Singapore seems to have been, for the past decade, floundering with no well defined heading. Granted, there have been some great new initiatives such as NParks' work in building a greener and more pleasant environment, as well as forrays into large scale event management (with mixed results), but it appears that the only truly concerted movement has been increasing the population, as seen in extensions of the rail network to and relatively rapid building of housing in the northeast. Most lists of Singapore's major achievements do not contain anything post-2000. This leads to the question of whether our leadership thinks we are "there" and only minor incremental moves are necessary. I would most certainly disagree with that proposition, pointing to clear quality of life issues that are widespread.
As a national direction, I would propose something familiar. As a statement of objectives, it reads: to build a democratic society, based on justice and eqaulity, so as to achieve happiness, prosperity and progress for our nation. (Nostalgically: 建设公正平等的民主社会，并为实现国家之幸福、繁荣与进步.) That definitely sounds good and agreeable to most, though it need not be the direction for our nation as articulated by the government, but there are compelling historical reasons for it.
We need a direction to tack to and it should be clearly articulated. It will serve as a set of principles and objectives to verify all legislation and initiatives against. Conversely, such a direction may be used to design and formulate legislation and initiatives.
With apologies for the abstractness, this call for an articulated direction is basically an appeal for a statement of mission, vision and values, on which strategic thrusts and the crafting of initiatives may be based. We need this, or, like corporate entities without one, be destined to flounder and envying the increasing success of others with clarity of purpose and alignment to that purpose.
I propose that the formulation of a clear direction be done in Parliament. The pledge could be the basis of one. It should be bourne in mind that goals like "ensuring security" and "promoting growth" are of a strategic nature (supporting the mission and vision, respecting the values). Let's do this right and get Singapore on the road to success upon success. Is any MP up to the task of raising a motion on this matter?
Sunday, May 29, 2011
Friday, May 20, 2011
A Major Pitfall of Consensus in Quantitative Group Decision Making
The use of quantitative methods for decision making is popular in the public sector as it affords decision makers a more defensible grounds for decisions and make them less second-guessable. Most decisions, such as who to award a contract to or what action to take, entail a group of public officers making decisions.
Supposedly, it is argued, inconsistency arises from differing opinions and "consensus" has to be reached. In the Singapore Government, the Analytic Hierarchy Process (AHP) is used to make purchase decisions for large buys. The award of the Marina Bay Sands and Resort Worlds Sentosa contracts are examples of decisions made via the AHP. The AHP is tolerant of inconsistency and one can "measure" it via a metric called the Consistency Ratio, which paradoxically is a measure of inconsistency rather than consistency.
Though seen as a necessary aspect of group decision making, the allowance for inconsistency can, nonetheless, be taken advantage of to promote an alternative by an interested party amongst the decision makers. This is especially true when the allowable margins for inconsistency are large as are those for the AHP. Such issues may arise in other quantitative group decision making methods.
Globally, for the AHP, practitioners take the recommendation of the inventor of the method that the Consistency Ratio should be less than 10% (8% and 3% for the special cases of 4 and 3 alternatives/criteria respectively). These guidelines, I have found, are unsatisfactory. Originally, I noted how obtuse the definition of the Consistency Ratio was to decision makers (even to those who are mathematicians and engineers). The Consistency Ratio is defined in terms of the eigenvalues of a matrix of preference ratios. On the face of things, one would not be able to tie the metric meaningfully to inconsistency as people might intuitively understand it or model it quantitatively. I made an attempt to link the Consistency Ratio to a model of error in related human judgments (i.e. inconsistency) and found how poor the accepted guidelines are. (Draft article here.) My sense is, the guidelines have not been tightened because few on the planet understand the Consistency Ratio.
On the flip side, many people have a good feel of how much inconsistency they can get away with without even getting close to violating the Consistency Ratio guidelines. This statement probably extends beyond the AHP. I claim that a member of the decision making group with a hidden agenda can push for certain strategically chosen judgments that will (possibly strongly) affect the decision, but be accepted by the group for the sake of "consensus". This is basically it.
What I would recommend, however, is that groups of decision makers be forced to bite the bullet and ensure consistency in their judgments. This would inoculate the decision from inconsistency-based subversion. People will have to work harder, but the fact of the matter is, consensus is meant to be an agreement on a position, not a disparate cloud of judgments that do not quite mesh with each other. In a manner of speaking, advocates of allowing "inconsistency" as a necessary byproduct of group consensus are promoting laziness in group decision making.
On a separate matter, I've also written on a vulnerability and failing of the AHP, how one might go about manipulating it, and how a minimal modification would solve the problem. (Article here.)
As a post script, I would recommend that the public understand how public money is being spent, so as to be able to check "government excesses". Somehow all this aspect of decision making has a bit of the flavor of the Sophists, who were accused of teaching a system of false and pernicious tricks of verbal fence whereby anything whatever could be proved, and the worse be made to seem the better. Would anyone like to be coached in numerical sophistry? I'm sure I could come up with a syllabus if there is sufficient interest. And like the Sophists, I will charge tuition.
--
In a manner of speaking, the "government excesses" I alluded to might entail things like the purchase of 472 designer chairs costing $575 each by the Ministry of Manpower. In reply to queries, a MOM spokesperson said, "We conducted an open tender in accordance with government procurement guidelines. The brand of the chairs was not specified in the tender invitation... Taking all these factors into account, the successful tenderer meets our requirements and offered the best value for money over the lifespan of the chairs." A $272,000 purchase does not mandate the use of a quantitative method like the AHP, which leads one to wonder how the decision was arrived at. If the details of that procurement decision were made public, I hope it would stand up to scrutiny.
