The Banking System and The Financial Crisis: An Economic and Risk-based Analysis
21 November 2008 and 1 December 2008
Mr Lam Chuan Leong
Over the last two months, markets around the world have witnessed tremendous turmoil, including a near collapse of the banking system in the West. Developments were so sudden and unprecedented that they led to interventions by Western market-based governments and even questions whether the free market system can remain viable. The crisis in the banking sector has set off chain reactions in the global economy, and the adverse effects will continue to be felt in the months and the year ahead. While the American and European economies are amongst the hardest hit, Asia’s export-oriented economies are also at risk. Indeed, the scale and extent of the events that unfolded since the bursting of the sub-prime bubble in August 2007 have taken the world by surprise. In the wake of the financial crisis, Singapore has entered a technical recession, following two consecutive quarters of quarter-on-quarter contractions in economic output.
Mr Lam Chuan Leong, who is Senior Fellow at the Civil Service College, discussed the origins of the sub-prime and subsequent liquidity crisis, the outlook for the global economy in the medium term and the possibility of a deep global recession. He explained the inter-relationships within the banking system, how it creates money, and significant concepts like toxic assets, bank recapitalisation and derivatives (especially collateralised debt obligations or CDOs). The lecture also examined the role of financial regulation and government intervention in this crisis as the US and European governments and central banks inject more than a trillion dollars into their economies to compensate for the withdrawal of private credit. In conclusion, Mr Lam, through the lens of managing complexity and uncertainty, shared how governments and individuals can respond to the current crisis, and the relevance and value of risk-based analysis.
See Lecture Notes
The Myth of the Rational Voter: Why Democracies Choose Bad Policies
18 November 2008
Associate Professor Bryan Caplan
"Voters are worse than ignorant, they are, in a word, irrational – and they vote accordingly." This is Associate Professor Bryan Caplan’s key thesis in his recent book The Myth of the Rational Voter: Why Democracies Choose Bad Policies (Princeton University Press, 2007). Caplan argues that democracies frequently adopt and maintain policies that are economically damaging. This runs contrary to the idea of the “wisdom of crowds” or the “miracle of aggregation” which states that when votes are aggregated, a minority of well-informed voters can lead to optimal decisions/guesses even if the majority of the voters are ignorant and vote randomly.
Based on responses to the Survey of Americans and Economists on the Economy, Associate Professor Caplan identified four systematic biases of voters. First, voters do not understand the benefits of markets and how the pursuit of private profits yields public benefits: they have an anti-market bias. Second, they underestimate the benefits of interactions with foreigners: they have an anti-foreign bias. Third, voters equate prosperity with employment rather than productivity: they have a make-work bias. Last, they tend to think economic conditions are worse than they are: they are biased toward pessimism. He suggests relying more on markets and less on democracy, and advocates improving economic literacy among the populace to reduce these systematic biases.
Bryan Caplan is an Associate Professor in the Department of Economics, Center for Study of Public Choice, and Mercatus Center, at George Mason University. He is the author of The Myth of the Rational Voter: Why Democracies Choose Bad Policies (Princeton University Press, 2007), which was named “the best political book this year” by the New York Times and a “Best Book of 2007” by the Financial Times. A self-professed libertarian, Associate Professor Caplan has won the First Place Article prize in the Templeton Enterprise Awards and the Thomas S. Szasz Award for Outstanding Contributions to the Cause of Civil Liberties. His current project is a new book, Selfish Reasons to Have More Kids. See Lecture Notes
Supplying Energy Through Greater Efficiency
19 September 2008
Dr Alan Meier
Many studies show that over 30% of present electricity use can be saved economically. But why aren't consumers making these investments? Many barriers discourage investments in energy efficiency. As a result of market failures and other barriers, there is significant underinvestment in energy efficiency. Actions by governments and other groups can address these market failures and reduce the barriers to greater energy efficiency. Higher energy prices also create space for new, profitable business opportunities. Dr Meier, a senior scientist in the Energy Analysis Department at the Lawrence Berkeley National Laboratory, provided insights on how governments can make sensible investments in energy efficiency and capture opportunities to increase energy productivity. See Lecture Notes
Fostering a National Innovation Ecosystem: Lessons for Singapore from the US Experience
25 August 2008
Dr Charles Wessner
Dr Charles Wessner, Director of Technology, Innovation and Entrepreneurship at The National Academies of Sciences, USA and a well-known policy expert on technology and innovation in the US, focused on policy recommendations for fostering a conducive national innovation ecosystem. Dr Wessner discussed the policy myths and market realities of the US innovation ecosystem, and distilled lessons for policymakers in Singapore, which included an examination of the role of government, and how it can partner universities and industry effectively to encourage research and innovation. Dr Wessner also shared best practices and lessons from the innovation experiences of other countries. See Lecture Notes
ESRN
Lunch Forum "Targeting That Works: Enhancing Efficiency
and Fairness"
(co-organised with the Ministry of Community Development,
Youth and Sports)
20 March 2008
Professor Richard Zeckhauser (Lee Kuan Yew School
of Public Policy Distinguished Visitor)
Governments face increasing pressure to
do more to improve the conditions and opportunities of disadvantaged
and low-income individuals through social programmes. Often,
the effectiveness of these social programmes requires better
targeting of scarce government resources to the people who
will benefit most from the programmes. Targeting aims to enhance
both efficiency—maximising social benefits per unit
of cost—and fairness—directing resources to those
who need them most. However, targeting also means that resources
will be diverted from those whose participation in the programme
imposes significant costs on others and those who benefit
less from the programme. This is why targeting is fraught
with political risk and difficulty.
