It is not at all but several weeks later, the government is carrying out a larger spending adjustment exercise by cutting what the Finance Ministry calls non-critical expenditure across all ministries in order to accommodate for the ballooning fuel subsidy cost, which in turn is created by military conflicts in the Middle East.

I still would not call it austerity for the same reasons I rejected the charge levelled at the 2018-2020 Pakatan Harapan government: at that time, total spending and the economy itself actually grew. For 2026, total government spending and the economy would very likely expand too. It is just not the Malaysian mainstream view to expect a recession and an aggregated government spending cuts in the next 12 months. (Still, it does not help that the Anwar Ibrahim-led government itself uses the language of austerity…)

I find the cuts disagreeable though understandable.

Disagreeable because, for instance, to have RM3 billion worth of non-critical spending within the Ministry of Health that suffers from all kinds of manpower and facility shortage sounds incredible. So outrageous that even the Ministry of Health is contesting the cuts. One would think that if there were indeed that size of non-essential spending, it should be redistributed to essential services within the ministry instead of being redirected towards fuel subsidies that are not just unsustainable financially, but wasteful in terms of opportunity cost at a time when economies are competing at the technological level that could redefine future growth in a big way.

Ideally, what should be cut instead is the fuel subsidy spending, which the latest policy has failed its purpose. The regime was designed to save money but the truth is, it was designed to do minimal work during a time of low petroleum prices.

Just imagine the kind of policy we could run based on the amount used and to be used for fuel subsidies this year alone. We could turbocharge electrification throughout Malaysia and address the energy prices more sustainably. Fortify our health and education system to meet ongoing and future challenges. Build larger and stronger public transport network, which also reduces out dependency on petroleum. Provide very large cash transfer programs, which is a superior form of assistance versus subsidies. We could even pay Sabah and Sarawak large petroleum payments and address the cause of that one episode of national divisions.

Nonetheless, the cuts are understandable from various aspects. The war could end soon, somehow. Trump always chickens out. Alternative source of crude oil could be found soon, a betting man could say.

But the most important of them is the national election, which could happen as early as this year. In fact, some state elections are slated for this year, which shows Anwar Ibrahim is running out of options. Inflation negatively affects voters’ satisfaction with the government of the day. And after the electoral disaster for Pakatan Harapan in Sabah along the general discontent faced by the coalition within its own camp (with Umno sharpening some long knives in the passenger seat), anybody in PH seeking reelection would think twice before committing to an energy price hike.

For Anwar Ibrahim, it is doubly so because he and his allies have spent their political capital on self-serving items that include Azam Baki, the Sabah corruption and corporate scandals. These actions easily wash out actual (though limited) reforms done by the government. Not to mention, PH (and PKR especially) have spent an outrageous amount of time fighting its own base instead of its opponents.

As a result, in the PH tank there is no more political capital to be spent on tough policy for the common good at the non-instant gratification horizon. That is a tragedy for a coalition that ran reformasi as a slogan. PH has always needed to use its political capital for tough decisions. Close at the end of the line, it is plain to see that capital has been misspent on political machination that would never inspire confidence among the public, or fire the imagination of the PH base.

^[1] — The government has decided to raise air-conditioning temperatures in all its offices as part of austerity measures and to cut down on energy spending. [Austerity: Govt turns up the heat, raises aircond temps, to relax dress code. Malaysiakini. Zarrah Morden. Zikri Kamarulzaman. April 2 2026]

Solo is one of the great rivers of Southeast Asia and when I think of great Southeast Asian rivers, the Salween, the Irrawaddy and the Chao Phraya would come to mind. Adding to the list is possibly the Kapuas and the Musi. But the greatest without doubt is the Mekong.

The Mekong River flows from the Himalayas, snakes through southern China and defines the contemporary boundaries of Myanmar, Laos and Cambodia before empties out into the South China Sea just south of Saigon.