Tuesday, May 17, 2011
The SG World Cup Broadcast Foundation for WC2014 Broadcast Rights
The 2010 World Cup was an embarrassment for Singaporeans. We were fleeced by a FIFA that today (that is, May 2011) happens to be the subject of allegations of corruption (kickbacks to secure Russia's WC 2018 bid).
I'm not sure how much was paid but Wikipedia (via Reuters) records it to be SGD $21M. This is at variance with the hundreds of millions I heard bandied around in the local media. I'll assume that SGD $21M is the right number since with 250,000 viewing households, this comes to about $80 per household, which advertising should, ideally, drive down to $20. Note that the $21M figure is an escalation of about 33% in price v.s. the rights for the 2006 World Cup, again with numbers from Wikipedia.
It would be good if we were no longer victims of FIFA. Let's start a foundation, named the SG World Cup Broadcast Foundation, as a bidder. A few things to do to make this work:
- Tie up with MediaCorp to broadcast it on free to air TV. In return, they get a fraction of the advertising revenue.
- Get payment pledges from Singaporeans and the right to deduct up to some fixed amount by GIRO. (Say, with an estimated 250000 viewing households, a $50 maximum payment each gives $12.5M in pledges.) If it all falls through, nobody pays.
- Get advertising pledges. An auction mechanism is to be used for this (say a 2nd price auction with a reserve price, though a combinatorial auction will be more likely). Winners are legally obligated to take the slots they win.
How this works is, if there isn't sufficient popular interest up to a certain amount say up to $12.5M in pledges, no bid is made and the whole thing falls through. If people do not care enough to pay to watch, they shouldn't get to watch.
If there is enough interest, a bid will be made up to what is made possible by promised advertising revenue. To give a sense of what is possible, look at the available advertising slots:
Each match allows 90 min of low key advertising and about 15 min of high key advertising (5min before and 10min during the 15 min halftime). Matches at different stages have different value. Valuing matches only from the Round of 16 (Ro16) onwards, with a Quarter Final (QF) worth twice a Ro16, and having a Semi Final (SF) worth 4 times a QF, and the Final 4 (F) times a SF, we have 640 min of high key time in Ro16 terms. (Note, once more, that these are not actual times, they are value-weighted "time".)
The 640 Ro16 min (225 min in real time) will be for advertisements and the "low key time" will be for one exclusive Main Sponsor to have his logo plastered strategically. That Main Sponsor may also get some special advertisement bidding rights, such as the right to win advertising slots post hoc by just paying the winning price.
The maximum bid that the SG World Cup Broadcast Foundation will make to FIFA will be the amount pledged plus the advertising revenue (minus MediaCorp's cut). If the amount is respectable, it is in FIFA's interest to just give it to Singapore since it only loses money by holding out.
However much is raised in advertising, the important thing is that if money is saved, those that pledged to pay will pay less. That is, a smaller deduction will be made. For example, with 300000 $50 pledges, $10M in advertising and a $20M bid, those who promise to pay will pay $33.34 rather than $50. There will be free riders, but as there really is no answer to that problem, it will be ignored.
Who knows, the Foundation may be able to get the rights for World Cup betting, the proceeds of which it might use, transparently, for good social causes.
---
Post Script:
While I think the foundation should hold fast to NO PROFIT to avoid any of the unhappiness of the foundation's Exco being paid $5M for their work (which raises costs for everyone else), there might really have to be real work done. Secrecy will limit the number of people doing the work, which may be a full-time affair for some period of time. Due diligence on advertising, media regulations, etc.
The advertising auction itself will be a huge undertaking. A large combinatorial auction does not run itself. In particular, one for 90 10 sec blocks for 64 matches with various considerations such as "match loading" and "premium position" (see, for instance, Channel NewsAsia's advertising prices). In fact, if the combinatorial auction solution succeeds, it could become the model for future "big event" advertising rights.
My proposal is an absolute and a relative payment cap. The absolute cap being a specified amount. The relative payment cap being a fraction of the "surplus" to be redistributed. The two upper bounds should work together to ensure there is no excessive payment.
Sunday, May 8, 2011
Election Aftermath in Punggol East: Plurality vs Approval Voting
The aftermath of the General Elections in Punggol East is sad, especially for SDA's Desmond Lim who garnered only 4.45% of the valid votes in a 3-cornered fight and will lose his $16,000 election deposit.
Our electoral system, with the electoral deposit in place, is broken. The intent of the deposit is to prevent frivolous nominations for the ballot by demanding some level of assurance that the voters think of the candidate in question as a viable representative of their interests in Parliament.
Even in one-on-one straight contests, this intent is subverted. It is possible that both candidates are thought of as viable candidates by, say 40% of the voters, but one candidates has more people who thinks of him/her as a possible representative. There can be voters who think of both candidates are possible representatives. Say the approval ratings stand at 80% - 60%, and in some extreme case the results of a plurality vote turn out to be 90% - 10% of the valid vote. The 10% candidate loses his/her deposit needlessly.
I have previously written about approval voting and feel that it is the right voting system for gauging the mandate of the people. The results of an election are directly translated into a mandate: a candidates percentage of valid approval votes is exactly the number of voters who approve of him/her as a representative. If a voter thinks a candidate is a possible representative, that's a +1 for a candidate's/group's mandate, nevermind that that same voter also approves of another candidate/group.
Politically, this has implications. In a non-polarized Singapore, this will lead to the ruling PAP winning more seats as their candidate will be seen as "viable" by more people, while their base will staunchly disapprove of the opposition.
