ECONOMANIAC AY2009/2010

www.nus-ens.com

NUS

ECONOMICS

SOCIETY Annual Publication

CONTENTS p.03 Letter from the ENS President p.05 Economic Modules FAQ p.08 Econs Internship Interviews p.16 NUS Alumni p.20 ENS Events (see ENS calendar)

Economic articles p.49 Current Economic Global Outlook p.57 E-CoNomics – Climate Change p.64 Economics of Happiness p.72 How NUS students choose their food

ENS CALENDAR August 2009 September 2009 31 1 2 1 2 3 4 5 6

3 4 5 6 7 8 9 7 8 9 10 11 12 13 10 11 12 13 14 15 16 14 15 16 17 18 19 20 17 18 19 20 21 22 23 21 22 23 24 25 26 27 24 25 26 27 28 29 30 28 29 30 October 2009

November 2009 1 2 3 4 30 1

5 6 7 8 9 10 11 2 3 4 5 6 7 8 12 13 14 15 16 17 18 9 10 11 12 13 14 15 19 20 21 22 23 24 25 16 17 18 19 20 21 22 26 27 28 29 30 31 23 24 25 26 27 28 29 December 2009

January 2010 1 2 3 4 5 6 1 2 3

7 8 9 10 11 12 13 4 5 6 7 8 9 10 14 15 16 17 18 19 20 11 12 13 14 15 16 17 21 22 23 24 25 26 27 18 19 20 21 22 23 24 28 29 30 31 25 26 27 28 29 30 31 February 2010

March 2010 1 2 3 4 5 6 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 8 9 10 11 12 13 14

15 16 17 18 19 20 21 15 16 17 18 19 20 21 22 23 24 25 26 27 28 22 23 24 25 26 27 28

29 30 31 April 2010

May 2010 1 2 3 4 31 1 2

5 6 7 8 9 10 11 3 4 5 6 7 8 9 12 13 14 15 16 17 18 10 11 12 13 14 15 16 19 20 21 22 23 24 25 17 18 19 20 21 22 23 26 27 28 29 30 24 25 26 27 28 29 30 June 2010

July 2010 1 2 3 4 5 6 1 2 3 4

7 8 9 10 11 12 13 5 6 7 8 9 10 11 14 15 16 17 18 19 20 12 13 14 15 16 17 18 21 22 23 24 25 26 27 19 20 21 22 23 24 25 28 29 30 26 27 28 29 30 31 August 2010

30 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

16 17 18 19 20 21 22 23 24 25 26 27 28 29

Oct 2 p.20 Intervarsity meeting

Oct 9 p. 25

ENS Moon-cake Festival

Oct 13 p. 22 MTI Economic Dialogue

Nov 3, 5, 6 Exam Solutions Sale

Dec 11 p.32 Alumni BBQ

p. 28 Jan 6 - 9 Annual Chalet Jan 13 - 15 ENS Bonanza - Loveology the Flea p. 37 Jan 28 MOF Budget Quiz (Prelims)

Feb 11 p. 30 Chinese New Year

Reunion Dinner

p. 34 Mar 12 Investing Now! Talk

p. 37 Mar 12 MOF Budget Quiz Finals

Mar 29 OCBC Investment

Banking Talk

Mar 29-Apr 1 Exam Solutions Sale

p. 39 May 22 Economics Alumni Dinner p. 42 May 24 NEFMQ Prelims - Start

June 19 p. 45 Dinner & Dance

p. 41 July 12 - 14 Freshmen Shipwreck!

Camp

p. 42 July 31 NEFMQ Finals - End

Aug 5 Extra-Ordinary

General Meeting

Aug 12 Welcome Tea

Aug 17

Annual General Meeting

LETTER FROM THE PRESIDENT Dear Readers, Welcome to the new academic year 2010/2011!

In the past academic year the NUS Economics Society (ENS) focused on engagement - with our members, our Economics student population, our Economics department, our Economics alumni and relevant external organizations. We did this to work towards fulfilling our mandate, that is to promote the interests of our members and Economics major in an evolving environment. We successfully rolled out new activities and improved existing ones, each time bearing the larger aim in mind. To end off the 47th Management Committee’s term on a high note, I am pleased to bring you the latest issue of the EconoManiac, a publication produced specially for Economics students.

This issue highlights the events done by the society to introduce you to what the society is about, and what events are coming up in this new year. In addition, to answer some burning queries from freshmen and current Economics majors that are not addressed by the school administration, we have also included a FAQ for freshmen interested in majoring in Economics, as well as internship experience sharing. To show that Economics is not just all theory, but more so a tool to gain insights, we have also included a few enlightening student-written articles on a range of issues.

Wait, did I mention that the articles on the events done by the society are only an introduction? Yes, I did, because the society is more than just events. Its larger purpose is to take care of members’ and Economics majors’ interests as mentioned right at the start. It is a place where people in the organizing committees find opportunities to experience and learn – from planning skills to management of your own emotions in times of pressure; it is a place where friendships are forged while working together; and it is a place in which seniors have no qualms about coming back to help and befriend the new committee. In short, ENS is a place where people come together to help their peers, and in the process indirectly help themselves through the soft lessons learnt and bonds made.

Nonetheless, there will always be room for improvement in how the society can better serve its members and Economics majors. Thus, we hope that you would join us in improving how NUS Economics Society works.

I hereby wish everyone to have a progressive and purposeful new year. Hope you would enjoy this EconoManiac and find it useful.

