Question: Do you think the government should support businesses or the free market?
Yes or No?
The answer can be find in this book, and this is a recent profile of one of the authors the book. And yes he is from Chicago's Business School.
Showing posts with label government failure. Show all posts
Showing posts with label government failure. Show all posts
Sunday, July 12, 2009
Thursday, July 09, 2009
Micky Economics
Hong Kong's legislators would soon vote on whether to allow the government to convert its loans to the territory's Micky Land into equity according to this story.
What amazes me is the kind of argument that has been used to support the construction of Mickey Land in the first place and now its extension. The argument for building Micky Land, as least as it appears to me, is the following:
1. Build it (means Micky Land) first, and visitors would come!
Couple of years down the road, not that many visitors show up, the argument for extension relies on this:
2. Not that many people turn up because the park is too small. Build a larger park and visitors would come.
Amazing indeed. My sense is that if the whole enterprise is fully funded by the parent company of the local Micky Land, it would have been shut down a while ago. Amen.
What amazes me is the kind of argument that has been used to support the construction of Mickey Land in the first place and now its extension. The argument for building Micky Land, as least as it appears to me, is the following:
1. Build it (means Micky Land) first, and visitors would come!
Couple of years down the road, not that many visitors show up, the argument for extension relies on this:
2. Not that many people turn up because the park is too small. Build a larger park and visitors would come.
Amazing indeed. My sense is that if the whole enterprise is fully funded by the parent company of the local Micky Land, it would have been shut down a while ago. Amen.
Tuesday, February 12, 2008
Why Indonesia Misses Out on the Global Resources Boom?
Indonesia is one of the world's most prospective countries, with large seams of copper, gold and nickel yet untapped under the ground, mining analysts say. Yet there have been no large new mines developed since the Asian financial crisis in the late 1990s, meaning Indonesia is missing out on revenue from current high global prices for natural resources.
Why?
One major obstacle to foreign investment is fighting between the central and local governments over who should control mineral resources. Indonesia's parliament has been debating a new mining law which aims to settle those differences, but has as yet been unable to reach a compromise law.
More from this WSJ story.
Why?
One major obstacle to foreign investment is fighting between the central and local governments over who should control mineral resources. Indonesia's parliament has been debating a new mining law which aims to settle those differences, but has as yet been unable to reach a compromise law.
More from this WSJ story.
Monday, November 05, 2007
Government --- The Micky Saver
Today's edition of the HK Standard reported:
Mickey Mouse and his mates at Hong Kong Disneyland look set for another massive cash handout - courtesy of the taxpayer
More here.
Back in 1999, when the HK Disneyland project was still on the drawing board, my former colleague (and coauthor) at the Chinese University of Hong Kong professor Kwong Kai-sun had challenged the wisdom of having the project where the HK government is a majority shareholder.
Specially, professor Kwong criticized many assumptions contained in a government study which hailed the benefits that could be expected from the project. More here.
Mickey Mouse and his mates at Hong Kong Disneyland look set for another massive cash handout - courtesy of the taxpayer
More here.
Back in 1999, when the HK Disneyland project was still on the drawing board, my former colleague (and coauthor) at the Chinese University of Hong Kong professor Kwong Kai-sun had challenged the wisdom of having the project where the HK government is a majority shareholder.
Specially, professor Kwong criticized many assumptions contained in a government study which hailed the benefits that could be expected from the project. More here.
Sunday, November 04, 2007
Positive Externality
In response to my earlier commentary on infrastructure investment, a loyal reader to this blog Ming wrote:
I think the problem of infrastructures are even worse than SOEs.For SOEs, people aware of their ongoing financial burden on the government. For infrastructures, they call them "investment" which generate "postive externality". You can never say they are in deficit.
Indeed, positive externality has been used by the HK government to justify many of its so called infrastructure investments. HK Disneyland is a prime example where government investment was justified on the ground of positive externality. Read more here.
The sad fact is that the government never explains how private actors fail to internalize the externality before getting its visible hand got involved in the first place.
Wednesday, October 31, 2007
Build the Road, and the Cars Shall Come
Today's The Standard reported:
"The HK$7.8 billion Hong Kong-Shenzhen Western Corridor is being underused by as much as 89 percent, a government official admitted yesterday... the government had earlier estimated a daily usage of around 29,800 trips on the corridor - the fourth vehicular corridor to enter Shenzhen via Shenzhen Bay Port.
However, actual usage only rose from 1,400 trips in July to 3,256 in September, or about 11 percent of the estimate."
More here.
If a private company wrongly anticipates demand, the company will face financial problem. If the financial problem is severe enough, the company will go out of business. At the minimum, such failure will force the firm to learn from their mistakes and try to avoid the same error the next time around. That's the way the free market ensures that limited resources will be in the hands of those entrepreneurs who better anticipate what their customers want.
Unfortunately, this is not the way the government works. Instead, more infrastruture projects are in the pipeline according to this government document. The government never learns because it does not need to. It can tax and it can inflate.
"The HK$7.8 billion Hong Kong-Shenzhen Western Corridor is being underused by as much as 89 percent, a government official admitted yesterday... the government had earlier estimated a daily usage of around 29,800 trips on the corridor - the fourth vehicular corridor to enter Shenzhen via Shenzhen Bay Port.