From an (behavioral) economics standpoint, in a polarized nation, the modeling assumption of internal perceptions being approve/disapprove are greatly weakened/broken by the clear favoritism that hardcore party supporters have. Even if they would approve of the candidates of the opposite camp, the huge favoritism would lead them to lie about their preferences on the ballot slip. This is because the assumption is "no favorites, only approval-disapproval".
Perhaps with a more mature electorate with less polarization, this better form of voting will be feasible.
Our electoral system, with the electoral deposit in place, is broken. The intent of the deposit is to prevent frivolous nominations for the ballot by demanding some level of assurance that the voters think of the candidate in question as a viable representative of their interests in Parliament.
Even in one-on-one straight contests, this intent is subverted. It is possible that both candidates are thought of as viable candidates by, say 40% of the voters, but one candidates has more people who thinks of him/her as a possible representative. There can be voters who think of both candidates are possible representatives. Say the approval ratings stand at 80% - 60%, and in some extreme case the results of a plurality vote turn out to be 90% - 10% of the valid vote. The 10% candidate loses his/her deposit needlessly.
I have previously written about approval voting and feel that it is the right voting system for gauging the mandate of the people. The results of an election are directly translated into a mandate: a candidates percentage of valid approval votes is exactly the number of voters who approve of him/her as a representative. If a voter thinks a candidate is a possible representative, that's a +1 for a candidate's/group's mandate, nevermind that that same voter also approves of another candidate/group.
Politically, this has implications. In a non-polarized Singapore, this will lead to the ruling PAP winning more seats as their candidate will be seen as "viable" by more people, while their base will staunchly disapprove of the opposition.
From an (behavioral) economics standpoint, in a polarized nation, the modeling assumption of internal perceptions being approve/disapprove are greatly weakened/broken by the clear favoritism that hardcore party supporters have. Even if they would approve of the candidates of the opposite camp, the huge favoritism would lead them to lie about their preferences on the ballot slip. This is because the assumption is "no favorites, only approval-disapproval".
Perhaps with a more mature electorate with less polarization, this better form of voting will be feasible.
Saturday, May 7, 2011
The Law Society and Legislation: If not them then who?
I've just learnt somehow that in 1986 the Law Society lost its "statutory duty to comment on legislation" by special legislation. This is extremely strange to me. If not them then who? Is our country thoroughly unchecked and unbalanced?
Yes, I'm a political and legal swa gu.
It's recommended to look at the first supplementary source for a more comprehensive look at the matter. It is a worthwhile read (including the footnotes) and comprehensively deals with this part of the judicial history of Singapore.
Primary Sources:
Teo Soh Lung (Former ISA Detainee) speaking out on the ISA and her detention
Interview of Francis Seow (very long interview)
Supplementary Sources:
The Law Society of Singapore: Destined to Forever Hold its Peace? (Mohan Gopalan, forthcoming, Singapore Law Review)
Wikipedia Entry on Francis Seow
Yes, I'm a political and legal swa gu.
It's recommended to look at the first supplementary source for a more comprehensive look at the matter. It is a worthwhile read (including the footnotes) and comprehensively deals with this part of the judicial history of Singapore.
Primary Sources:
Teo Soh Lung (Former ISA Detainee) speaking out on the ISA and her detention
Interview of Francis Seow (very long interview)
Supplementary Sources:
The Law Society of Singapore: Destined to Forever Hold its Peace? (Mohan Gopalan, forthcoming, Singapore Law Review)
Wikipedia Entry on Francis Seow
Political Memory
Rallying is coming to a close and people will soon go to the polls. Soon the election will be forgotten by the man in the street, who will go back to his life.
Yet, it is important that we do not forget. We must not forget the promises made by the parties, and we must not forget the successes and failures of the various parties on the ground.
We must create a record of the actions of the parties and the candidates. Parliamentary records must be archived and referenced. Votes on bills must be searchable.
Pulling up a politician's record should be a piece of cake, whether he/she is in parliament or not. Only with a good memory will we be able to gauge whether promises made are empty, what the circumstances under which a failure to fulfill promises were and so on. With this, by the next election, we will be prepared to decide with certainty who to give the mandate to.
I attempted to, albeit a bit too late, push out a tool for making more rational voting decisions using a reasonable methodology for "multi-criteria decision making", so voters could be facilitated in balancing track record, pork, and how they are represented on issues. (http://vote.individualpreference.info/ was launched just after Nomination Day. It also tried to push out approval voting, which provides a better gauge of the mandate any candidate has to represent the public.)
It turns out that the "Candidate Notes" feature of the site (part of "Candidate Evaluation") would be a useful thing to expand. Having a record of a politician's position on matters and what he/she has done would be tremendously valuable. Knowing that their actions will be tracked will keep politicians on their toes.
I propose we all, as a community of Singaporeans, work together to make this a reality. A robust system of records of our political history (complete with a local archive of public documents).
We need a political memory. We need it to be reliable and authoritative (hence the documents).
If you'd like to form a group. Contact me. Let's do this together.
Yet, it is important that we do not forget. We must not forget the promises made by the parties, and we must not forget the successes and failures of the various parties on the ground.
We must create a record of the actions of the parties and the candidates. Parliamentary records must be archived and referenced. Votes on bills must be searchable.
Pulling up a politician's record should be a piece of cake, whether he/she is in parliament or not. Only with a good memory will we be able to gauge whether promises made are empty, what the circumstances under which a failure to fulfill promises were and so on. With this, by the next election, we will be prepared to decide with certainty who to give the mandate to.