Thank you. Yap Kim Leng President NUS Economics Society 47h Management Committee

47TH

MANAGEMENT COMMITTEE

Executive Committee

President

Yap Kim Leng

Vice President Tan Kok Leng Joshua

Hon. General Secretary

Tan Jia Yong

Hon. Financial Secretary Elgiva Lin

Asst. Hon. Gen. Secretary

Ankita Dhingra

Asst. Hon. Fin. Secretary Jo Ong Zu Er

Asst. Hon. Fin. Secretary

Lee Chin Yi Felix

Business & PR Director Wong Jun Jie

Subcommittees

NEFMQ

Director: Joel Tan Vice Director: Foo Xian Yun

Advertising & Marketing

Director: Connie Lam Vice Director: Lee Shao Li

Talks & Seminars

Director: Ang Pei Yi Evelyn Vice Director: Priscilla Teo

Student Welfare

Director: Dawn Lee Vice Director: Andrew Thia

Sports & Social Director: Howie

Vice Director: Wayne Chua

Publications Co-Directors: Suhas Bhat,

Cheok Wei Yong

Bonanza Co-Directors: Jo Ong Zu Er,

Lee Chin Yi Felix

Economics Modules FAQ In this section, we provide a brief overview of some economics modules that were taken in the past academic year (AY09/10). As the content and curriculum of each course varies according to the professor teaching it, do note that the scope of the modules offered this academic year may differ from the ones described. Nevertheless, we hope it will give you a general idea of some of the key contents of each module. EC1101E Introduction to Economic Analysis: Taught by: Dr Vijayakala Seevaratnam and Dr Lim Kin Lian An introductory course to Economics, it covers both micro- and macroeconomics. Much of the content would have been covered in junior college, though new topics such as consumer choice theory and game theory were introduced. Some calculations are involved, such as computing inflation rates and GDP growth etc, but are manageable. EC2101 Microeconomics I: Taught by: Dr Hou Zhaoyang This microeconomics course focused on many topics that were covered in EC1101E, going into greater technical detail on certain topics such as consumer welfare (substitution and income effects, cost of living indexes etc). The calculations involved were that of a maths problem solving type. This course relied heavily on the textbook by Bernheim and Winston. EC2102 Macroeconomics I: Taught by: Dr Serene Tan This course introduces macroeconomics by building on micro-foundations. The first half thus covers the consumers’ utility maximisation problem, and builds on it by introducing the firm and government. It is essential to know differentiation (to calculate first and second order conditions) and to be clear about what each condition means. The second half of the course explores the Keynesian/Neoclassical debate over differing policy prescriptions. It

includes the AD/AS, IS-LM model, real business cycle (RBC) model. This second half involves less calculation but it is important to be able to describe the transmission mechanisms of policies. EC2303 Foundations for Econometrics: Taught by: Dr Zhou Lingzhi This course is essentially a statistics course and covered topics such as discrete and continuous probability distributions, confidence interval estimation, and hypothesis testing (one and two-sided). Many concepts would have been taught in junior college mathematics, and the questions set are not difficult but require familiarisation with the different concepts. EC3101 Microeconomics II: Taught by: Dr Serene Tan

The first half of the course was a revision of EC2101’s basic concepts, such as indifference curves. The 2nd half introduced new topics, such as game theory and adverse selection. The new topics are isolated and not really built upon previous chapters. The level of difficulty is comparable to that of EC2101, and the maths involved are the usual optimisations and manipulations as in her EC2102. The questions set were similar to EC 2102, that is, mainly open-ended questions.

EC3102 Macroeconomics II: Taught by: Dr Aamir Rafique Hashmi

This course made use of the same textbook as that of Dr Serene Tan’s EC2102 course. Accordingly, the content follows a very similar style to EC2102, with a comparable

difficulty level. After covering the different macro domestic economy model, he went on to teach about different types of open economies and their monetary policies. Exam-wise, his questions are short questions that do not require elaboration (unlike those in EC 2102). Try not to elaborate too much as you may run out of time doing his papers.

EC3303 Econometrics I: This course continues from EC 2303, and covers concepts such as dummy variables, linear regression, multiple regression and the use of these concepts on hypothesis testing. While it is not difficult understanding the concepts, the application of these concepts to answering questions may require some effort. The course also introduced the use of statistics software. EC3381 Urban Economics This module explores more interesting

topics like transport, urban rejuvenation and development. The economics element clearly comes through with formulas and graphs pertaining to these topics making it both fun and intensive. The project is a crucial part of this module due to its huge percentage. In order to ace the project, there is the minimum requirement of numerous case studies (6-8) with statistics pertaining to the topic. This module is extremely heavy going (compared to the other economics modules) so do not expect a light workload. EC3332 Money & Banking

This module is mathematical in nature. However, one can ace this module through practice. The concepts are clear and easy to understand as long as one dutifully goes through not only tutorial questions but other questions in the textbook. Otherwise, the concepts will seem incomprehensible.

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Through the Lens of Vacation Internships

Many of us study economics as we believe it is practical and has real life applications. Indeed, some students took their learning experience to another level as they spent the summer break applying what they have learnt in school and gaining new forms of knowledge by doing internships and embarking on their first foray into the working world. Internships allow us to gain experience and practical skills for future careers, as many students we interviewed would testify. To find out more about internships, we gathered a range of economics majors who had interned in both the private and public sector to find out their perspectives on the various industries. We also found out some the differences between the private and public sector from one student who had worked in both a government agency and a bank. Find out more from these students as they share their experiences and dish out important information on internships:

DAWN LEE @ CAPITALAND

1. Where did you do your internship?

I did my internship at Capitaland’s Economics Research Unit. CapitaLand is one of Asia’s largest real estate companies with core businesses in real estate, hospitality and real estate financial services focuses in cities in Asia Pacific and Europe.

2. How did you source for your internship?

I sourced for my internship by first looking for contacts of relevant HR personnel. Then, I emailed my CV to them together with a short (but sweet) cover letter. The CV is a selection and screening process where you highlight things you have done that have greatest synergies with the companies’ interests. From opinion I have

gathered, a CV should fit into just a page. To me, the cover letter is comparatively less important, just like ribbon on a box. But of course, it always is good to choose a nice ribbon. As I was on exchange during the period, mine was a phone interview at midnight to accommodate the time difference. Like preparation of the CV, it is important to be prepared and candid. What I thought I could have done better was to provide more verbal cues that I was going to speak next. There were instances in the interview where both my interviewer and I spoke at the same time.

3. What was your job scope?

My job scope was to come up with various dashboards. One dashboard, for example, was to provide leading indications an economy’s direction. I had to select indicators, then devise a system which alerted readers to changes in outlooks for each economy. Skills in MS Excel, Bloomberg and CEIC are a plus!

4. How was your experience as an intern?

It was fulfilling – the dashboard was something I came up with and I felt it made a difference to the purposes of the company. My colleagues were patient and gave me a lot of guidance. It was a remarkably meaningful and educational learning experience.

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5. What did you gain from your internship?

On the technical front, let’s just admit my proficiency in MS Excel was basic. The initial days of my internship were marked by extreme googling. Google is my new best friend. As long as you have Google, there’s nothing you can’t do.

In terms of soft skills, I learnt how to communicate better. I also observed the need for sensitivity in day to day conversation.

6. Any other advice for students looking for internships?

If you are certain on the field you will be pursuing, do something related. If you not sure yet, look for an internship that is challenging. It helps you become more certain of your choices. In any case, expose yourself to more things. Just.... don’t do nothing about it!