However, actual usage only rose from 1,400 trips in July to 3,256 in September, or about 11 percent of the estimate."
More here.
If a private company wrongly anticipates demand, the company will face financial problem. If the financial problem is severe enough, the company will go out of business. At the minimum, such failure will force the firm to learn from their mistakes and try to avoid the same error the next time around. That's the way the free market ensures that limited resources will be in the hands of those entrepreneurs who better anticipate what their customers want.
Unfortunately, this is not the way the government works. Instead, more infrastruture projects are in the pipeline according to this government document. The government never learns because it does not need to. It can tax and it can inflate.
Sunday, September 02, 2007
Get This Freddy Boy, It's Our Money Not Yours
A story in the HK Standard reported that:
...Asked whether the government would invest more money on Hong Kong Disneyland to attract more tourists, Secretary for Commerce and Economic Development Frederick Ma Si-hang said the government is considering all the possibilities and more investment is not ruled out.
The former secretary [for economic development and labor] Stephen Ip Shu-kwan had said more investment was not possible ... but the government's decision is not rigid. We will not rule out any possibility," he said.
However, Ma stressed the government is only a shareholder and should not get involved in the management of the theme park. He added that Disneyland, "should think of a way to solve the problem [of decreasing visitors]."
Read the whole story here.
Picture this: If you were an owner with a 57% stake in a company and the managment team has continously failed to deliver on performance during the past two years since the firm in question. Would you, as a majority owner, sit back and wait for the same old management team to turn around the firm as implied by Freddy's remarks up top, or would you go ahead and dump the useless management team just like that.
What would you do?
Guess 99.999% of my readers would choose the second option. Then why Freddy is so stupid? No he is not. Afterall, it's not his money which is at stake, it's yours and mine i.e. tax payer dollars we are talking about here. That's why.
...Asked whether the government would invest more money on Hong Kong Disneyland to attract more tourists, Secretary for Commerce and Economic Development Frederick Ma Si-hang said the government is considering all the possibilities and more investment is not ruled out.
The former secretary [for economic development and labor] Stephen Ip Shu-kwan had said more investment was not possible ... but the government's decision is not rigid. We will not rule out any possibility," he said.
However, Ma stressed the government is only a shareholder and should not get involved in the management of the theme park. He added that Disneyland, "should think of a way to solve the problem [of decreasing visitors]."
Read the whole story here.
Picture this: If you were an owner with a 57% stake in a company and the managment team has continously failed to deliver on performance during the past two years since the firm in question. Would you, as a majority owner, sit back and wait for the same old management team to turn around the firm as implied by Freddy's remarks up top, or would you go ahead and dump the useless management team just like that.
What would you do?
Guess 99.999% of my readers would choose the second option. Then why Freddy is so stupid? No he is not. Afterall, it's not his money which is at stake, it's yours and mine i.e. tax payer dollars we are talking about here. That's why.
Thursday, April 12, 2007
It's Your Money Too!
The government finally has offered some details on its plan of giving out freebies to film makers. The plan was first mentioned in this year's budget.
A story in today's SCMP reported:
"Films costing less than HK$12 million could qualify for grants of up to 30 per cent, according to a government discussion paper submitted to the Legislative Council yesterday..."
Why limit it to HK$ 12 million? Is that any analysis to support that? (May be, I have not read the government report submitted to the legislature yet).
It gets better.
"At least half of the main cast and film crew would have to be local permanent residents."
Does the government think that the reason for the decline of HK's movie industry is caused by the industry's past hiring patterns, ie too many non-residents are employed. If so, why the industry itself couldn't figure it out and shifting its employment pattern?
It gets even better.
"To be eligible, films must be commercially viable, with third-party financing of at least half of the production budget."
If so, ie. the movie is known to somebody to be commercially viable, you wouldn't need the government dole in the first place, wouldn't it?
Finally, giving government handouts to some "qualified" movie makers but not others based on some necessarily arbitrary criteria mean that all movie makers are not competing on an equal footing. How would this square with the government's calling for the urgency of a competition law when it serves as one source of the problem itself?
A story in today's SCMP reported:
"Films costing less than HK$12 million could qualify for grants of up to 30 per cent, according to a government discussion paper submitted to the Legislative Council yesterday..."
Why limit it to HK$ 12 million? Is that any analysis to support that? (May be, I have not read the government report submitted to the legislature yet).
It gets better.
"At least half of the main cast and film crew would have to be local permanent residents."
Does the government think that the reason for the decline of HK's movie industry is caused by the industry's past hiring patterns, ie too many non-residents are employed. If so, why the industry itself couldn't figure it out and shifting its employment pattern?
It gets even better.
"To be eligible, films must be commercially viable, with third-party financing of at least half of the production budget."
If so, ie. the movie is known to somebody to be commercially viable, you wouldn't need the government dole in the first place, wouldn't it?
Finally, giving government handouts to some "qualified" movie makers but not others based on some necessarily arbitrary criteria mean that all movie makers are not competing on an equal footing. How would this square with the government's calling for the urgency of a competition law when it serves as one source of the problem itself?
Subscribe to:
Posts (Atom)