I attempted to, albeit a bit too late, push out a tool for making more rational voting decisions using a reasonable methodology for "multi-criteria decision making", so voters could be facilitated in balancing track record, pork, and how they are represented on issues. (http://vote.individualpreference.info/ was launched just after Nomination Day. It also tried to push out approval voting, which provides a better gauge of the mandate any candidate has to represent the public.)
It turns out that the "Candidate Notes" feature of the site (part of "Candidate Evaluation") would be a useful thing to expand. Having a record of a politician's position on matters and what he/she has done would be tremendously valuable. Knowing that their actions will be tracked will keep politicians on their toes.
I propose we all, as a community of Singaporeans, work together to make this a reality. A robust system of records of our political history (complete with a local archive of public documents).
We need a political memory. We need it to be reliable and authoritative (hence the documents).
If you'd like to form a group. Contact me. Let's do this together.
Tuesday, May 3, 2011
Immigration, Optimizing KPIs and Honesty
Allow me to pretend I understand human nature: where the outcome is defined in purely financial terms, one is best off by being a rational maximizer. Suppose the main actor's pay is determined by some KPI, we shall call G, in a monotone fashion. (G rises, pay rises.)
Clearly, it is optimal for the actor to maximize G in so far as resources allow. If G can be pumped up by pushing a strategy that suffocates other actors, so be it. That is rational maximization.
Suppose we have an elementary economic model.
- G(p) = K (M - p) p
A(p) = L p^{-a}
where a > 0. So G is the objective of the main player who controls p and A is the objective of the other actors who have no control over p.
G is a logistic model for GDP growth, and A denotes average wage where total wage is a concave monomial.
G is maximized at half absolute capacity (crush load), and since M is a rather large number, A(M/2) is tiny. Note that the main actor has no incentive to ensure that A(p) is a respectable number.
Now, the model is an obvious snipe at the immigrant labour policy. It is obvious that more immigrant labour means more GDP growth. But the lack of consideration of the average wage is (note: another snipe coming) symptomatic of a failure of all the PPE (Politics-Philosophy-Economics) graduates with excellent A level results to understand basic economics or making the assumption that the rest of the country does not understand.
Social Choice balances GDP growth and quality of life. The GDP growth KPI, in the parlance of economics, cannot implement the balance of GDP growth and quality of life. It would take very good men to resist the allure of optimizing their bonus KPIs at the expense of matters important to others. While it is possible to have a cabinet of such good men, let us protect the country. Let us legislate incentive compatibility into remuneration of our executive and our legislature. There is no negative impact of the on the good men who will direct their efforts in this direction anyway. Moreover, legislating this would be the honest thing to do, especially for a PPE graduate.
Inflating Away the Debt
I believe the Singapore Government has shrewdly taken a page out of the USA play book. Let me describe this classic all-American monetary play.
The post-World War II era was one where the USA had ascended to economic dominance with the decline of the Sterling Pound and the US Dollar's replacing it as the world's de facto reserve currency. As the reserve currency, trades were done in US dollars, hence it made sense to hold US Dollars and to hold US Dollar denominated debt. This made sense because of the reputation of the US Government of paying its debts (c.f. post-Independence deliberations on British debt) and the strength of its economy.
Fast forward to today, where the USA has taken on a tremendous amount of debt to finance infrastructure, war, pork, etc, and has apparently no politically likely way to turn a budget surplus. So the debt accumulates.
Now, the US Dollar used to be pegged to gold until this convertibility was cancelled by Nixon in 1971. The Federal Reserve long had the liberty to print money, but only with the dropping of the gold standard was it truly free to let the presses run with furious abandon.
The expansion of the money supply decreases the value of each dollar. So the fixed sum that is owed by the US Government to each lender decreases in real terms as the money supply increases. Furthermore, the Federal Reserve accumulates more dollars with which it can do things like pay interest on the national debt.
It's all very sneaky.
Back to Singapore. Currently inflation is at around 5%, so CPF rates of return of 2.5% represent a 2.5% year on year decline in the real value of CPF savings. The 2003 HBS Study "Singapore Inc." assessed CPF as a financial instrument that would be able to fuel government spending. This is very likely to be the case. I'm unsure what the Singapore Government's capital ratio is, but I'm very certain it is not 1. From this perspective, the Singapore Government borrows income and pays 2.5% interest on it. This is a great deal as assets can be acquired at today's value and repaid in lower real terms in future.
The post-World War II era was one where the USA had ascended to economic dominance with the decline of the Sterling Pound and the US Dollar's replacing it as the world's de facto reserve currency. As the reserve currency, trades were done in US dollars, hence it made sense to hold US Dollars and to hold US Dollar denominated debt. This made sense because of the reputation of the US Government of paying its debts (c.f. post-Independence deliberations on British debt) and the strength of its economy.
Fast forward to today, where the USA has taken on a tremendous amount of debt to finance infrastructure, war, pork, etc, and has apparently no politically likely way to turn a budget surplus. So the debt accumulates.
Now, the US Dollar used to be pegged to gold until this convertibility was cancelled by Nixon in 1971. The Federal Reserve long had the liberty to print money, but only with the dropping of the gold standard was it truly free to let the presses run with furious abandon.
The expansion of the money supply decreases the value of each dollar. So the fixed sum that is owed by the US Government to each lender decreases in real terms as the money supply increases. Furthermore, the Federal Reserve accumulates more dollars with which it can do things like pay interest on the national debt.
It's all very sneaky.
Back to Singapore. Currently inflation is at around 5%, so CPF rates of return of 2.5% represent a 2.5% year on year decline in the real value of CPF savings. The 2003 HBS Study "Singapore Inc." assessed CPF as a financial instrument that would be able to fuel government spending. This is very likely to be the case. I'm unsure what the Singapore Government's capital ratio is, but I'm very certain it is not 1. From this perspective, the Singapore Government borrows income and pays 2.5% interest on it. This is a great deal as assets can be acquired at today's value and repaid in lower real terms in future.