The Mekong is the great river I am most familiar with. From the air, I have seen the river and its delta in Vietnam. I have been to Phnom Penh twice over the span of 14 years and marveled at the transformation of the city. I have walked the streets of Vientiane during what appeared to be a dry season when the river to the west looked meek with people walking across to either get into Thailand or Laos. Further upriver in Luang Prabang where I spent several weeks, the river was wide and fierce. To cross it as many did at the Laotian capital would be pure madness. I have been through the Chiang Khong border checkpoint, where the Thai-Lao Friendship Bridge crosses a gentler Mekong. And more recently, I have been to Sop Ruak where the Thailand-Myanmar-Laos tripoint is.

While geographically and politically familiar with the river, I had never really thought about the history of its exploration until when I picked up a little gem from Tintabudi bookstore some months back. It is Milton Osborne’s River Road to China. I am familiar with Osborne from a long time ago when I took a class on Southeast Asian history at Michigan. His work was one of the references we used in a class ran by Victor Lieberman.

River Road to China recounts the 1866-1868 French expedition’s attempt to locate the source of the Mekong and determine whether it was navigable. Based on my previous travels and embarrassingly basic geographical knowledge of the river, I would have bet it was navigable all the way up to at least the Myanmar’s section. At each section of the river that I have visited, the Mekong is wide except in Vientiane during what appeared to be a drought.

With a more limited geographical knowledge but with a whole lot more courage (or bravado), that was exactly the suspicion of the French empire, which was expanding its influence across the Indochina in competition with the British. The French were looking for inland access to southern China via the Mekong, while the British were doing so through the Salween in Myanmar. There was race to Yunnan and the supposed riches of southern China.

The French expedition led by Ernest-Marc-Louis de Gonzague Doudart de Lagrée and also later Marie Joseph François Garnier met their first challenge near Sambor, approximately 200km to the northeast of Phnom Penh by river. The Sambor rapids were difficult but it could be negotiated, especially with stronger ships of the mid-19th century. de Lagrée, his men and local guides definitely did with more primitive boats after a struggle that came physically and psychologically.

de Lagrée had been to the Sambor rapids before and he had thought it was impossible to pass. But the expedition did pass the rapids and that raised hope.

That hope was quickly dashed. The Khone Phapheng Falls at the modern Laotian border are the uppermost reach of navigable Mekong. Khone Phapheng Falls are in fact the widest waterfall in the world. I never knew that, thinking Iguazu Falls on the Argentine-Brazilian border being the widest. But no. The Khone Phapheng Falls have a width of nearly 11km, Iguazu is only nearly 3km.

Unlike the Iguazu that rises close to 100 meters, the Khone Phapheng is just 21 meters tall in a series of cascades. In many ways, the Laotian falls are a gentle feature. But that was enough to block any steamship from going upstream. Years later, the French ended up building a rail line to sidestep the problem presented by the Falls.

Now knowing the Mekong was unnavigable, there was still an objective left: find the source of the Mekong. And so, the expenditure pressed on but in a disastrous fashion due to tropical diseases, the limits of French medical knowledge of that time, political realities of the Indochinese interior and simply, European imperial arrogance. de Lagrée in fact spent a second half of the expedition suffering from what seems to be malaria and died unceremoniously in Yunnan away from the Mekong after a failed surgery. de Lagrée shared the fate of another French explorer, Alexander Henri Mouhot, who popularized in Europe the ruins of Angkor but died out of malaria. Mouhot is buried in a tomb in the outskirts of Luang Prabang.

The rest of the team attempted to look for the source but they eventually abandoned the mission due to a civil war in Yunnan between Muslim rebels and the Chinese imperial forces. It was too dangerous to proceed.

While there was strong suspicion about the location of source of the Mekong by the end of the 19th century, it was only truly discovered by the 1990s technology. We today know that the Mekong originates from Lasagongma Spring, deep in the Tibetan Plateau.

Finally, there are two other points I would explore slightly further.

