Day trips to Singapore are tiring.
You wake up at 5am, catch a cab to the airport. Board the plane at 8am. Arrive at Singapore at 9am. Start your meetings at 10am. Finish meetings, then rush to the airport by 6pm. By the time I get home, its past 10pm and I’m almost dead. Working till 10pm is not as tiring. The travelling is a killer.
On the other hand, I like Singapore. Its efficient. The cabs are clean and they take you regardless of where you wanna go. The toilets are clean. People are polite. And most of all, Singapore is actually cheap. If you earn, SGD that is. And therein lies the problem. I am being arbitraged. And I dont like it one bit.
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Let me give you an example. A cup of decent coffee in Malaysia costs at least RM8. In Singapore, it costs SGD4.50. Of cos after conversion (SGD/MYR = 2.4), its more expensive, but consider that a joker who earns RM2k in Malaysia will earn a similar amount SGD2k in Singapore for the same job (probably more after tax since tax rates are lower there). So all in, putting in the same amount of work in Singapore allows you a much higher quality of life compared to over here.
Now, neoclassical economics would suggest that a rational human being like me would rush over to Singapore to work. Supply of labour floods Singapore, employers get to cherry pick, salaries get lower and basically it becomes an employers market. The opposite happens in Malaysia (employee’s market). Net-net, salaries in both Malaysia and Singapore should converge to an ‘equilibrium’. In theory, they should.
But they dont, at least not in the short run. Neoclassicists insist they would in the long run. But to paraphrase Keynes, in the long run, we are all dead anyway. So is neoclassical economics flawed? Yes and no. If you assume that the only driver that affects my utility is salary, then yes.
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But in reality, that is not really true. There are other drivers, each of which has its own opportunity cost attached to it as well. Family, maxine, Malaysian food, JAIS (sic), UMNO Youth etc. Singapore doesnt have all those entertainment …hehehe. Once those things are factored in, it would be right to say that yes, probably this is the equilibrium for me. Hence, that’s why I am still here.
Also remember, my drivers are different from another person’s drivers. The respective opportunity costs also differs and changes across time. Now you can see how modelling an economy is next to impossible as you have to take into account each person’s preference and utility. And we havent even talked about exchange rate fluctuations, inflation and growth expectations etc yet!!
So the next time someone talks to you about econometric models, tell em to throw it away.
There is nothing wrong with the traditional assumptions of humans being rational and utility maximising creatures. We definitely are. Its the opportunity cost part that is missing and using the correct drivers/variables all of which is humanely impossible to model. So why rely on something that you know is inaccurate in the first place?
I think I’m with the Austrians on this one….
Posted by maxthecat80 
