Meeting of the minds

In 2010, I wrote my Masters Thesis based on the Economic theories of Inequality and Segregation in Singapore.

With income inequality becoming such a hot topic in Singapore, many have pointed to capitalism and the government’s policies as principal reasons for the it. However, this data might shed light on why income inequality may be an inevitable social result of our own personal choices.

For those who are interested, a good starting place to understand would be to find out more about contractual discrimination and social discrimination.


Society as Science


Food for thought for today

Waddle Waddle Waddle

New year celebrations always have that air of new hope around them. The fireworks and the promises of a better year are often pull a very convincing veil over our rational expectations.

Yet, this veil can work two ways.

At the introductory economics level, this veil can be summarized into a word – expectations. Simply put, expectations affect consumer and investor behavior.

Expectations are rarely formed by oneself. It is an accumulation of hearsay and experience through interaction. The economist reported that since the start of 2014, almost 3 trillion dollars have been wiped out by pessimism. The pessimism largely stems from the expectation that the US federal reserve will cut back its stimulus programme.

In this instance, one would do well to question the basis of this pessimism. The analysis can also be done for Singapore (in your essays!).

Is this pessimism justified? For one, we have to consider if the bad news is even bad news at all! For example, it is pertinent to read very carefully if China’s growth rate is slowing (still positive growth!) or has it shrunk. Assuming China grew at a rate of 10% last year, a report stating that growth rate slowed to 7%  is much different from the economy contracting by 2%! And even if growth slowed, is there reason for PANIC?

Pessimism can wipe out an economy, baseless pessimism can do the same. The same applies for optimism.

Have you looked at the fundamentals of the economy before deciding if the downturn is a temporary dip?

RIP Dua Pek: Leow Lip Chuan John


It’s one month since you have passed Dua Pek, we still miss you. The above picture is the last one I  have of you.

I had the privilege of writing the eulogy for you, I will always remember the lessons you taught me.


Good Afternoon,

Introductory remarks

We are gathered today to say our farewell to my Uncle, John Leow. We are here today to say our farewell to a father, a brother and a friend.

Over the last four days, each of us have struggled in our own ways to deal with the loss of our beloved John, maybe even recalling all the possible “what-ifs” scenarios.

What if he had done that?”

“What if we had done that?”

Today, I would like to reflect on three key lessons that Dua Pek has taught me about life, family and our faith through three of his favourite stories.

The Umbrella Story

My Uncle, together with the rest of his brothers and sisters had very humble beginnings.  My grandmother had to raise pigs and various other farm animals to sell in order to put my uncles and aunties through school. Dua Pek went to SJI, which was, then at Bras Basar.

He would tell us that he would have to walk out of Dairy Farm to Upper Bukit Timah Road to catch bus 170 to Queen’s street before walking another 10 minutes to SJI. When it rained at Bukit Timah, he would make the journey barefoot with a green-waxed umbrella.  More often than not, he would arrive in town to find it completely dry.

Imagine a 16-year-old Dua Pek arriving in town without shoes; with an umbrella in tow.  It is a funny image and his classmates agreed and so they made fun of him; calling him a “china man”.

We were all 16 once, and we know how such comments can sting at our self-worth and I am sure it stung Dua Pek’s.

The irony in it is that in the later part of Dua Pek’s life, he became very much associated with China – its history, culture and politics.

He doesn’t say it out very often, but I think in telling this story, Dua Pek wanted his nephews and nieces to know that hard work paid off, and that it doesn’t matter what kind of background you came from, we each had an equal shot in life.

Dua Pek also maintained his simplicity in his outlook, there was nothing extravagant about him. He would find joy in the smallest thing around him and his curiosity was often aroused by simple trinkets.

Stay curious, stay humble, stay grounded and never ever forget where you started from. That was the lesson that he sought to teach us.

The “Cow-Milk Pig” Story

The next story would be my personal favourite. I call it the “Gu Ni Ter” story because Dua Pek always referred to the protagonist as such.