One, the expedition played a role in expanding French influence in Southeast Asia. During the expedition, France controlled the Mekong delta (French Cochinchina) but one surviving member of the expedition, Garnier, briefly captured Hanoi on the delta of the Red River in northern Vietnam on the pretext of securing free river passage in yet another attempt to access Yunnan but this time, via the Red River. While he died in a battle near Hanoi and the city itself was liberated by the Vietnamese soon after, in the longer run, France ended up ruling the whole of Vietnam because Garnier showed it was possible.

Two, I wonder if there were non-Europeans who had traversed the length of the Mekong before the French exploration. It seems quite plain that the locals who worked as porters and navigators for the French knew about the rivers more than their employers. More than that, there were Malay fishmongers all the way from the Malay Peninsula in Phnom Penh when de Lagrée spent days dining with the Cambodian king, Norodom I. He was familiar with the king given that earlier, he played a role in forcing Cambodia to become a French protectorate. More curiously, there were Malay bombmakers as far north as Dali, the northernmost city along the Mekong that the French explorers visited. If there were Malays along the upper reaches of the Mekong, surely it would not be an overreach to expect others like the Thais, Laotians, Cambodians. Vietnamese, Chinese or any other local groups that had explored the river.

Here, I am glad Malaysia has largely steered away from export-restrictive measures. Multiple economies have done so to prolong supply in the domestic economies. After all, shunning the export doors is a quick-and-easy solution. And looking at the domestic use chart below (produced earlier to highlight the crisis at hand), exporting might look unnecessary given the rising stress at home.

Yet, export ban is beggar-thy-neighbor policy that would make everybody worse off. This is especially so the most manufacturing products are complex involving inputs that could only be obtained through external trade. We could be a net exporter of oil and gas, but we would be a net importer of various chemicals. If we restrict our exports that other needs for their economies, it would be likely others would do the same too. This would result to a whole chain dying off in the short term (while investing takes years) and exacerbating the ongoing energy and chemical-based supply disruption.

Rather than resorting to restrictive trade measures, we should (and appear have) capitalized on our exports in return for guarantee for imported supply. Australia and Singapore have done exactly this recently where Australia promises to continue to supply Singapore with LNG and in return, the latter guarantees diesel supply for the former.^[1] Malaysia appears to have the similar arrangement with Australia.

That is the way forward. Malaysia should use our surpluses in various industries as a bargaining tool to ensure our own supply security whenever possible: our surpluses are both the carrot and the stick we must use. The key is to strengthen our trade ties instead of cutting it.

^[1] — In this context, we reaffirm our commitment to strengthen energy security, to support the flow of essential goods including petroleum oils, such as diesel, and liquefied natural gas between our two countries, and to notify and consult each other on any disruptions with ramifications on the trade of energy. [Joint Statement on Energy Security. Lawrence Wong. Anthony Albanese. March 23 2026.]

Complacency

While neighboring economies have quickly engaged in some kind of mitigating measures, Malaysia appears to be carrying on with business as usual. The latest business-as-usual approach the government has taken is to provide and finance highway toll discounts for the upcoming Eid holidays, which will work to raise petrol and diesel consumption above what it would have been without discount. The subsidy regime has also left unchanged, taking any possible adaptive saving measure out of the equation. Decision on work-from-home arrangement would only be taken after Eid.

It seems the government is complacent. After all, the official communication designed to comfort Malaysians is that Malaysia is a net energy exporter and that the country has two-month’s worth of supply of petroleum products at home. Adding to this is the fact that Malaysia is one of the better prepared economies to weather the supply disruption storm.

Negative effects are unavoidable

Yet, the negative effects are a matter of when, not if.

This is so because many of the industrial (indeed petroleum) products used within Malaysia are exposed to international trade. At the very least, domestic prices are affected by global prices, even if the country is self-sufficient in one specific sector or the other. That is one of the fundamental facts for a small open economy such as Malaysia. Within context of the latest supply disruption, it means domestic prices should go up tracking global prices. This has not taken into account the problem with smuggling, which is really a feature (and not a bug as some would think) of the way Malaysia set prices for its petroleum products.