HO KIM CHEONG @ MAS

1. Where did you do your internship?

Monetary Authority of Singapore, External Department

2. How did you source for your internship?

The internship was part of the prize for winning the Public Policy Challenge 2008. I had applied to MAS as I wanted to

understand in greater detail about the financial sector and how MAS, as the central bank of Singapore, has implemented policies to shape Singapore's financial sector and advanced Singapore's interest in the international financial arena.

3. What was your job scope?

My main role at the external department of MAS involved surveying the current state of financial regulationst rolled out in the UK, US and the EU, and this culminated in a presentation to senior MAS management on new strategic recommendations to advance Singapore’s interest in international financial forums. I also helped out in the preparation for a series of meetings leading up to the Asia Pacific Economic Cooperation (APEC) held in Nov 2009 in Singapore.

4. How was your experience as an intern?

Working in the External department in MAS was indeed challenging for me and my colleagues. With the financial crisis, regulations were constantly rolled out by different governments/ regions and it was difficult to understand their intended strategies. I was really fortunate to have my colleagues and mentor who were able to provide useful insights regarding this aspect, and it helped me a lot in the crafting of my presentation. The fact that there were also other interns interning in other department added colour to my internship experience as we often had lunch gatherings to talk about our experiences in the respective departments. I would consider those wonderful times interacting with the other interns as one of the highlights. This has also allowed me to understand MAS in a more well-rounded manner.

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5. What did you learn during your internship?

Though the department that I interned with does not involve economic forecasting and E- views or watching economic trends like inflation (those are in other departments, which are very popular with Economics students), being with the external department for three months allowed me to develop a deep relationship with my fellow colleagues and understand their enthusiasm towards the nature of their job - which is to deal with international financial cooperation. More importantly, it allowed me to understand my strengths and weakness; the nature of work I am interested in and whether I like to interact with people, or am just as comfortable with working on the computer throughout the day.

6. Any advice for students looking for internships?

An internship is not just another part time job meant to fill up a person's summer holidays, or to earn some extra money to go for the Great Singapore Sale (pardon the joke). Many students, including me, do not really have an idea on what kind of job they want in future. As such, the summer period would be one great way to experience the working world and know where their inclinations lie. Do not have any expectations as to what kind of work or treatment you expect to have during the internship, and embrace whatever you are being tasked to do. Being uncomfortable indicates that you are learning. Be proactive too and gain as much learning opportunities as possible. With that, your internship will be fulfilling.

BENNY YEO @ OCBC

1. Where did you do your internship?

I interned at OCBC at the Global Trade Finance (GTF) department under the

division of Global Transaction Banking. GTF deals with structuring and financing trade deals for companies involved with import and export of goods. Trade finance is a common office amongst banks and is gaining popularity with companies as it serves to improve their cashflow position.

2. How did you source for your internship?

I got this internship through a recommendation and a bit of luck. I applied for the internship quite late in semester 2 and the internship positions were almost filled. My opening was sort of a last minute request from my department. On hindsight, I would have been more mindful of the recruitment window.

3. What was your job scope? My department was involved with the whole cycle of financing trade, from the very start of sourcing for new clients for the bank to till the end of monitoring our trade products and improving their performances. I was more involved with the monitoring side and was often tasked to produce reports and analysis of our products. This involved a lot of number crunching and a great deal of excel skills. I was also often encouraged to create more efficient processes.

4. How was your experience as an intern?

Initially, I struggled a bit as sitting in front

of a desk crunching numbers the whole day

is not fun at all, in fact it was something I

dreaded the most. However, getting an

understanding of what I was doing and

how the reports that I generated were

going to be used helped me in getting

accustomed to my role. I often asked

questions to seek a good overview of my

department.

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5. What did you learn/gain from your internship?

As the nature of my department required sensitivity towards trade flows on the international scene, I often got the chance to be updated with news from different parts of the world and how the bank reacted to it. Apart from being exposed to the functions of the bank’s trade products, I became more equipped in analysis techniques and some IT skills.

6. Any advice for students looking for internships?

I did not really go through the whole process of interviews and test to get this internship but I got a few tips from some of the staff which might be helpful. Surprisingly, one comment that came right to my mind is to not be too prepared such that your interview turns out to be very rigid and technical. It will be very obvious to the interviewer right from the start and would be even uglier when the interviewer test you something out of the box that you

have not prepared. Try focusing more on the intangibles like our own attitude, principles and sharing of past experiences. This would make the interview more lively and pleasant.

TAN JIA YONG @ MOM

1. Where did you do your internship?

I did my 10 weeks internship at the Ministry of Manpower, Manpower Policy and Planning Division (Labour Market Analysis Unit).

2. How did you source for your internship?

Sourcing for my internship was not difficult, as I basically went through a list at NUS eJob Centre and applied for the ones I liked. Also, I also applied externally by going directly to the companies / ministries / statutory boards’ websites.

The difficult task at hand was that of updating my resume, highlighting my previous job experience, and removing outdated ones. A cover letter was also important to securing the internship, as this cover letter would let me reveal my intentions, my interests to my prospective supervisors and let them gauge if there are good matching of jobs.

Strangely enough, there was no interview process. The HR personnel called me one day and said that I was selected for the internship based on my resume and cover letter alone. Once in, I did asked my covering supervisor on this and the reason given that there were too many applicants and not enough time to interview them all, plus after years of experience, it was easy to tell just by the resume and cover letter alone if the applicant was a good fit for the job. I guess I just lucked out.

3. What was your job scope?

I was brought on as a project intern, doing the Labour Market Bulletin. Basically, I had to conceptualise a new Labour Market Information (LMI) product from scratch that would be differentiated from the other LMI products in the market like the statistical reports by MOM. This would be done by identifying potential manpower demand in specific industries and

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providing statistical records. After which, I had to come up with a product mock up.

4. How was your experience as an intern?

Overall, my internship positive has been quite positive. What I liked about this internship was that I get to participate in meetings and observe their operations. Also, I accompanied some of my colleagues to industry engagements, which was very enlightening as I gained insights on how various companies tried to cope with manpower shortages.

Aside from work, I went on various Department lunches and unit outings, which made for good team bonding and got to interact with my colleagues outside of work. How many of us can say that we went Sentosa to kayak during our internship period? Also, the large number of interns at MOM ensured that we were never short of company during the 10 week period.

5. What did you learn from your internship?

I learnt about the public sector structure and work environment from my colleagues and supervisors, which figured in my decision making process for my future career paths. I also gained skills for presentations and interacting with senior management.