For those who do not know the story, Dua Pek always found joy in recounting his duties as a young man, the oldest child in the household and the chores that Ah Ma gave him. These chores would include being the mid wife to the household sow. According to Dua Pek, sows only give birth very early in the morning and he would have to prepare a kerosene lamp as well as a bamboo cane to aid in the delivery of the piglets.

He would continue – once each piglet was born, he would have to use his bamboo cane to direct each piglet to suckle on its mother. Once, to his horror, the sow gave birth to one more piglet that she could suckle. He panicked and quickly carried the piglet back home to Ah Ma not knowing what to do.

Ah Ma then advised him to mix condense milk and hot water and to feed the piglet as if it was a child. I don’t know if Dua Pek adopted that piglet as his personal pet, but it did sound like he fed it the same diet until it was necessary to sell it away. Hence the reference to it as “Gu Ni Ter”.

This was Dua Pek’s way of telling us that every life is precious and that we should watch out for the lost, the last and the least, especially within our own families.

This story was often told in parallel with the story of how he took care of the twins in the family, my uncle Linus and my father Pius. His message to me at least was clear. “I was the oldest in the family; Ah Ma depended on me to take care of my younger siblings.”

This message resonates strongly with me and it has changed my perspective on various issues that I have faced and/or am facing. Dua Pek never complained about the additional expectations and workload being the eldest but gave his best and more; that is something that I would wish to emulate.

On my own relationship with my sister, Dua Pek always reminded me, she is your sister, you owe it to her to take care of her – when she calls, you must come to her aid.

Being the eldest child in a family is never easy; you would have to balance your role as a role model and a peer. Conflicts would be unavoidable. Dua Pek too had his share of sibling conflict to deal with. He never shared with me the details, but he left me with an important lesson- never stop loving the person because of the disagreement. Dua Pek always showered love and care on each and every one of his nephews and nieces – Joanne, Carmelita, Timothy, Philene, Myself, Mae and Lyn-Sue. He always made it a point to meet us up when we were back in Singapore after a period overseas. I think that would be his way of loving his siblings in spite of any differences. So to my uncles Lucas, Linus, my father Pius and my auntie Patricia, Dua Pek loved each of you, he had a hand in bringing some of you up. Though conflicts may have arisen in the years that have passed, his constant love and care for us his nephews and nieces is testament to his love for each of you.

One other little “piglet” that Dua Pek adopted was his Godson, Andrew. Uncle Andrew, you were Dua Pek’s godson, business partner and good friend. Both of you experienced so many things together and Dua Pek’s passing must be equally hard for you.  Dua Pek always looked out for you like a son, and I can only offer comfort in that he is still looking out for you.

The Jesus-Mary-Joseph Story

The final story that Dua Pek would like to tell is his testimony of his faith and trust in our Lord Jesus Christ.

This story occurred when Belinda was a baby.  This was a time when cot death was common and Dua Pek paid particular attention to taking care of baby Belinda. There was a time when Belinda wasn’t burped properly after feeding and she became, in Dua Pek’s own words “like butter”.

Dua Pek would re-enact this story every time he told it and it would actually border on dark comedy because he would make us laugh each time.

In his words, he carried Belinda upside down while sticking his little finger in her mouth, trying to induce a burp. And as he did so, he would cry out “Jesus – Mary –Joseph, please help me”. It did sound quite comical every time he told it both because of the absolute simplicity of his plea and how helpless he was at that point. He would laugh at himself at the end of the story, but I suspect more so out of relief.

His message to all of us was keep your faith in Jesus – Jesus never lets us down. Also, the simplest of invocations was the most powerful prayer we would ever need. I have said it only once since I have heard the story, and it actually did work.

Overall lessons

Dua Pek has had a very colourful life with a huge range of experiences from his wide travels. He would have had plenty more stories to share but would repeat these three stories the most. These are the issues that were closest to his heart and his most precious gift to us.

In the last fourteen months since he was diagnosed with cancer, he made it a conscious effort to have dinner with the entire extended family every Sunday. These dinners were often filled with laughter and personal anecdotes, including the telling and re-telling of the stories I have mentioned above.