Qualitatively tracing the disruption ripples with an IO table

To understand the seriousness of the supply disruption, the ripples throughout the domestic economy could be traced through the input-output table. The table links every sector with each other by accounting for all output for all sectors as well as its input from domestic and foreign sources. The latest IO table Malaysia has is from 2021, with the next one due to be published likely this year.

O&G disruption

The clearest channel to trace that disruption is to trace the industrial linkage between oil and gas to chemicals and from there on, to other downstream sectors that use energy and chemical inputs. The chart below is a graphical representation of that linkage within the context of domestic output use (with international trade taken into account).

Here, the output of oil and gas has been traced down by five levels, i.e. from oil and gas, to refined petroleum, to basic chemicals, to special chemicals and then to the next stream user sectors that among others include pharmaceuticals (as listed in the chart).^[1]

While five levels may appear deep, it is possible to drill down deeper and trace all the IO table and hence, the whole economy. For instance, a sector located downstream of pharmaceuticals includes the healthcare sector and healthcare output would be used by other services, like banking or even electricity manufacturing. Or for electricity, it could go down to land transport and then to other activities dependent on land transport.

I do only five because these five levels to me appear to be the among the sectors likely to feel the heat early on, either by the consumers, the producers or the government that may subsidize either consumption or production of certain goods. The numbers even tracing it only 5 levels already suggest a huge portion of of the economy should be affected.

That is not at all comforting.

Fertilizer disruption

O&G and is not the only source of the disruption. Fertilizer manufacturing, which uses natural gas as input, is also a major point of trouble in its own right. The chart below traces fertilizer’s immediate users.

Quantitative tracing

These charts are drawn to scale. For laypersons, that means it is more than possible to trace the expected quantitative effects on all industries using the underlying data. How would one ringgit change in output price of oil and gas affect the change in prices of other downstream sectors? How would one unit of volume change in oil and gas affect change in other sectors?

That will be some further calculations I will do in private.

^[1] — for crude oil & natural gas, coke & refined petroleum, basic chemicals and specialty chemicals, the corresponding rectangles represent total output and imports of the respective sectors. For the rest sitting at the end nodes (to the most right of the chart), they instead represent sum of input from the supplying upstream sectors. For instance, while basic chemicals node represents all of its output and imports, plastic products node only represents the sum of inputs used from basic chemicals and specialty chemicals. For the end node (right most), only sectors using at least 1% of its supplier output are listed. Anything below that is aggregated under the label others. This is done for simplicity’s sake

One was that it would soften the GST blows faced by households and companies. Second, related to the first, it would the GST more politically palatable. Third, there was a sense that it was fairer (and easier) to tax consumption instead of income. And finally, there was an idea that it was fairer to have flatter tax rates.

It is the fourth point that came across my mind as I read Equality: What It Means and Why It Matters recently. The book records a conversation on economic, political and social equalities between economist Thomas Piketty and philosopher Michael Sandel.

Within the context of flatter taxes, both parties highlight the importance of the middle class in forming any social compact. The middle class is important because in most settings if not all, it is the middle class who would fund the arrangements the most. Such compacts involve the financing of public institutions and infrastructure that in theory would introduce positive externalities that no private endeavor could bring. 

But the middle class needs to be to convinced to come on board and pay up. It is not enough for them to become the beneficiaries of any institution generating positive externalities. This is especially so when they know the poor would not be paying as much as they do, if at all. Jealousy and a perverse kind of envy when it comes to taxation (or lack of) are something that need to be kept in mind.

This could be addressed by having a progressive taxation regime, where members of the upper class are required to pay more through steeper tax rates.