6. Any advice for students looking for internships?

Go out and explore different sectors while you can, and do not be fixated on just one particular industry. Be sincere in your application, and make the effort to wow your future employers.

PRISCILLA TEO @ MOM &

NORINCHUKIN BANK

1. Where did you do your internship?

I interned at Ministry of Manpower (MOM) in the Corporate Communications Department (CCD). Previously, I did a short internship stint with Norinchukin Bank, a Japanese Bank that does trading for its headquarters in Japan.

2. How did you source for your internship/s?

I got both internships through the NUS ejob centre. Resume preparation started before my first internship and I edited my resume as I went along. There was no face to face interview for my MOM internship. It was a phone interview with my supervisor and questions that were touched on included my previous work experiences. For my internship at Norinchukin Bank, there was a face to face interview with two directors.

3. What were your job scopes?

At MOM, the project I was involved in was the National Productivity and Continuing Education Council (NPCEC). Apart from my involvement in this project, I was roped in to do admin briefs for the Minister, as well as media monitoring. Every morning, I would browse through the newspapers and

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look out for reports that are related to MOM. (Yes it's part of my job to read newspapers!) The paper that I was in charge of is Zaobao. And trust me, it was not that easy to read the Chinese characters initially, or even having to translate! I was also involved in online media monitoring, doing media analysis, making changes to the new MOM website, as well as assisting my colleague in the Singapore Workforce Branding project.

While I did not have much hands-on experience during my internship with Norinchukin Bank, it was understandable as I was mainly attached to the front office. In the morning, I would read up on the latest happenings in the market that took place the previous night. Later in the day, I would monitor the news also as any announcement by the central banks may result in movement in the market. Even though I was not involved in trading, I was in the trading room, experiencing the bustle. During my internship, I also wrote a report on the Euro market for the management. Other than my attachment to the trading office, I interned at the back office for a few weeks as well. My stint at Norinchukin Bank was designed as a learning project and it proved to be a very enriching internship for me.

4. What did you like or dislike about your internship experience?

I enjoyed both internships as they were very good learning experiences. I had very fun experiences in MOM, such as going on a photoshoot, which was a first for me! Occasionally, I followed my colleagues on recce trips and also attended events to staff the Minister.

Also, at Norinchukin Bank, being able to experience trading first hand was an exciting process. In addition, I was also brought on a short field trip to a brokerage firm. This certainly changed my viewpoint on brokers.

One aspect that I did not like was not the job itself, but rather that I had to wake up early everyday. I am not an early riser by nature for sure! But that's just part and parcel of working life. In addition, I would have liked to have gain more exposure to the other aspects of banking, such as corporate finance, as well as to other departments in MOM.

5. What did you learn from your internships?

From my internship at MOM, I learned the importance of being meticulous and that even the tiniest details cannot be overlooked. From doing an analysis of media coverage on Productivity, I observed the varied editorial stances of the different media. Previously, I would probably have just taken news articles at their face value and not bothered with any deeper analysis. During the internship, I assisted my colleagues in their work and this gave me an accurate gauge on how their work load is like.

I am very thankful that my supervisor at Norinchukin Bank took time to impart her knowledge to me despite being busy with trading activities. Being in the trading room allowed me to pick up the terminology along the way and the internship was a good learning opportunity out of the classroom. Economics is not simply just books and lecture notes, but also can be applicable in real life.

6. What is the difference between working in the public and private sector?

Working in the public sector impacts Singaporeans directly as any policy implemented will affect the target group. I believe it is a meaningful job to be contributing back to the society. In addition, I feel that the public sector takes care of the workers' welfare well. During my short internship, I noted that there were many activities organized for staff

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welfare, such as 'Eat With Your Family Day' and 'Ice-cream Day'. Also, there may be more checks and balances in the public sector.

On the other hand, working in the private sector may involve less bureaucracy as proposals in the public sector will go all the way up to higher management for approval. One can look at this from both sides of the coin: procedures in the public sector may highlight the importance of one's job while those in the private sector may provide greater ownership of one’s

job. I feel that if one is more profit-driven, depending on the career path, private sector may be the route to go.

7. Any advice for students looking for internships?

My general advice for students would just be to learn as much as you can from the internship and enjoy yourself in the process!

We hope you have learnt much from the sharing by our economics majors and that you may soon embark on your own journey of learning by engaging in meaningful and fulfilling internships during the next vacation break!

A SNAPSHOT OF NUS ECONOMICS ALUMNI EVENTS

To cater to diverse interests of approximately 1300 alumni members, the NUS Economics Alumni has held several workshops and social activities since its launch on 2nd Mar 2007 at the Cathay Preview Lounge. Highlights of some of our past activities are as follows

Though the economics department is now 75 years old, it was only three years ago that economics alumni

came together as a group to form the NUS Economics Alumni. Other than organising events for alumni to

network and gain knowledge, the NUS Economics Alumni also works with NUS Economics Society and the

Economics Department to contribute back to the current students.

“Today we are taking one step forward in helping the needy in our very midst in the launch of NUS

Economics Alumni bursaries. An anonymous donor has pledged $50K and many more have followed his

example. I hope that you will not only enjoy the fellowship and entertainment in our Alumni-organised

events, but also take the opportunity to give what you can in the donation form found in this magazine. This

is what economics is all about, that of helping each other in the society we are in, more so in the very

institution that has helped us, the students majoring in economics who are assessed as being needy by

NUS administrators. Our committee and the NUS development office and Registrar’s office will administer

the bursaries which hopefully can be awarded in the forthcoming academic year.”

-extracted from Dr Lee Soo Ann, Chairman, in foreword of Commemorative Magazine 2010

Wine Appreciation Night hosted by Solymer Asia (2007)

The event, held at Far East Square saw more than 20 members having an enjoyable time learning and

sampling a variety of Spanish wine.

Mooncake Festival Celebration with invited speakers Mr Yang Yew Chong, Chinese Studies Alumni and A/P Victor Savage, Department of Geography, NUS (2007)

Though the historical and cultural origins of the Moon-cake Festival and toponymics, the study of place names, did not have much in common, that did not stop the Economics, History and Chinese Studies Alumni from successfully organising a talk on both topics. Mr Yang Yew Chong began with a presentation on the history behind the Moon-cake Festival. After a short intermission where moon-cakes were served, A/P Victor Savage gave a talk on how some places in Singapore came to be named. Utilising his personal collection of old photos, A/P Savage riveted the audience with his engaging lesson on a lesser known aspect of Singapore's past.