As the months past, we could see that Dua Pek was increasingly in pain but yet he kept insisting that Sunday night dinner was important. I always had the privilege of sitting opposite Dua Pek. This allowed me to see where Dua Pek’s gaze fell.

Despite his pain, his gaze was most often on Dua Em, Angie, Belinda and Willie – the ones who are the most precious to him. And I know, he must have been praying for Jesus’s blessing on each of them. On the nights where he caught me catching his gaze, he would leave me with the words “you must take care of one another.” His thoughts never strayed from you, his beloved family.  You were the focus of his life and he always thought about you no matter what.  The four of you will be most affected by Dua Pek’s passing; we share in your grief. We are also here for you, as your family.

Dua Pek also liked to visit us at home and he would always comment on how peaceful it is at dairy farm estate. He enjoyed the peace and quiet that the estate offered. As we gather here today, I am confident that he has found a peace that the world cannot give, a peace that would place him with his beloved Jesus, Mary and Joseph.

Closing remarks

Dua Pek, we will miss you.  Watch over us, especially us, your children, nephews and nieces that we may grow into people you have taught us and shown us to be.

Say hello to Gong Gong, Ah Ma, Jo Kor Kor and Auntie Agnes for us.

It is very hard to say goodbye but our faith teaches us that we would be reunited in the kingdom of God. So when it is our turn to take our journey on our own, do be there to welcome us home.

Book Recommendation: The Hobbit

I know I am seriously very slow, but I started reading this book after watching the movie, The Hobbit: An Unexpected Journey. Like the Lord of the Rings Trilogy, I enjoyed the book much more than the movie.

The Hobbit by J R R Tolkien was I think, written as a children’s bed time story. I can imagine myself reading this to children, together with the sound effects that would accompany the trolls, goblins and elfs. It is one of those books that you should own – if not for yourself, for the little ones that you have at home.

The Hobbit by J R R Tolkien is available for SGD 12.67 here with free shipping to Singapore. (You save SGD 10.77!)

For those of you who want the entire box set with The Hobbit as well as the compete Lord of the Rings Trilogy,  here is a box set thats going for just about SGD50 with free shipping.

Am currently reading a couple of books so I hope to update as soon as I am done with those.

more tk…

The Haze – A GCE “A” Level(ed) Analysis

The PSI readings in Singapore reached its peaked of 321 at 10pm on 19 June 2013. This is the worst air quality in our history and has reached Hazardous levels. Naturally, everyone is upset with the state of things. Some of taken their views online to post suggestions and comments on our political leaders’ facebook pages. AND unlike Barrack Obama’s treatment of our Malaysian friends (who by the way are suffering from the Haze as well), our leaders did actually respond! I am following LHL’s facebook page and he has been relatively (given his schedule) prompt in updating his position on the matter. Other leaders have as well from the reposts I have seeing, thought admittedly, some leaders do need a PR scrub, I think Mr William Sin would agree 😀

I am NOT a government’s spokesperson, nor am I interested in clarifying the government’s position. I only intend to list and evaluate the effects and the suggested solutions to this problem for my students.

To set matters in context, I will quote Minister K Shanmugam, the minister for foreign affairs, he said, in response to public criticism (and this is just a portion of his response -see, see i declare first ah) – “Look at the map, see where we are. Every country is sovereign and we can’t intervene in the actions in other countries. The burning is taking place in Indonesia. What do you think Singapore can do about that? Singapore has raised it with Indonesian Ministers, and over several years, we have offered technical assistance, expressed our deep distress at what is happening, and have also raised the issue internationally. The problem recurs, nevertheless. The reality of international law, international relations must be recognized. That is what we have been saying – in every field, our size and geography means that we are often price takers, not price makers – whether it is economics, geo politics, or the environment.”

So, my question to my students would be very easy – how would you propose to solve this problem? I will take the approach of identifying the solutions as they would appear in my class and would provide some sense of evaluation.