As Piketty states it in the book:

It’s also what contributed to building a new social contract where the middle class would accept contributing to the social state. They knew that they would benefit from it, but also that people at the very top were going to pay a lot more than they would. Whereas today, of course, there’s a big suspicion by the middle class—more than suspicion—that people at the top are not paying their fair share. It makes them say, “Okay, then I’m not going to pay for people who are poorer than me.” [Page 17. Equality: What It Means and Why It Matters. Thomas Piketty. Michael Sandel]

Of course, the tax monies received by the authorities have to be put to good use and that means for the betterment of society. That betterment at the very least is the various effective functioning public institutions, which are central to the creation of sense of community and belonging, but also long-term public investment in a myriad of fields.

That sense of community and belonging achieved through some social compact financed by progressive taxation is a profound point at a time when far right extremists are championing identity politics and driving a plural society, like the one in Malaysia, apart.

From here, Piketty (and Sandel) are presenting progressive taxation is a tool to fight off the far right. It is a tool to create institutions that inculcate that sense of civic community and belonging to rival whatever the far right is offering.

Piketty and Sandel had the conversation (which has been edited into a book format) from the standpoint of the political left. I would not classify myself as a leftist. Yet, the ideas are useful for a person like me, who believes in civic nationalism with a dose of liberalism.

Criticisms of the current state of affairs are everywhere, including in contemporary literature. Two books from my recent readings rise to the top of my mind. Omar El Akkad’s non-fiction One Day Everybody Will Have Always Been Against This and RF Kuang’s fantasy-scifi-historical fiction Babel or The Necessity of Violence.

One of those betraying parties are many liberals in the West.

El Akkad’s thesis is clear from the book title itself, with ‘this’ being the genocide in Gaza and apartheid across occupied Palestine. He points out the hypocrisy of Western liberals, especially US liberals, where human rights are held up only for some but not others. That has been a constant criticism of the US and Western Europe (the centers of such liberalism) for a long time but the idea has gained its greater purchase in the past several years, especially with the wildly different approaches taken by then with respect to Ukraine and Palestine.

El Akkad’s criticism goes deeper than simply highlighting the hypocrisy. He believes many western liberals are really interested in messaging and virtue signalling all to make themselves look good. When push comes to shoves, they would create a caveat to wriggle their way through the issues while pretending there is no hypocrisy involved after all.

This, I believe, is one of several reasons why Western liberals no longer hold the prestige they once had in the eyes of many Asian liberals. I have summarized my thoughts on the matter on Kam Raslan’s A Bit of Culture over radio some weeks back. In the same show, I recommended El Akkad’s work as a book to be read.

That hypocrisy is one of several themes explored in Babel. But more than that is another relevant but more damning fatalist criticism developed from that hypocrisy. It is that people of different culture, or more specifically, minorities in a white world would never be considered as equal. Set during the European industrial revolution on the eve of the Opium War, the novel traces the life of the hero and his small cohort at Oxford, some who are radicalized over the injustices of British colonialism.

Babel is an excellent novel and I enjoy Kuang’s writings. In fact, Babel is my second Kuang’s work I have read, with the first being Yellowface. Even so, I won’t yet be as pessimistically fatalistic about multiculturalism as Babel is, even in this current decade of disappointment. Babel takes place during a time of severe power imbalance between the Western world and everything else, where the subscription to the idea of equality can easily be corrupted by hypocrisy that those in power.

With the ongoing multidecades-long rise of Asian economies, the gap representing power imbalance is shrinking and for some, has been reversed. This, I hope, would make that same hypocrisy harder to sustain and a more genuine inclusivity more achievable.

Sleepiness is a regular cause behind it but any kind of persistent distraction is enough a reason for it. It does not help when a novel plays around with plot sequence to the point of misdirection. To understand such kind of novel, the mind needs to be at attention. All-absorbing, all-aware, all-thinking. The moment the mind is caught undisciplined, the reader will go through the motion of reading mechanically without comprehending the meaning behind the words.