"Sustaining Financial Peace of Mind - Lessons from the Endowment Approach" by Mr. Wee Sin Tho, Chief Strategist for the NUS Endowment Programme (2008)

A total of 25 Economics Alumni members had an engaging and informative session with Mr Wee at the Tan Chin Tuan Function Room at YMCA Orchard. Mr Wee highlighted the challenges and concerns regarding retirement, health costs and the costs of living.

Tea Session with graduating students with talk by Mr Tang Wee Lip, Vice-Chairman of the NUS Economics Alumni (2008)

About 30 graduating students gathered at the new FASS lounge for a refreshing talk by Mr. Tang who has had varied experiences in both the public and private sectors over four decades. He offered words of advice regarding career paths and also shared on the important questions to ask when embarking on a career.

A SNAPSHOT OF NUS ECONOMICS ALUMNI EVENTS

"Eloquence Essentials 2008", a workshop by the NUS Toastmaster's Club

3 speakers from the NUS Alumni Toastmasters Club conducted the session on the various techniques of speaking off-the-cuff and presenting speeches confidently. It was truly a “learning by doing” endeavour and Mr. Daniel Lo, a committee member and private banker emerged the “best speaker” for the night.

ENS Annual Career Talk & Golf Talk by Mr Lip Ooi, PGA Professional (2009)

NUS Economics Alumni collaborated with the NUS Economics Undergraduate Society (ENS) in organising a career talk for the students and also invited Mr Lip Ooi, a PGA Professional, to share on “The Economics of Golf”.

Second NUS Economics Alumni Annual Dinner (2009)

The NUS Economics Alumni held its second annual dinner at Goodwood Hill. As before, the event was very well attended with about 100 alumni and friends from the graduating class of 1950s to recent graduates from the Economics Department.

The guest of honour was Emeritus Professor Lim Chong Yah who gave us a historical journey of the Economics Department, including the role played by a large number of alumni from the department in the founding years of Singapore.

Prof Lim and Peter Law also showed us that age is no barrier to singing. Despite the rain and the prevailing global financial crisis, the ambience was good and spirit was high.

Book Talk by Mr Koh Kay Yew, co-editor of the book “The Fajar Generation – The University Socialist Club and the Politics of Postwar Malaya and Singapore" (2010)

Mr Koh was the secretary general and president of the University Socialist Club (USC) in 1964/5, and president of the University of Singapore

Economics Society in 1965/6. In the 1950s and 60s, the USC and its organ Fajar were a leading voice advocating the cause of the constitutional struggle for freedom and independence in peninsular Malaya and Singapore. The talk gave the younger alumni members a snapshot of the political atmosphere during that period as many were too young to remember such events, and they also never knew that NUS at one time was a hotbed of revolutionary activity!

A SNAPSHOT OF NUS ECONOMICS ALUMNI EVENTS

EVENTS

EVENTS

ENS meets NTU-ES, SMU-OIKOS & SIM-ES

by Jia Yong, 2 October, 2009

The first inter-tertiary meeting of the economics societies

On Friday, 2nd October, ENS met the economics societies of the other universities in Singapore. The ‘collaboration’ meeting was held at Tapas Wine Bistro at Holland V in the evening.

Games to break the ice were presented by each university and all participated with much gusto. Evelyn, the Talks & Seminars Head, even won one of the games!

NTU Economic Society was formed only last October. As they are still a young society, they do not carry out many large-scale events. They help in creating networking sessions for their undergraduates and in running an “Economics Awareness Week” every year. They were very keen to work with ENS in order to learn and improve their standing as a society.

Similarly, the SIM Economic Society also has been formed within the past two years. They were featured in the Business Times when they applied economic concepts in order to analyse their annual Amazing Race. SMU-OIKOS (the name for SMU’s economics society which stands for “home and family in Greek, representing the Society's vision of uniting the SMU Economics community and establishing a home away from home”) has been around for 6 years and they assist the students by providing welfare, linking between them and the management, holding academic talks and by hosting an annual dinner.

ENS, as you may very well know, has been there for 47 years. The name originally stood for Economics & Statistics Society until the society decided to dedicate itself for economics students. We have 7 sub-commitees and we hold major-scale events such as an annual Bazaar, NEFMQ and a Dinner & Dance.

All in all, it was a good meeting. There definitely is a potential for collaboration in the future. NUS ENS would like to thank Yizhen & Zhenni from NTU & SIM respectively for organizing this event.

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Outstanding Budding Economists Honoured in MTI Economics Dialogue

reported by Wei Yong, 19 October, 2009

The annual Ministry of Trade and Industry (MTI) Economics Dialogue was inaugurated last year through a major collaboration with National University of Singapore (NUS) to recognize top economics students from local universities and for students and economists to engage in discussion on pertinent economic issues. This year, it was held in Singapore Management University on the 13th of October 2009.

“It is an exciting time to study Economics, and to be an Economist,” declared Mr Lim Hng Kiang, Minister of Trade and Industry, the Guest of Honour for the MTI Economic Dialogue during his keynote speech themed “Economics and Public Policy in Singapore”. Despite the blame on economists for the world’s most severe

economic contraction since the Second World War, he explained that "economists have provided us with frameworks and behavioural insights that have enriched our understanding of the world" and that "the recent recession should sweep away some old dogmas [and] give rise to new, fresh insights."

After the keynote address, Mr Lim presented the MTI Economist Service Prizes to outstanding local economics undergraduates. The MTI Best Thesis Prizes were awarded to Mr Harvey Cheong from SMU; Ms Han Yi from the NUS; and Mr Chiam Yee Hong, Ms Zhou Yuan and Mr Yos Virin from Nanyang Technological University (NTU). Three other students won the MTI Book Prize: Mr Joel Ng from SMU,

Mr. Lim Hng Kian,

Minister of Trade and

Industry, gave his

speech on the topic

“Economics and

Public Policy in

Singapore”.

“It is an

exciting

time to

study

Economics,

and to be

an

Economist”

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Ms Christabelle Soh Ning En from NTU, and Mr Zhuang Kai Quan from NUS. Each prize came with a $2,000 cash prize sponsored by MTI

The NUS recipient of the MTI Book Prize, Mr Zhuang Kai Quan, is now in his final year of pursuing his Double degree in Economics and Engineering in NUS. He was spurred to study economics because it is a great tool to understand human behaviour.