The next question is, is it intended? If so, it is a sneaky form of taxing both employees and employers simultaneously. (Just that employees get something out of that grift, and don't mind.) Then again, all employers calculate the CPF contribution as well as the tax rate, making it unlikely that it is a deliberate con. If it is a deliberate con, I will never see my money again. But if it isn't, I need my CPF interest to be at least on par with inflation. Again, if it is a con, it is very much in line with pushing back the retirement age (more inflating).
Whatever it is, I want my money back.
Zeitgeist...
Der Zeitgeist ist die allgemeine kulturellen, intellektuellen, ethischen, spirituellen und/oder politische Klima innerhalb einer Nation oder spezifische Gruppen. Er umfasst auch die damit verbundenen Moral, soziokulturelle Richtung und Stimmung der Zeit.
Ist es wirklich wahr dass die Zeit für ein bisschen Veränderung reif ist?
Ist es wirklich wahr dass die Zeit für ein bisschen Veränderung reif ist?
Monday, May 2, 2011
Solving the Singapore Housing Problem: A Very Radical Idea
Affordable housing for the young in Singapore is one of the key drivers for the vital national strategic goal of population renewal. It is also a "difficult" problem to solve as one would like to reduce housing prices for new buyer while not destroying the "value" of public housing that has been previously purchased.
As a preliminary, we must note that in public policy there will be winners and losers. Singaporean singles have been losers throughout Singapore's history as a result of housing policy. It is clear that to solve the problem of rising housing costs for first-time buyers, current flat valuations cannot rise indefinitely.
Before attempting a solution, it bears considering whether there is a point to solving the problem. If not, we are done and you can stop reading. As usual, the strategic aspect is my justification for mobilizing our efforts to solve the problem.
Consider defence. High spending on national defence is not of immediate benefit to the nation or even of much benefit in the near future. But, security is a strategic imperative which is a key enabler for secure economic expansion and consolidation. So we spend money on it continuously. If being a nation of homeowners is a strategic objective, in so far as it is important, we should be willing to spend an increased amount of money on it over some non-perpetual time horizon. If easy home ownership truly drives population renewal and population renewal is a strategic objective, then we should be willing to spend.
Naturally, if we spend money, we will, by definition, improve the situation. So I lodge the caveat that there must be a price we are willing to pay, and we will refuse to pay any more than that.
While I have official numbers, I cannot use them here. And since I do not have access to them at this very moment, I will guesstimate using publicly available information.
Via Census 2010, in 2010, Singapore's resident population numbered 3.771 million people (3.231 million citizens and 0.541 million PRs). HDB reports that currently 84% live in HDB flats. Assuming 4.5 residents per flat, we'll have about 0.7M flats. Suppose the average HDB flat has market value $300k.
SingStat reports that the median monthly household income is $5000, $4000 after CPF for those under 50. Suppose $2000 is used to pay for a home each month interest free, and the goal is to own one's own home in 7 years under such terms, we should target an average price of $170k. This is in line with reversing the 11.1% year on year price increases over 2005 to 2010 (69%).
Suppose we aim to reduce the average market value to $170k over 10 years. (I'm not, at the moment, asserting that we should.) On the surface, this entails a reduction in value of $92 billion, which has already been paid out by the current residents.
On closer observation, this is not the case. We do not want this to be a capital gains exercise, so we have to peg the value returned to the purchase price of the flat. In this event, the flats bought before 2005 are, on average, cheaper than $170000. It is the post-2005 purchases that we are concerned about. If we suppose that 20000 flat purchases were made annually, this means that it would cost $7.8 billion to compensate people for the government imposed fall in flat prices. Paid out over 10 years, this would be $780 million annually.
This is a very radical plan. Let us consider who wins and who loses.
Winners: (i) New flat owners, who may then go about making babies (or so they would like us to believe), and (ii) former HDB flat owners who cashed out after 2005.
Losers: (i) HDB flat owners who bought their flats more than 5 years ago and would like to upgrade. The capital gains due to appreciation from the 2005-2010 period will be wiped out, and (ii) all HDB flat owners who took loans and paid interest on the higher principals.
This might widen the real gap between the cost of public and private housing. (It may also remain the same as there will be less upward pressure on private property prices leading to their fall.) This is just as well. It is not the government's duty to ensure that people are able to upgrade to private property, neither should it be an objective that people should be able to profit off public housing as the ones that are buying are typically younger citizens. Public housing is not meant to be a multi-level marketing scheme.
Where would we find $800 million a year for 10 years? Let's cut the Defence... Firstly, HDB has been selling more expensive flats for the past 5 years, this is to be given back. I do not buy the "cost of land" argument. Public housing is a public good that is supplied by the government under the price the market is willing to supply it. Similarly, market prices are not paid for national defence and civil defence.
There are about 6500 resale transactions a year, with this winners, who cashed out after 2005, took away $2.55 billion (or about $78k per household). Now what we really have to fund is the capital gains of the roughly 32500 who cashed out. With HDB returning its gains, $255 million a year for 10 years remains. This is no pocket change, but it is a lot more manageable now. What would make this even more manageable would be to return money, first, to CPF up to the amount paid out of CPF. This would probably lengthen the repayment horizon to 20 years.
As for really raising the money, my solution for raising the money for this and everything including education and social safety nets is to raise corporate tax (the headline rate is 17%) and upper bracket income (the headline rate is > $320k is 20%; higher brackets could be created). That's where most of the GDP growth went anyway. (My sense is that, the richer oone is, the more the state expends to protect one and one's property. This is a service that should be paid for.)