I found myself in exactly that situation multiple times while reading When I Sing, Mountains Dance by Irene Sola, which is originally written in Spanish and then translated into English by Mara Faye Lethem. I would read pages and pages before stopping and then realizing that I had no idea what I had just read.

When I Sing, Mountains Dance is a fiction set across several generations. There is one timeline but that timeline is observed by multiple characters within the same time period and then across multiple periods. It is the diversity of perspective and the numerous characters that threw me off track. But there is another factor that tripped me: the reader needs to finish almost each chapter before reaching full comprehension what it is all really about. It is like you have all puzzle pieces laid out but the final key that would make it all sensical is given only at the very end: the final paragraphs will make you to reassess earlier paragraphs that you read and thought you understood.

The novel has fewer than 200 pages but the naughty play on sequence forced me to take more time than usual to finish it. I ended up revisiting earlier pages to make sure I get the story straight.

That may sound discouraging. But that very plot device (is that the right term?) that challenges the reader’s attention span is also the very reason I find the novel memorable and enjoyable.

There is also a little bit of magical realism that makes the novel fantastical, coupled with just simply beautifully translated sentences peppered throughout the novel. That made me wished I could read the original in Spanish.

It is also the expiry date for the MyKasih program, a government scheme providing all Malaysian citizens aged 18 or above with RM100 digitally through each person’s identification card. However, the scheme isn’t universally accepted at all stores.

Paternalism and practicality and possibly something else have restricted spending avenues to a subset of consumer products—certain basic food items, baby requirements such as diapers and hygiene products like tooth pastes—at selected stores. Although MyKasih is free money for all voting-age Malaysians, somebody in Putrajaya must have thought it was morally inappropriate to have the money spent at the more upscaled Cold Storage, Jaya Grocer or Aeon MaxValu chains. It should be spent at places like KKMart or Hero Market instead, or so the logic goes, where the marhaen, the common people, patronize.

But no matter the misguided targeting policy. There is RM100 free money to be spent. However restricted the options are, there are still rich options available and there are choice purchases to be made before the government-funded cash-like voucher expires at midnight.

Recently with a baby, diapers are at the top of my mind and although I live rather comfortably, I won’t mind free RM100-worth of diapers. The economist in me optimizes. I reckon this supply of diapers would last me several weeks, or days depending on how often the baby poos.

I head to the nearest government-approved outlet for my free diapers. Currently finding myself in Petaling Jaya, it turns out the KKMart on Jalan Telawi in Bangsar is the most convenient convenience store for me. And so I turn up on Jalan Telawi, readying my IC to redeem my RM100-worth of diapers, possibly much at the chagrin of some policymakers in Putrajaya.

“Bangsar, of all places! Bangsar!” I’d imagine the man behind the desk shouts. “Next year, we’ll remove Bangsar from the pre-approved list!”, barks the man to his special officer who nods and says “yes sir, we’ll do that. No Bangsar in the list.”

It turns out, I’m not the only one thinking about spending it on the very last day. There’s line forming at the cashier’s counter. But it isn’t too bad. Five, maybe six people lining up.

I walk and begin my search for diapers at the back of the store. “A ah! There they are.” No, those are toilet rolls. No, I don’t need that. No, those are napkins. No, those are some kind of paper products. No, no, no…

It isn’t a big store and I find the right shelves soon after. But I realize I have no idea which diaper brand to buy. I flip out the phone, call the wife who immediately gives a sighing instruction. “Do you see it?”

“Yes, I do.” No I don’t. “Okay, see ya. Bye bye.” I’m currently reading RF Kuang’s Babel and I’m reminded by the novel that the etymology of goodbye if God be with you. May God be with me.

As I begin to pray deep in my heart, my eyes land on the right brand. I guess I didn’t need to pray after all.

A bag of those diapers cost RM12.50 each. My mind quickly calculates the math and understands immediately getting 8 bags would fully utilize my RM100. But 8 bulking bags are a pain to carry. I have a shopping bag with me but it isn’t big enough for 8. I have to carry these bags to the counter awkwardly and then to the car parked nearby.