The MTI Best Thesis winner from NUS, Ms Han Yi, on the other hand is currently undergoing training at National Institute of Education. When asked about her thesis on the Advanced-Life Delayed Annuity (ALDA) and the CPF Lifelong Income Scheme (CPF LIFE), she explained, “The thesis was written against the backdrop that Singaporeans are living longer and many face the risk of outliving their retirement savings. Life

annuities provide protection against such a risk. Using Singapore mortality and interest rates, my study shows that ALDA, being an innovative type of life annuity, is better than traditional life annuities in a number of ways. CPF LIFE is found to be very similar to ALDA, though with more restrictions. So I proposed a private market for ALDA alongside CPF LIFE.”

Following the awards presentation ceremony, the dialogue session opened with Mr Keith Tan, Director of the MTI Economics and Strategy Division, as the moderator, and panelists: Asst Prof Choy Keen Meng from NTU Division of Economics; Prof Hoon Hian Teck from SMU School of Economics; Mr Mathew Welch, the Managing Director and Head of Financial Institutions (Asia) from ING Wholesale Banking; Mr Yeoh Lam Keong, the Vice-President of the Economic Society of Singapore; and Dr Yip Chun Seng, the Deputy Director of the Strategic Resource Section, MTI Department of Statistics.

Among the main issues discussed were Singapore’s role in dealing with climate change; the major challenges facing the Copenhagen talks later this year; measures that propelled recovery of countries from the global financial

crisis; and the system of “grotesquely overpaid” banking executives.

The MTI Economics Dialogue concluded with a dinner and networking session during which students chatted with friendly MTI officers and discovered more about what public sector economists do.

Mr. Zhuang Kai

Quan, NUS winner

of the MTI

Economist Service

award

The panelists engrossed

in discussion.

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ENS Mooncake Festival by Humair Bin Md Omer, 9 Oct 2009

The Mid-Autumn festival is an annual event and is organised by the Sports N Social (SNS) sub-committee of ENS. This year it was held on 9th October at Lover’s Park behind Central Library under the guiding influence of SNS head Howie Lee. The moon-cakes were brought voluntarily by the members. The traditional candles in colourful paper lanterns were lit across the railings of the central library lift. The event kick started with the ‘Guess who’ game. Cartoon stickers of animals, heroes etc were pasted at the back of each person. We had to guess what stickers we had on our back by asking for clues from others. This game was used as an ice-breaker session where everyone got to know each other. The second game was loads of fun. It was named the ‘Treasure Hunt’. Paper lanterns were first lit to guide the adventurers (us) in our exciting excursions. The bold warriors then started to look for their first check-post with only an obscure riddle as a sign in their hand. I took the road with the lion-hearted hunters of the Advertising and Marketing (ANM) subcommittee.

We first crossed a dark, narrow path that led us to a dead end. We turned back with our strength and faith intact. After traversing hundreds of acres of grassland filled with hidden dangers and blood-sucking insects we finally reached the Arts canteen, our first landmark where a lady of extraordinary beauty was waiting with plates of mooncake in front of her.

Our task was to find out what type of mooncake each one was with only the

aid of the sensory nerves at the tip of our tongues. Mooncake veterans within our group were summoned and their years of experience were put to a severe test as they rummaged from one mooncake into the next. Finally, they were able to fully elucidate the different types of cakes which only meant we had our next riddle to tackle and destination to find. The second station was deep in the jungles of the lover’s park. I would certainly admit that the game here was the strangest and the most bizarre of its kind. Our group was segmented into two- possibly a master plan to create enmity among us! We were given chocolate sticks which we had to put in our mouth but were not allowed to eat them! A test of our will power? Not even that. Rubber bands were then to be hung and we had to pass it on with the sticks in our mouth. Err.... the boys certainly had a good time here! A really dry joke followed from the head of the check-post (not her fault! She was only speaking what she was reading).

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With our next clue in hand, we marched onto our next post where the instructor asked us several quizzes which we handled comfortably. The last station was where we needed to showcase our inborn talent in acting. We had to guess words by acting. Interestingly, although at first it appeared tough, almost all the guesses turned out to be correct. With the last destination fulfilled, we ran over to the main spot at the Lover’s spot only to find ourselves at the 3rd position! Pictures, prize distributions of mouth-watering, heart-rending mooncakes and a fabulous display of fireworks, initiated by me, followed. When asked for Lee’s comment on the event, he replied with a broad smile

“It’s an annual celebration which helps to build bonds under a full moon”. The VP of ENS, Mr Joshua Tan was also very enthusiastic in answering all the enquiries. On the question of why the mid-autumn festival was held so late, he said that the time of the festival clashed with the midterm tests and projects. Also, he joked that since we are economists we try to maximize utility and hence it is smarter to buy the moon-cakes when the price falls a week later after the festival. He commented, “I think the mooncake festival is a great opportunity for Econs majors to bond together”. It was a truly fun-filled event and one that deserves to be held every year!

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ENS Chalet - Fun, Food & Laughter!

by Howie Lee

To kick start the new decade, S&S proudly organised the annual ENS chalet for all members of ENS. Held at NSRCC, Tanah Merah, this event brought people from different sub-committees together and saw a high turnout of 40 people for the BBQ on the first night. Many people chose to stay over to have fun by playing board games, mahjong, and cards. The forfeits involved brought about much delirious laughter! This was a time when many lasting friendships were formed and this inter-committee interaction provided an avenue for people to feel a larger stake in their membership in ENS.

ENS Chalet 2010 was a success and S&S is sure that this event will be the bedrock for continued cooperation among members of ENS for the rest of the academic year. Most importantly, we hoped that everyone enjoyed themselves and found buddies and lecture-mates through this chalet.

One little devil . One gunner . One thinker . One cool . One huh?!

One ENS

Mah Jong and FOOD

(:

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Chinese New Year Celebration! by Howie Lee, 11 February 2010

In the spirit of the Chinese New Year tradition, the NUS Economics Society organized a steamboat dinner at Chinatown. This brought people across the myriad subcommittees together and fostered bonds among members.

The turn-out was so good; it exceeded the S&S Subcommittee expectations for 40 members. Were people turned away? Of course, not. After all, the more the merrier! We eventually squeezed and had a delightful time of hearty food and conversation.

To sum up what happened, in the words of Howie, the Head of the Sports

and Social (S&S) Subcommittee, "We cooked, we ate, we chatted, and we wished one another prosperity and good health."

CNY Steamboat

The whole bunch of us, the people of ENS.