This is just an idea, and a radical one, which I arrived at after sitting down and thinking: Let me, right here, right now, come up with an plan for solving the problem of expensive housing. I'm surprised that it was not even more radical. (Costing > $10 billion) So here's a plan. I'd like to hear more.
As a postscript, I note that in the run up to polling day, Lee Kuan Yew has accused Tan Jee Say of not being qualified to draft an economic plan for Singapore. While I respect Lee Kuan Yew's achievements, I do not appreciate his personal attack, and see it as one on myself as well. It would befit a man of his standing to, rather, rationally attack the ideas rather than the person. I, myself, like talking about public policy in a rational manner.
I, pardon my pride, see myself to be just as able, in this respect, as administrative service officers, given my larger and more specialized toolkit. (In their favor, they are reasonably capable and have access to more detailed information.) This is not all hubris and I know where I stand. Just in the recent months, I've had a government scholar delightedly refer to himself and colleagues as "laymen" when I presented them with a "free gift capability". They also accepted my practical recommendations on how to plan their own organization (which were a step down from a better solution that I wanted but knew would be difficult to achieve politically). I have also had a hand in some changes in Q1 2011 that will have a positive impact on the lives of Singaporeans in some parts of the country. This may not conclusively prove that I know what I'm talking about, but it might indicate I'm no hack.
There are many such as me who do not love "policy work" but are probably better able to do it by virtue of a combination of good technical skills and wide breadth of knowledge. We have the vocabulary for the task and it would be irresponsible to write us off. By all means, attack the ideas so we can sharpen them, but to attack the person is distracting, distasteful and dishonest.
As a preliminary, we must note that in public policy there will be winners and losers. Singaporean singles have been losers throughout Singapore's history as a result of housing policy. It is clear that to solve the problem of rising housing costs for first-time buyers, current flat valuations cannot rise indefinitely.
Before attempting a solution, it bears considering whether there is a point to solving the problem. If not, we are done and you can stop reading. As usual, the strategic aspect is my justification for mobilizing our efforts to solve the problem.
Consider defence. High spending on national defence is not of immediate benefit to the nation or even of much benefit in the near future. But, security is a strategic imperative which is a key enabler for secure economic expansion and consolidation. So we spend money on it continuously. If being a nation of homeowners is a strategic objective, in so far as it is important, we should be willing to spend an increased amount of money on it over some non-perpetual time horizon. If easy home ownership truly drives population renewal and population renewal is a strategic objective, then we should be willing to spend.
Naturally, if we spend money, we will, by definition, improve the situation. So I lodge the caveat that there must be a price we are willing to pay, and we will refuse to pay any more than that.
While I have official numbers, I cannot use them here. And since I do not have access to them at this very moment, I will guesstimate using publicly available information.
Via Census 2010, in 2010, Singapore's resident population numbered 3.771 million people (3.231 million citizens and 0.541 million PRs). HDB reports that currently 84% live in HDB flats. Assuming 4.5 residents per flat, we'll have about 0.7M flats. Suppose the average HDB flat has market value $300k.
SingStat reports that the median monthly household income is $5000, $4000 after CPF for those under 50. Suppose $2000 is used to pay for a home each month interest free, and the goal is to own one's own home in 7 years under such terms, we should target an average price of $170k. This is in line with reversing the 11.1% year on year price increases over 2005 to 2010 (69%).
Suppose we aim to reduce the average market value to $170k over 10 years. (I'm not, at the moment, asserting that we should.) On the surface, this entails a reduction in value of $92 billion, which has already been paid out by the current residents.
On closer observation, this is not the case. We do not want this to be a capital gains exercise, so we have to peg the value returned to the purchase price of the flat. In this event, the flats bought before 2005 are, on average, cheaper than $170000. It is the post-2005 purchases that we are concerned about. If we suppose that 20000 flat purchases were made annually, this means that it would cost $7.8 billion to compensate people for the government imposed fall in flat prices. Paid out over 10 years, this would be $780 million annually.
This is a very radical plan. Let us consider who wins and who loses.
Winners: (i) New flat owners, who may then go about making babies (or so they would like us to believe), and (ii) former HDB flat owners who cashed out after 2005.
Losers: (i) HDB flat owners who bought their flats more than 5 years ago and would like to upgrade. The capital gains due to appreciation from the 2005-2010 period will be wiped out, and (ii) all HDB flat owners who took loans and paid interest on the higher principals.
This might widen the real gap between the cost of public and private housing. (It may also remain the same as there will be less upward pressure on private property prices leading to their fall.) This is just as well. It is not the government's duty to ensure that people are able to upgrade to private property, neither should it be an objective that people should be able to profit off public housing as the ones that are buying are typically younger citizens. Public housing is not meant to be a multi-level marketing scheme.
Where would we find $800 million a year for 10 years? Let's cut the Defence... Firstly, HDB has been selling more expensive flats for the past 5 years, this is to be given back. I do not buy the "cost of land" argument. Public housing is a public good that is supplied by the government under the price the market is willing to supply it. Similarly, market prices are not paid for national defence and civil defence.
There are about 6500 resale transactions a year, with this winners, who cashed out after 2005, took away $2.55 billion (or about $78k per household). Now what we really have to fund is the capital gains of the roughly 32500 who cashed out. With HDB returning its gains, $255 million a year for 10 years remains. This is no pocket change, but it is a lot more manageable now. What would make this even more manageable would be to return money, first, to CPF up to the amount paid out of CPF. This would probably lengthen the repayment horizon to 20 years.