By now, the line at the counter has grown longer.

On my messaging app, a friend at another place complains that the MyKasih system is struggling to handle the sale volume for today. “The system is down! This government I tell you!”

I count there are seven persons in front of me. The customer at the counter hoping to maximize his MyKasih allowance struggles to do the math and the cashier is obliging by too much. “This item cannot. That can.”

“How about that?”

“Can.”

“That?”

“Cannot.”

This to-and-fro conversation goes on for 10 minutes. It is as frustrating as lining up at a fast food restaurant and having the person in front of you being indecisive about his meal. “Big Mac?”

“No, this is KFC.”

It’s the next person’s turn but she is underspending it. “Wait, ah. I look for more stuff.” She leaves her stuff on the counter and goes to the back of the store. Several minutes later, she comes up only to bring an item that is priced above the residual value she has.

“It’s over the limit. You’ll have to pay cash for it.”

“Let me look for something else. Wait please. I’ll change.”

Another minute or two later, she finds it. “Thank you. I really appreciate the patience.”

Next!

This customer has the same problem. The cashier says, “if you don’t spend it, the government will donate it to charity.”

He replies, “oh it’s okay,” possibly feeling the intense stares from everybody else in the line. The line grows longer and it has been half an hour since I joined it.

A man with a helmet enters the KKMart. “Bang, MyKasih boleh guna sini?” Bro, could I use MyKasih here?

“Boleh, boleh. Join the line,” he smirks, knowing full well the implicit cost of MyKasih. The RM100 may be free, but so too standing up for half an hour or longer, opportunity cost be damned.

It’s been 45 minutes and the line is barely moving. A couple comes in. They assess the situation and decide it’s not worth the effort. “Jom kita pergi Speedmart sebelah.”

I look behind and I cannot see the end of the line. It has snaked all the way to the back. Give it time and the line will become an Ouroboros, with its end meeting the head at the counter.

I can’t feel my legs. This is no way to spend New Year’s Eve. I can hear a thunder or two. It’s starting to rain heavily outside. Maybe I should say the prayer after all.

“It’s only RM84.35. Do you need to get anything else?” This consumer runs deeper into the store.

Next!

“RM96.55. Anything else?” Off he goes.

Next!

My back hurts.

Finally, just above the hour mark, it is my turn.

One bag of diapers. RM12.50 appears on the screen.

Two bags. RM25.00.

Three bags. RM37.50.

Four bags. RM50.00.

Six bags. RM75.00.

Eight bags. RM100.00.

The cashier smiles and gives me an ovation. I hear laughter from behind, enjoying their comedy of math, paternalism and government targeting policy.

The rain stops.

These traffic fines are meant to discourage behaviors that affect the public space negatively (for instance, parking at the junction is illegal because it may cause collision between other road users). But today, these effective fines are too low that instead of functioning as deterrent, they are now an enabler of bad behavior. The fines become fees.

What this means is that instead of a person paying fines to make amends, now that person pays fees to allow him to commit wrongdoing. So, people now are paying fees for the permission to break the law.

Fine as fee is among the subjects of Michael Joseph Sandel’s What Money Can’t Buy. The subtitle is more descriptive: The Moral Limits of Markets. Sandel is a political philosopher who is perhaps best known for his Justice lecture series.

Fine as fee is only a specific example of a general set of cases where incentives designed to discourage certain behavior end up encouraging it instead. More precisely, (some) market-based incentives have the capacity of corrupting individual behavior by making previously frown-upon actions acceptable, which in the end makes the experience of public space sharing less desirable. There is a hint of the tragedy of the commons here.