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Meetings with the Alumni - The BBQ and Lunch 11 Dec 2009, 9 Jan 2010

The ENS committee met up with our alumni during a barbecue on 11 December 2009 at an alumni’s (Wei Ning – a previous ENS President) condominium and a New Year Lunch on 9th January 2010 in NUS.

So how did these collaborations with the alumni come about? Kim Leng, the current ENS president answers:

Ever since the beginning of ENS-Alumni relationships a year plus ago, we have had several meet-ups and collaborations, and a few more major events/projects in the pipeline that will cater to undergraduates. As we recognise each other’s complementary role in achieving more together under a common identity, we see that there is definitely a lot of potential to do what we could not do before in the years to come. It is especially heartening that our Alumni have been forthcoming and altruistic in contributing back to the current Economics undergraduates, which is a privilege we take seriously. Hence, during my term the Executive Committee of ENS always kept alumni relations one of our top priorities.

Ever ready to engage us, our Alumni invited the current ENS committee to their events, one of which was the BBQ that traditionally would have been attended by only their own Alumni members. In addition, we had a New Year meeting cum lunch with the Alumni committee on a separate occasion to lay down the roadmap for the future of ENS-Alumni collaborations.

So what exactly was good from these meetings?

As the Alumni BBQ was open to their members, we had the opportunity to meet with several non-committee alumni besides the alumni committee. The New Year lunch saw a greater number of committee people from both sides turning up. For both events, there were about 10 people from ENS committee.

At first, the ENS committee thought that the first meeting (the BBQ) would be a formal and restrictive event, but that was not true at all! It was just a meal. The alumni were also very friendly. Through such formal and informal events, both sides were able to put faces to names, which would facilitate future collaborations.

Of course, our side had the additional advantage of being able to network with working adults and learn about how they deal with all the hassles that come with adulthood and independence. It is through such events that, in the process of socializing, we also laid down the groundwork for the future.

Any concluding thoughts?

Well...there is nothing much to lose but much to gain.

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Investing Now! Report 12 March 2010

The talk titled "Investing Now: Making Sense of Common Investment Products", proudly organized by the NUS Economics Society, conducted by the Investment Management Association of Singapore and supported by MoneySENSE, took place on the 12th March 2010 from 6.30pm to 8pm. The talk was conducted at lecture theatre 14 of the Faculty of Arts and Social Sciences at NUS, attracting 130 students from various faculties, including Business, Computing, Engineering, Arts and Social Sciences, Law, Medicine, Science, Design and Environment, and even the Lee Kuan Yew School of Public Policy.

The students who attended the talk gained much insight from the speaker Mr Dennis Siew. Mr Dennis Siew has 14 years of experience in the investment industry. He was a Managing Director at Temasek Holdings from 1998 to 2006 in the area of private equity and funds investments and oversaw Temasek's investments in Telco, Media and Technology sectors. He currently heads the funds management of a Financial Institution in Singapore, and is a member of the Investment

Management Association of Singapore. Mr Siew holds a Master's Degree in Computer Science and Engineering from the University of Michigan, and a First Class Honours Bachelor Degree in Electrical Engineering from the University of Adelaide. He also holds a CFA qualification.

With his many years of experience in the investment industry, Mr Siew gave his audience an extremely insightful and informative talk on a wide range of investment products. His talk covered topics from stocks and bonds to other retail investment products. He also spoke in detail about the basics of investing, such as deciding on an appropriate asset allocation and considering the risks and transaction costs of one's intended investments.

At the end of the 2 hour talk, Mr Siew was eager to answer any doubts or queries raised by the audience. After each question was raised, Mr Siew shared his understanding of the issues raised by giving examples and engaging

Mr. Dennis Siew giving

his speech on investment

Interested audience focusing their

attention on Mr. Dennis Siew.

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his audience constantly. A number of students in the audience posed several questions for Mr Siew, of which he replied to patiently and conscientiously. When the question and answer session came to an end, the emcee thanked Mr Siew for his delightful talk with a round of applause from the audience.

Even after the talk came to a closure, a few members of the audience had questions which they wanted to ask Mr Siew personally. Of course, Mr Siew did not deny them a chance to have their questions raised and answered. He stayed back in the lecture theatre to patiently answer what the students asked. I am sure these students benefited significantly from the talk and Mr Siew's kind advice.

The smooth running of this talk would not have been possible without the support of MoneySENSE. The organizing committee from the NUS

Economics Society National Economics and Finance Management Quiz (NEFMQ) 2010 also contributed to the planning of "Investing Now". NEFMQ 2010 would like to extend our appreciation to the speaker as well as the Investment Management Association of Singapore and MoneySENSE for their invaluable help.

Mr. Dennis Siew answers students’

queries after the talk.

The organizing committee from the NUS Economics Society –

National Economics & Finance Management Quiz (NEFMQ) 2010

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The Inaugural MOF Budget Quiz 12 March 2010

The Finals of the Ministry of Finance (MOF) Budget Quiz was held on 12 March 2010 at the Supreme Court Auditorium. Here we have the Vice Head of the Talks and Seminar Subcommittee, Priscilla Teo’s answers to questions on the Quiz.

First things first - what is the MOF Budget Quiz?

The MOF Budget Quiz is an inaugural event held by MOF in collaboration with NUS Economics Society. It is an outreach programme to the public, specifically to promote greater awareness of the Budget and public financing issues among youths in Singapore. Questions for the Budget Quiz Challenge comprised of Economics questions (80%) and questions pertaining to Budget and Public Financing issues (20%). The economics questions covered topics across micro-economics and macro-economics, with a heavier emphasis on the latter.

Tell us about the participation and reception by schools?

Each school was allowed to register up to two teams of three members (capped at 16 teams per category).There were a total of 16 teams in the junior college/polytechnic category and 13 teams in the university category. No supporters were allowed for the prelims. However, for the finals, each school was allowed a maximum of 40 supporters. In particular, Dunman High School (JC) and Anglo-Chinese Junior College had the most supporters during the finals.

What was the competition format?

There were two categories: (1) junior colleges/polytechnic and (2) university. The preliminary rounds were held separately from the finals. Briefly put, in the preliminaries, there was a 20-min MCQ session, a non-elimination flash round, and an elimination flash round.

Participants thinking hard during the preliminary rounds.

The top four teams proceeded to the finals, in which there were the Speed Round, the Step Round and the Team Round.

So what were the results?

