortune.

Sizing the slices

How much time do we take to bake a pizza compared to working out the even-ness of the distribution of various ingredients on the pizza and then slicing it all up into sufficient slices to be shared around the table. And why does that matter. So it matters when there are different people involved in baking the pizza and thinking about the size of the slice they will be getting later. There may be some putting different topics and determining how evenly distributed they should be and so on. And then there’s the guy determining how the slices are cut. And then maybe some kind of system determining who gets which particular slice. Maybe that is by a ballot or random system.

And yes in case you’re already suspecting, I’m thinking about the economy. An economy where people are obsessed with trying to secure a bigger slice for themselves will not behave very optimally to enlarge the overall pizza. Because their energies are caught up in the distribution process; then resources aren’t quite properly allocated. The best approach is to maximize the size of the pizza before splitting it up. But the challenge is that the way we determine the split can affect how to maximize the size.

And then how do you deal with people in the overall scheme of things, who genuinely has very little to contribute to the size of the pizza but is very much part of the overall process? Do you exclude them from the distribution? How are they going to affect the others who are productive? And if you do include them, will you be disincentivizing those who are contributing a lot more to producing the pizza?

As an economy moves from the early stage developments to more mature stages, and with more specialised industries and niches in the economy, these questions will crop up more often. What we need to do is to take a stance on which direction and how we want our markets to be headed. And what would we sacrifice to make that work.

Market capitalism

Economics is not a discipline of the capitalist though they might think so. Because the communist had their study of economics and the manner of trying to deploy the calculations and understanding in central planning. But I digress. What I’m pondering over recently, is that intricate link between the market and capitalism. I wonder, if there was something apart from market capitalism. And as it turned out, there are ideas of alternatives around state-capitalism which is where the state tries to accumulate capital and operate an economy dominated by state-owned firms. But to some extent, that is what communist regimes have sought to do. So ultimately, the ideas of capitalism, when taking the notion of the market away, actually represents something very different from what we commonly believe to be capitalism.

In that sense, capitalism as we conceive it probably still has the market principles and ideals at the fore in the manner it is perpetuated. In that sense, the ills of modern capitalism isn’t necessarily the notion of capitalism per-se but allowing the (unguided) market to take the lead in too many of the things that actually matter. The idea of markets regulating themselves is honestly a little ludicrous to me. In an older world where there were many things in our lives that dominate including ideas around moral, characters, and virtues, we tend to be keen to govern the market and regulate it, seeing that there are higher laws to follow.

But in the world today, we increasingly allow the market to dominate our judgment of things, especially with regards to value of things – tangible or not. That means that what the society needs to care about, which might not be valued by the market properly, may just fall off the radar. It happened for the climate of the world; and who is to say that market capitalism is not coming for other things that truly matter to us as humans.

Da Hong Pao Oolong

Authentic Tea House, a brand under Coca Cola Singapore used to sell these cans of Chinese tea (unsweetened) that uses Da Hong Pao tea leaves from Wuyi mountain or so they claimed. Da Hong Pao is itself a very expensive variety of tea and this canned tea was very popular in Singapore for quite some time. My family and I were fans of it.

Recently they changed the tinge of the color of this product. It went from bright red packaging to a little bit darker red. And instead of saying ‘Da Hong Pao’, it was saying ‘Oolong’ though the subtitle still said it was brewed from Da Hong Pao leaves. The taste is distinctly different and I’m not sure if it was a change in formula that demanded that update in marketing and product design.

Either way, my family didn’t like it. And we wonder if it has to do with the cost or the limited supply of the Da Hong Pao tea leaves. It is sad that Coca Cola Singapore decided to introduce an inferior product to replace one that is so popular and widely consumed. But to a large extent, that is the story of industrialism, and also of the worker who have been doing a good job that was previously appreciated by the employer. Sooner or later there’s always a desire to standardise things, make it good enough but not so great that it becomes irreplaceable. But in the process, we lose something.

Dig and ship

Australia is extremely resource rich and has low population density. The demand for its resources will come from elsewhere. And the reason is probably that those are industries already established elsewhere and needs those raw materials from Australia because they already squandered those they have nearer to them.

So for decades, minerals, and other resources have been dug up and then shipped to those other production locations. Global supply chains are formed this way. There is a mix of proximity to key resources or demand, as well as some path dependency and government competition to promote and attract investments inward. It is not formed by mere economic calculations at every moment.

That is to say that in the energy transition, Australia has the chance to attract actual industries needing their raw materials to situate in Australia. This will also mean pushing up the population of the country and potentially straining what is conceived as the carrying limits of the land. So it is a trade off to consider. But either way, the world could be better from this logistics chain optimisation at regional level.

Industry chains and value chains

It was interesting to look at the copy and storytelling of this TWS’ piece sponsored by Ministry of Trade & Industry. The main message is around skills and jobs upgrading and the changing economic situation of a country that developed. I appreciated the empathy and recognising that the economic shifts do cause people to be left behind. But the idea of applying a one-size-fits-all solution to the broad economic shift seem simplistic to me.

The fact that the country embark on a kind of industrialism does not require all its people to do the same. When the UK was undergoing the industrial revolution, the French and Italians started forming artisan guilds and creating systems of artistic and craft authenticity verifications to protect and price their products better. When Frito-Lays or other big brands moved their potato chip making operations to developing countries, the developed European farms started making their own chips and marketing them at prices that are 4-5 times.

Sure, there is more technical components involved in the premium versions and probably more work went into the marketing, packaging and consumer experience. But this is precisely the sort of product development and market-growth thinking that Singaporeans need to move into the next stage of our development.

Manufacturing value-add and improvement in Singapore can be achieved by having more economic promotion, tax incentives and being able to gather a bunch of competent people able to participate in the production. That is because we are small and rely on MNCs investing in manufacturing capacity. And that MTI push for people to become cogs of such industrialism is based on this strategy. Yet as an individual, I don’t know how optimal this is. I find it simply makes us even more fragile and at the whims of the industrialism.

I’m not sure how worthwhile it is to develop stronger manufacturing base driven by our homegrown technologies and research. We do have that strategy in place and try to move in that direction as well. But we are stuck as second class folks in the game if we continue to encourage the majority to remain as cogs in that industrialism perpetuated by others.

Who does the market serve?

For a government, it makes sense to periodically step back, figure out who and what the market is not serving that it should really be serving and create interventions to redirect the market.

This is why carbon regulations, carbon pricing and systems of disclosure is so important. And all of these entails the government and the people making a choice to take away that false liberty of choice that the market creates. This decision is driven by seeking to serve the people who otherwise would not be served by the market.

For example, in the case of people who are hard-to-insure. The market-based insurance approach makes things harder and harder for them as the companies are able to discriminate against them and pool only customers with better risk profiles.

The invisible hand is invisible but it is still guiding and directing. Better for us to articulate as a society how we want the market to serve us and get it to do just that.