In his ground-breaking book, Targeting
in Social Programs: Avoiding Bad Bets, Removing Bad Apples,
KSG Harvard Professor
Richard Zeckhauser defines bad bets as those individuals
who are unlikely to benefit much from the social resources
channeled to them, and to whom resources should be channeled
differently. An example is the older person who suffers from
a chronic illness receiving subsidised and costly medical
treatment at a hospital (as opposed to him receiving care
in a step-down facility). He defines bad apples as individuals
whose irresponsible behaviour imposes significant costs on
others in the programme and marks them unsuitable as beneficiaries.
Welfare abuse and fraud are a good example of bad apples.
In the lunch forum, Prof Zeckhauser discussed
the pathologies that commonly account for poor targeting in
social programmes, different approaches in targeting, and
ways to improve targeting in social programmes. See
Lecture Notes
Country Outlook Seminar: Sustaining Growth, Realising Potential
27 March 2008
Mr Gurcharan Das
Once shackled by dirigiste policies that accounted for what was derisively known as the “Hindu rate of growth”, India has now embraced globalisation and free-market policies that have transformed it into one of the world’s fastest growing economies, alongside China. India’s growth model, however, is a unique one. Unlike the Asian economies, India’s growth is not export-driven but relies largely on domestic consumption. Growth is also not broad-based, accompanied by a labour-intensive industrial revolution, which could absorb the tens of millions of Indians still trapped in rural poverty; instead, it is led by high-tech services. Neither has India had the agricultural productivity increases that industrialised countries have had in the past.
India’s growth has taken place in spite of the state, whose policies have not kept pace with the booming private sector. Although the government embarked on a series of economic reforms in the 1980s, which intensified after 1991, Indian entrepreneurs still face a range of obstacles, such as stringent labour laws and indirect taxes. Poor governance has also led to the failure of the state in the provision of public goods such as education, health care, clean drinking water and basic infrastructure. Indians are increasingly forced to turn to the private sector where the state has failed while the bloated and inefficient public sector continues to be a major drag on growth. But the state cannot merely withdraw. Markets do not work in a vacuum; they need a network of regulations and institutions. The state will also have to grapple with the socio-economic challenges that come with rapid change, such as regional growth disparities and sharpening income divides, which could threaten social harmony and political stability.
Mr Gurcharan Das, author of international bestseller India Unbound, spoke about the long-term sustainability of India’s spectacular economic growth and offered his take on what the state needed to do to maintain the growth momentum and handle the developmental challenges arising. See Lecture Notes
Seminar
on Ageing, Innovation and Policy
9 January 2008
Dr Joseph F. Coughlin
A rapidly ageing population
is often seen as a problem that societies must overcome. Yet,
this very same trend can be an opportunity. To see it as such,
policymakers need to understand the changing profile of this
fast-growing segment of the population. The ageing baby boomers
of today are already quite unlike the elderly of previous
generations. They are wealthier, healthier and better educated,
and they have higher expectations and more sophisticated demands.
By changing their mindset and attitudes towards the elderly,
policymakers can be creative – both in designing innovative
policies to cater to their needs, and in seeing, and seizing,
the opportunities that an ageing population may create.
In this seminar, Professor Joseph Coughlin,
Director and Founder of Massachusetts Institute of Technology’s
AgeLab and an expert in the field of ageing, shared his insights
on disruptive demographics, how to come up with innovative
policies and products and deliver them well, and how countries
may overcome obstacles that reduce the effectiveness of innovative
policies and technologies. See
Lecture Notes
Close
Seminar on International Organisations and Singapore: Unlikely bedfellows or true opportunities for growth and cooperation?
MEWR-CSC Environmental Experts Series
A
View from Shell: The Future of the Energy Industry
Intrinsic
Motivation