There is one real world example I would like to cite from the book. It revolved around child-care centers in Israel that had difficulties with parents who were always late in picking up their kids. To discourage late pickups, the centers introduced a fine. In theory, this should encourage parents to pick up their children on time. But it became a perverse incentive, a concept undergraduates learned in their introductory microeconomics classes. Instead, it changed parents’ behavior for the worse, who now see the fine as a payment for late pick-up service. Incidence of late pick-ups rose afterward, as parents were more than happy to pay for the convenience. The lesson here is that that fine (a market-based solution) changed the expectations about late pickups: from something that reflects irresponsibility to just another non-judgmental service.

But this example and more are not a Freakonomics kind of entertaining read that opens up the world of economics to lay readers. Sandel attempts to convince us that market-based incentives change norms, unlike the typical economics assumption that these incentives itself are valueless and only reflects preexisting preferences.

Sandel’s ultimate thesis is that we have evolved from having a market economy to becoming a market society, where market mechanism has pervaded throughout all aspects of our life. He is worried that such proliferation is crowding out non-market norms and that the outcome is for the worse. Some of these norms are the egalitarianism (for example, lining up as opposed to express lanes where you pay to get ahead), the sacredness of human life (as opposed to paying for human organs or babies), honesty (as opposed to paying for friendship or dates), empathy (as opposed to auctioning immigration rights to refugees), civic mindedness (as opposed to paying to pollute or simply be a litterbug) or in general, the inculcating of the public spirit or civic duties which the market more often erode.

What Money Can’t Buy can be seen as an anti-market work but I think that is an unhelpful way of looking at it. Instead, it should be seen as a warning that not all realms of life should be opened to market mechanism or solutions. We should not bribe our kids with cash so that they eat their greens or clean their rooms or get an A at school. Sometimes should be encouraged through non-market means. There are social and moral limits to markets and there is wisdom in acknowledging those limits, even if one is—especially if one is—as I am, generally a pro-market person.

This brings back to our Malaysian case of traffic offences and fines as fees where people pay to commit offences. The possible solutions (apart from the market ones that involve more severe non-discountable punitive pecuniary penalties) appear to be a non-market one: towing, driving license suspension, lengthy court cases and even jailing.

Yet, most of these non-market solutions require government enforcement and enforcement requires funding, i.e. tax revenue. This goes back to the contributory factor behind the proliferation of market mechanism in our life: shortage of public funding means a retreat of public service, and that empty space gets filled up by private enterprises.

And yet, non-market norms where it exists can be cheaper than market norms. As Sandel writes, and I agree with this:

“[f]rom an economic point of view, social norms such as civic virtues and public-spiritedness are great bargains. They motive social useful behavior that would otherwise cost a lot to buy. If you had to rely on financial incentives to get communities to accept nuclear waste, you’d have to pay a lot more than if you could rely instead of the residents’ sense of civic obligation. If you had hire schoolchildren to collect charitable donations, you’d have to pay more than a 10 percent commission to get the same result that public spirit produces for free.”^[1]

^[1] — The mentions of nuclear waste and donation refer to an earlier real world examples in the book.

On nuclear waste: Switzerland needed a site to store nuclear waste. In a survey, when residents of a village were asked whether their would accept the government constructing a nuclear waste site at their location, 51% said yes out of sense of civic duty and the common good. But when the same question was asked with cash compensation added in, the result changed. Now, only 25% would agree, with the rest felling offended that they were being bribed.

On donation: two economists did an experiment involving high schoolchildren going door-to-door solicitating donations for certain cause. These children were divided into 3 groups. The first group was given a motivational speech about the worthiness of the cause, the second was given the same speech while getting to keep 1% of any donation collected and the third was also given the same speech while getting to getting to keep 10% of donation collected. The result? The first group collected 55% more donation than the second group. Meanwhile, the third group did better than the second, but worse than the first. Lesson: doing it for free out of civic duties leads to better results, but if you want to pay, it has be to a lot.

Since today’s the second anniversary of the book, I thought I should share the talk here.

In summary, I explained why 1990s was fundamental in shaping the Malaysia of today. The video has me talking for 60 minutes and the rest was me answering questions.