As an introduction to any answer, please make sure of course that you are sure about the market failure that is occurring here, in this case, there would be an extremely high external cost – marginal social cost is definitely higher than marginal private cost. “Social” here is used in the context of the well being of citizens in at least three countries – Indonesia, Singapore and Malaysia, who are all affected by the haze. Private costs refer to the costs born out by the plantation owners who have been accused of starting the fires.

Solution 1: Tax the people responsible for starting the fire

Evaluation: At the time of this writing, there are 173 hotspots in Indonesia. ONE HUNDRED AND SEVENTY THREE. Given the complex structure of government (provincial, state, federal) in Indonesia, the taxation process would be hellish for the lack of a better word. Also, taxation without enforcement would be toothless. How can a state or even provincial government cope with the implementation of an ad hoc tax system? To complicate matters further, in theory, we would have to tax the equivalent of the marginal external cost – that means officials would have to in theory compute 173 computations for tax returns, and we all know how easy it is to compute the external cost.

Solution 2: Ban slash and burn method

Evaluation: They already did! Lets consider this, the land area of Sumatra, where the hotspots are is 473,481 km². Singapore’s land area is 710 km². You see where I am heading towards?

Ok, so these would be the first suggestions off the cuff and their simple evaluation. Next, the suggestions from the public on how the Singapore government should have reacted to the haze problem and their simple, objective evaluations. These suggestions were found on facebook.

Solution 1: one political party recommended repatriating Indonesians

Evaluation: Ok…. then I will lose some of my most interesting students. The Indonesian embassy estimates that there are about 200,000 Indonesians are in Singapore. Say we go forward with repatriating the Indonesians – the Singapore government would have to bear the cost of repatriation. This is an explicit cost. What about the implicit costs? The lost of productive capacity as a result of a fall in the number of Indonesian workers; the potential lost in Trade and the threat of retaliation from Indonesia – I think the cost incurred to Singapore would be great! and noting that it does not at all impact the PSI level, what would we have to gain? The “loss” of not being able to live and work in Singapore would still be an external cost to the plantation owners –  that is to say they would still not take this cost into account and continue burning.

Solution 2: Boycott Indonesian Products

Evaluation: I shall let the facts speak for themselves, quoting from my student’s favourite source of reference, Wikipedia, “Indonesia-Singapore trade volume reaches S$36 billion (US$ 29.32 billion). Singapore is Indonesia’s top foreign investor, with a cumulative total of US$1.14 billion in 142 projects. Trade between the two countries also hit around $68 billion in 2010. At the same time, Indonesia’s non-oil and gas exports to Singapore are the highest in the region.” Ok, you want to boycott Indonesian products? Sure, are you willing to be both unemployed as well as overwhelmed by the haze? The economics behind this remains similar to that above.

So what can be done? I think from the Singapore side, nothing. There is no way Singapore laws can be applied on Indonesian plantation owners, IF a Singaporean firm owns and runs the plantation, that would be a different story –  but then again, prosecution in Singapore doesn’t necessarily translate to action in Sumatra.

Singapore can exert political pressure on Indonesia but can it impose some form of penalty on Indonesia in terms of trade? Sure we can, but are we prepared to face the consequences?

I think knee jerk responses are just that. Someone taps your knee, you kick the person, the person punches you back. Can you take that punch?

The Economic Reasons for Free Cone Day

Ben and Jerry’s celebrated their 34th annual free cone day today as a celebration of gratitude to their customers who have supported them through the years as well as to say a huge thank you to their staff who have always diligently served scoops and scoops of ice cream every day.

“We’re always striving to show our fans that we love them more than they love us,” said Dave Stever, chief marketing officer of Ben & Jerry’s. “And Free Cone Day gets the job done.”

I must disclose that I had my go at the free cone but what exactly are the reasons behind free cone day?

To do this, we will first assume (like in any economic argument) that B&J’s is profit seeking – that the more profit the make, the happier their owners will be. To do this, they would want to maximise revenue (their total takings) and minimise their total cost (wages to their employees etc).