As for really raising the money, my solution for raising the money for this and everything including education and social safety nets is to raise corporate tax (the headline rate is 17%) and upper bracket income (the headline rate is > $320k is 20%; higher brackets could be created). That's where most of the GDP growth went anyway. (My sense is that, the richer oone is, the more the state expends to protect one and one's property. This is a service that should be paid for.)
This is just an idea, and a radical one, which I arrived at after sitting down and thinking: Let me, right here, right now, come up with an plan for solving the problem of expensive housing. I'm surprised that it was not even more radical. (Costing > $10 billion) So here's a plan. I'd like to hear more.
As a postscript, I note that in the run up to polling day, Lee Kuan Yew has accused Tan Jee Say of not being qualified to draft an economic plan for Singapore. While I respect Lee Kuan Yew's achievements, I do not appreciate his personal attack, and see it as one on myself as well. It would befit a man of his standing to, rather, rationally attack the ideas rather than the person. I, myself, like talking about public policy in a rational manner.
I, pardon my pride, see myself to be just as able, in this respect, as administrative service officers, given my larger and more specialized toolkit. (In their favor, they are reasonably capable and have access to more detailed information.) This is not all hubris and I know where I stand. Just in the recent months, I've had a government scholar delightedly refer to himself and colleagues as "laymen" when I presented them with a "free gift capability". They also accepted my practical recommendations on how to plan their own organization (which were a step down from a better solution that I wanted but knew would be difficult to achieve politically). I have also had a hand in some changes in Q1 2011 that will have a positive impact on the lives of Singaporeans in some parts of the country. This may not conclusively prove that I know what I'm talking about, but it might indicate I'm no hack.
There are many such as me who do not love "policy work" but are probably better able to do it by virtue of a combination of good technical skills and wide breadth of knowledge. We have the vocabulary for the task and it would be irresponsible to write us off. By all means, attack the ideas so we can sharpen them, but to attack the person is distracting, distasteful and dishonest.
Regulation of Industry
At the expense of the general population, the Singapore Government is too friendly to big business and somewhat lax in its regulation. To cite an example, allow me to quote (the original) of my letter to the Straits Times Forum (dated Mar 28, 2011).
Singapore had to be big business friendly when there was no big business to supply jobs. Now Singapore's economy is bustling. It is time to put in place regulations that may be described as having a large basin of acceptable operating standards and tremendous penalties for straying from these standards even a bit (the basin is, after all, large).
Consumer protection also known as protection of the property/contractual rights of the general populace should be a core value of any civilized nation. Why expect less of Singapore?
- I read, with great dismay, Friday's article "WoW... StarHub, why so slow?". Consumers seem to be getting a severely raw deal with respect to broadband access. Violation of the Quality of Service (QoS) obligations warrants a fine of $5000 monthly. This comes to less than two cents per subscriber per month in StarHub's case. Whether violations occur or not is secondary to the magnitude of the punishment, which reveals a lax attitude towards regulation of the broadband industry by IDA. A QoS violating broadband provider incurs a tiny cost per subscriber while all subscribers incur economic losses in terms of lost pleasure, wasted time, or even lost business. Furthermore, subscribers remain locked in by their contracts. Stiffer penalties for violations are needed to ensure satisfactory service in what might today be classified as critical infrastructure.
Allow me to give an example of strong, but fair, regulations. Informally speaking, sustained failure to provide broadband services of the promised quality amounts to breach of contract by a service provider. As such, to protect the interests of consumers, regulations should to be in place that give subscribers the option to void their contracts without penalty, returning any loaned or subsidized equipment if necessary. In addition to that, a sizable fraction of total monthly bills should be refunded to consumers and a similarly sizable fine levied. In this example, the punishment fits the crime although consumers are arguably still on the losing end with the previous losses due to poor service and the trouble to, if they choose to, contract with a different service provider.
Regulation of critical infrastructure such as broadband should be strong. No Singaporean would tolerate intermittent power or water today. Why should we tolerate sustained slow broadband?
Singapore had to be big business friendly when there was no big business to supply jobs. Now Singapore's economy is bustling. It is time to put in place regulations that may be described as having a large basin of acceptable operating standards and tremendous penalties for straying from these standards even a bit (the basin is, after all, large).
Consumer protection also known as protection of the property/contractual rights of the general populace should be a core value of any civilized nation. Why expect less of Singapore?
Sunday, May 1, 2011
NS (Nursing Service) for Women
The Nursing Careers page on the Ministry of Health's website (retr. 1 May 2011) acknowledges both the key frontline role of nurses and our acute shortage of nurses in Singapore. To rattle off a quick statistic, the proportion of those aged 65 and above will double to 20% in 2020. Allegedly, this is a problem because of the decline in the proportion of people who are economically productive, but that is a separate issue. Given the status quo, potential healthcare costs are set to rise and our already stretched healthcare system will be stretched ever more severely.
My proposal is the conscription of women to be trained and to serve as nurses in rather the same fashion as men are currently conscripted into the military. Nursing Service (NS) for women. This idea may be, at the outset, distasteful to young ladies and their parents. Let me attempt to convey the national and personal advantages of such a scheme.
The national advantages are obvious. All women will be trained as nurses and nursing professionals will be able to take on more specialist tasks as more basic administration and treatment is handled by NSF (Nursing Service: Full time) nurses. This would be a boon to the health service.
Another major benefit to the nation is the boost in our health risk hedge. A major element of Goh Keng Swee's design of the national service system was the intent to be able to field, in an event of military need, a large number of troops after some years of the system's operation. Hence the NSF and Reservist systems. Similarly, in the event of a healthcare incident (such as the SARS and H1N1 outbreaks) there would be, at all times, a large group of people with the basic skills necessary to support the medical profession in addressing the problem.
