Without knowledge, there will be no freedom. For one's that doesn't know the value of freedom, will never truly appreciate it.
Often a times, when i read current affairs news related from Malaysia, that has slight relevant to the economics of the country, somehow, I got the feeling that Malaysian public is generally economically-ignorance. That is to put it kindly. I would like to say our general public (and the politicians!) are absolutely stupid and retarded in terms of basic economics.
An easy example is the shortage crisis of essential items during festive seasons. By imposing a ceiling price on many essential items such as sugar and meat, the government effectively limits the economics incentive for the supplies to import more of these items. Consequently, we ALWAYS, i repeat, ALWAYS encounter a shortage in the supplies of these so-called controlled items. While it's important to ensure that the suppliers and retailers didn't take advantage of the consumers, we really ought to let the market to price itself.
Ohter notable examples, which I don't have time to describe in details are:
a) existence of monopolistic firms (e.g. indah waters?, syabas? tenaga? tv3?)
b) conflict of interest of government controlled "privatised" companies
c) level of involvement of the state in supposedly private investments (thru khazanah, epf, tabung haji etc).
d) lack of market mechanism and the presence of market failure in many areas.
Well, recently, a blogger-businessman turned politician, Tony organized a Coffee Talk session , which focus is to clarify basic economics issues to the general public. Hopefully more of these sessions will be held, and perhaps someday, the education ministry will engligthen itself, and began compulsory economic lesson to high school students (rather than some stupid pendidikan moral).
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10 comments:
hehey, call my economic-ignorant, i thought the reason why Govt imposing ceiling price for items like sugar or meat is to prevent retailers from making huge profit by raising price of these items during the high demand timing (before festival)? I thought the consumers who are the one complaining?
Deat SilentMeNot:
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hi mich, while the intention of the government is noble (like all other times), but it wasn't really well thought out off.
the reason for the high demand, as u mentioned, is the festive season. the optimal outcome is to allow retailers to set the prices they want, and bring in as much supplies as needed, and hence, all consumers being able to enjoy the goods, while retailers making their fair amount of profits.
THe only thing ceiling price is doing at the moment is to create artificial shortage (since suppliers didn't have the incentive to bring in more goods)...and because of this shortage, there is an incentive for retailers to raise the prices, albeit illegally.
Read in Milton Friedman's book, Govt intervention is always comes from noble intention, but it rarely works (so much so on socialism too :P)
Yeah, I would agree that if retailers are allowed to set the prices, it is an incentive for them to bring in more supplies. For this case, it will solve the shortage issue, but it does not deal with high price issue then, does it?
if the supply is increased, obviously the prices will come down to a fair market level, what our consumers are willing to pay for it. :)
i do believe in govt intervention, only if its well thought of.
think it in another way, if the retailers know that the demand will be all-time high, will they still decrease the price?
Or in another point: even if the price has been capped at ceiling price, i think retailer still have the incentive to bring in the goods. After all, retailers would still gain higher profit from selling 100 units compared to selling 10 units, even though the profit is already fixed. Does it valid as the incentive?
:)
I appreciate the feedback. But this can be easily explained using a supply-demand diagram.
if the price is capped, retailers will bring as much as he can afford by that price.
and even if retailers know the demand is high, there's a limit to the price he can charge. if one retailer insists to charge higher price, then, consumers can just go to the next seller. :)
haha, a picture is worth of thousand words? May be you can sketch a little bit and put it as diagram in your next blog :P
see, you also agree if retailer insist of increase the price, they will be punished (by customer or by law). Therefore to gain as much profit as they can, they will have to go for higher volume but at lower profit. And depending on the nature of the goods (seasonal good will be tougher to say, but sugar/flour is readily available and stocked for all year round-assuming), the retailer will still gain higher final profit than the usual time, due to higher volume and assuming that the sale price and the cost of good is same. (cost+profit=sale, betul?)
haha, see, your title make me malu lar, me not economics, but engineer, love math and has interest in economic principles/philosophy :P
new post posted. :)
1 more topic on econ: minimum wages! Any thought?
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