Giving out things for free is not a very “Singaporean” thing to do. Anything given out free must incur a cost, and if there is no revenue to make up for the cost (since it is free) then it will have to be a lost. Or does it? First of all, the main thing here is that we see revenue as explicit revenue – in terms of cash – we simply ignored the implicit revenue. Let me TRY to explore the economics behind free cone day using 2 sides of the argument – the gains in Revenue and the reduction of Costs.

This is not a full essay nor infallible arguments

The Gains in Revenue – Gaining new ground

The first and most obvious reason for giving out free cones is that it is a MASSIVE advertisement. Have you seen the queues at B&J outlets on free cone day? In my opinion, the advertisement is directly targeted at new consumers – in particular, students.

The crowds and the generally laid back hype help portray B&J as cool and “the place to be”. How many of those in line are lured by friendly nudges on their shoulders to visit their nearest outlet “after school”?

Why is this necessary? Simple, people vote with money. Free cone day isn’t targeted at adults simply because the opportunity cost for standing in line for adults is simply too high. Given that free cone day ends at 8pm (here in Singapore), there would be a very low possibility that working adults would actually be in time to queue for the free cones (of course, this is discounting the adults who are have relatively flexible working arrangements). Furthermore, B&J’s are competitively priced with their competitors – Andersen’s, Hagen Daaz, to name a couple. Throwing a free cone day just to gain a marginal share in this market doesn’t make sense.

Instead, luring new economic able agents – students with control over their own allowance would help B&J prolong their economic longevity by having established a new pool of customers. Giving out novel flavours expose these students to the world of “better” ice cream, as opposed to the ice cream that are available in supermarkets (e.g. marigold, magnolia etc). This helps lock in the consumer base.

Think – nobody goes to B&J’s on an average day because “they have free cone day”, but it is more possible that some go to B&J’s because they tried “something nice on free cone day” and are back for more.

Does it matter that not everyone gets a cone on free cone day? No, those in line will bring those who missed out. Throw a stone in a still pond and admire the ripples.

The benefits gains from these informal media of advertisement far outweigh the cost.

The reduction in Costs – it’s a whole social experiment

Think about it- if you have about 7 locations in Singapore and several hundred across the world. What would be the easiest way to see which shop (and hence manager) is the most effective/least effective and which flavours sell the best?

When you queue for B&J’s free cone day, you are providing B&J with the following information

  1. Your age;
  2. Your geographical location;
  3. Your choice of ice cream (taste and preference)

These are precious information to any retailer! This information can then be used to tailor promotions to specific outlets!

Furthermore, as I was trying to explain to my class just before they went crazy, by drawing a large crowd, they are actually using the law of large numbers to find the efficiency of each outlet. In economics, no one cares about the outliers – the odd chance of serving 1 cone in less than 5 seconds or the still odd but not as odd chance of serving 1 cone in 15 minutes, we care about the average. How many customers can each store serve in a given time? This helps managers track the efficiency of which staff can dole out the sweet treat. Locations with the highest efficiency would be studied and raised up as a model, locations with the lowest efficiency will be studied and mitigation would be put in place.

Free cone day also acts as a geographical survey – what is a location’s potential customer base? And what kind of customers make up the customer base? The B&J outlet at Rochester Park drew mainly students –JC and secondary, would it be surprising if they gave discounts in future for students from these schools?

Next, it costs retailers to stock perishables and even more when these perishables run out of their shelf life. The popularity of a select variety of flavours help the retailers to decide which flavour to stock more of and which flavour to stock less of. There were six flavours to choose from today – my guess is three of the flavours were the most popular and three were the least.

This post is not meant to discredit B&J’s. I love their ice cream. I love what they are doing – in providing a nice chill out environment. This is meant to challenge my students’ understanding and approach to such a phenomena. There is no free lunch. Most things (especially in business) can be stripped down a cost benefit analysis.

If you have any views on this, feel free to write a comment or connect with me through twitter @pzhiwen.