The female "NSFs" would spend a year or so training up to at least some subset of the National ITE Certificate (NITEC) in Nursing curriculum, which qualifies one as an Enrolled Nurse. To give a greater sense of nursing careers, let us revisit the Major Nursing Appointments section of the Nursing Careers page on the Ministry of Health's website (retr. 1 May 2011):
Nursing is a worthwhile skill of unquestioned value. Such training would equip girls with real and practical skills and enable them to take better care of their families, ushering in an age of excellent preventive care. This would be a huge self-esteem boost likely to be greater than the one associated with being "a defender of the nation" for men (which has faded in the past decades). In addition to improving the overall quality of life, this would also drastically lower national healthcare costs.
NSF nurses might be deployed to hospitals, polyclinics, and even retirement villages. (I have other ideas about state sponsored retirement villages that any Singapore citizen 70 and over is entitled to stay in with free food and board. More on this when I have time.)
The big question is: Who loses and who gains? I would say that the winners are the nation, most families and most girls. Some families do not need the additional healthcare benefits of having a nurse in the house. Some girls who plan to go on to lucrative careers unrelated to nursing will see their career progression retarded a little. The nursing profession will benefit as well. The larger base of Enrolled Nurses and "pre-Enrolled Nurses" will free up capacity for professional nurses to focus on more high value nursing tasks. Furthermore, the NS period for nurses would be a useful to girls planning to move into the nursing and medical fields.
Phase in can be done slowly to build the necessary infrastructure. Experienced instructors have to be appointed from the nursing and medical professions. This would reduce immediate treatment capacity. This problem may be less difficult than the introduction of the program. Whether to begin with an initial voluntary phase for 3 years with a very generous lifetime tax relief, and tapering it down to the target tax relief level as partial compensation for economic losses.
Clearly there are implementation issues, but the big picture view is: this is good, serving national needs and upgrading national resilience, providing families and communities with valuable skills, teaching young ladies practical and useful skills that will also add to their standing socially. Let's do this.
My proposal is the conscription of women to be trained and to serve as nurses in rather the same fashion as men are currently conscripted into the military. Nursing Service (NS) for women. This idea may be, at the outset, distasteful to young ladies and their parents. Let me attempt to convey the national and personal advantages of such a scheme.
The national advantages are obvious. All women will be trained as nurses and nursing professionals will be able to take on more specialist tasks as more basic administration and treatment is handled by NSF (Nursing Service: Full time) nurses. This would be a boon to the health service.
Another major benefit to the nation is the boost in our health risk hedge. A major element of Goh Keng Swee's design of the national service system was the intent to be able to field, in an event of military need, a large number of troops after some years of the system's operation. Hence the NSF and Reservist systems. Similarly, in the event of a healthcare incident (such as the SARS and H1N1 outbreaks) there would be, at all times, a large group of people with the basic skills necessary to support the medical profession in addressing the problem.
The female "NSFs" would spend a year or so training up to at least some subset of the National ITE Certificate (NITEC) in Nursing curriculum, which qualifies one as an Enrolled Nurse. To give a greater sense of nursing careers, let us revisit the Major Nursing Appointments section of the Nursing Careers page on the Ministry of Health's website (retr. 1 May 2011):
- Major nursing appointments
The following are major nursing appointments, a person may undertake in the course of a nursing career in Singapore.
- Enrolled Nurse
Administers treatments, medications, medical procedures and monitors patients' progress under the direction and supervision of a registered nurse.
- Registered Nurse (RN)
Assesses plans, and provides and evaluates preventive, curative and rehabilitative care for patients in a wide variety of settings. These include public and private hospitals, nursing homes, home-based services and other healthcare settings. RNs also supervise the enrolled nurses and patient-care assistants.
- Specialised Nurse
Requires patient care and medical knowledge, skills in equipment and facilities management as well as ward management.
Nursing is a worthwhile skill of unquestioned value. Such training would equip girls with real and practical skills and enable them to take better care of their families, ushering in an age of excellent preventive care. This would be a huge self-esteem boost likely to be greater than the one associated with being "a defender of the nation" for men (which has faded in the past decades). In addition to improving the overall quality of life, this would also drastically lower national healthcare costs.
NSF nurses might be deployed to hospitals, polyclinics, and even retirement villages. (I have other ideas about state sponsored retirement villages that any Singapore citizen 70 and over is entitled to stay in with free food and board. More on this when I have time.)
The big question is: Who loses and who gains? I would say that the winners are the nation, most families and most girls. Some families do not need the additional healthcare benefits of having a nurse in the house. Some girls who plan to go on to lucrative careers unrelated to nursing will see their career progression retarded a little. The nursing profession will benefit as well. The larger base of Enrolled Nurses and "pre-Enrolled Nurses" will free up capacity for professional nurses to focus on more high value nursing tasks. Furthermore, the NS period for nurses would be a useful to girls planning to move into the nursing and medical fields.
Phase in can be done slowly to build the necessary infrastructure. Experienced instructors have to be appointed from the nursing and medical professions. This would reduce immediate treatment capacity. This problem may be less difficult than the introduction of the program. Whether to begin with an initial voluntary phase for 3 years with a very generous lifetime tax relief, and tapering it down to the target tax relief level as partial compensation for economic losses.
Clearly there are implementation issues, but the big picture view is: this is good, serving national needs and upgrading national resilience, providing families and communities with valuable skills, teaching young ladies practical and useful skills that will also add to their standing socially. Let's do this.
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