Rank Junior

College (JC) /Polytechnic

University

Champion Raffles

Institution (JC)

National University of

Singapore (Team 2)

1st

Runner-Up

Dunman High School

Singapore Management

University

2nd

Runner-Up

Anglo-Chinese JC

Nanyang Technological

University

3rd Runner-Up

River Valley High School

National University of

Singapore (Team 1)

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Team NUS 2 won the university category

Team Raffles won the Junior College/Polytechnic category

As the organizer, what feedback have you received?

The feedback for the event has been positive. The targeted audience found the quiz to be challenging and it was a good opportunity to apply what they have studied in school, as well as to learn out of the classroom setting.

Any concluding thoughts?

The quiz might have been even more relevant, should there be more questions pertaining to the Singapore Budget 2010. On the other hand, this would mean a narrower scope of questions. All in all, the MOF Budget Quiz 2010 was a successful event held by MOF, in collaboration with NUS Economics Society, Talks and Seminars Subcommittee.

Online news releases (Ctrl+click): NUS, RI win MOF budget quiz - The

Straits Times, Mar 12, 2010 Video of the MOF Budget Quiz Finals

- RazorTV, Mar 12, 2010 Video from the MOF Budget Quiz

Preliminary Round: They could run the Country, - Razor TV, 1 February 2010

Budget Quiz Committee 2010

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Economics Alumni Dinner:

The People, The Lessons, & The Future

By Yap Kim Leng

The Economics Society (undergraduate)

was honoured to be invited to attend the

Economics Alumni Dinner on 22nd May at

Pyramid Club. It was a gathering, in fact

the gathering, that brought the alumni

across generations back for a night of well-

deserved catching up and knowing new

people – something simple that tends to be

neglected in daily lives, yet so crucial in

keeping souls rejuvenated and minds fresh.

The night was also made more enjoyable by

the sumptuous buffet food, the tranquility

of the club and the magician who went

round tables to entertain guests.

So, for an undergraduate like me, was it

just another ceremonial dinner that I had

to attend? Certainly not. For one, I had the

privilege of working closely with our

alumni for the past two years, so it was a

day of catching up and knowing new

people as well. More importantly, I saw the

commitment of the alumni in reaching out

and contributing back to their roots once

again. In the opening speech by Dr Lee Soo

Ann, he talked about the bursary fund

seeded and initiated by the alumni, as well

as the mentorship programme for

economics undergraduates. Though these

ideas were brought up casually before, it

was heartening to know of them being

carried out.

For some undergraduates from low income

families that have been struggling

financially, it would free up time and

energy to focus on the present and future

planning, rather than be caught up in

meeting ends. It represents the chance to

have a more level playing ground. And for

most undergraduates, being in a very

systematic academic system had the

backlash of not knowing how to deal with

the complexities of life and making choices

under ambiguous conditions, be it dealing

with setbacks or how to find the drive that

keeps you going. Thus, guidance and

sharing from the mentorship programme

Left:

NUS

Economics

Society

Right:

Dr. Lee

Soo Ann’s

Opening

speech

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would help. And as with the bursary, the

impact will carry on after graduation. For

the mentors, they would also be glad to

find that there are many out there who are

curious and hungry to listen to their

experiences and advices. Hence, the alumni

can help to complement the school

administration which focuses primarily on

academic areas, and ultimately take a stake

in lifting the NUS Economics community

to greater heights through each

individual’s contribution. Some of the

alumni have taken on the unpleasant yet

necessary job of organising these, while all

it takes for the rest is just to overcome the

initial doubts and join in the ride. I cannot

tell you what form these efforts would take

eventually as I am no prophet, but it does

promise to be an engaging and fulfilling

process for the alumni who take part in

this pioneering journey.

From what I had witnessed of the

interactions during the dinner, we are not a

collection of isolated individuals but a

community whereby we identify ourselves

with and find solace and support. It was a

night worth remembering – the people, the

lessons, and the future to look forward to.

Yap Kim Leng,

President of NUS

Economics Society

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Shipwreck! Freshmen Orientation Camp When: 12th July to 14th July 2010 Where: NUS Campus, Sentosa, Orchard Road Who: 12 organizers, 18 OGLs & Councillors, 48 Freshmen Months of thorough planning finally produced fruit when our Econs Camp 2010 - "Shipwreck", actualised. 4 Orientation Groups decked in red, green, blue, and yellow came together to play fun and engaging games that will not be explained here due to fear of provoking the wrath of the pirates. (You should’ve come. Too bad you missed it. If you came, YAY!) There was torrential cheering from the campus to the seaside. Lots of bonds formed their first strings at this place too. The highlight of the camp was at Sentosa, where everyone had fun enjoying the sea breeze and playing games stationed by the sea. When the last day at Sentosa came, many were reluctant to leave and waddled in the sea until dusk. It was heartening and satisfying for the organizing committee to witness the formation of wonderful camaraderie although the camp may have ended – for this year. ;)

One big shipwreck family

Above: Passing ping pong ball

Below: Epic forfeit!

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National Economics and Finance Management

Quiz (NEFMQ) 2010 News Report

By Joel Tan Hsien Yong

31 July 2010

“And with the judges’

decision, the winner is

Hwa Chong Institution!”

announced the emcee.

The supporters of Hwa Chong Institution

exclaimed with joy. What a great day it was

for them as they emerged as the victors of

the prestigious National Economics and

Finance Management Quiz (NEFMQ) 2010.

A total of 345 students and 115 teams from

almost 20 institutions that consists of

Junior Colleges, Polytechnics, the

Integrated Programme and the

International Baccalaureate attended the

NEFMQ 2010 Finals that was held on 31st

July 2010 at the NUS University Cultural

Centre. Dunman High did well too, by

finishing second and performing better

than they did last year. The other two

finalists were River Valley High School,

which made it to the finals for the first

time this year, and Victoria Junior College.

The Senior Minister of State for Ministry of

Law and Home Affairs, Associate Professor

Ho Peng Kee graced NEFMQ 2010 with his

Top 4 teams with A/P Chia and A/P Tan

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presence as the Guest of Honour on the

day of the Final Round. Joining him in the

audience were Deputy Head of the NUS

Economics Department, Associate

Professor Chia Ngee Choon, Vice-Dean for

Office of Student Affairs, Associate

Professor Tan Ern Ser and Advisor to NUS

Economics Society, Associate Professor

Anthony Chin.

Our Guest of Honour, Associate Professor

Ho Peng Kee gave a speech in which he

emphasized the importance of economics

as well as financial management in a

student’s life and the reasons we must

always be aware of these topics.

Associate Professor Chia also gave a

resounding speech on what economics is

about and why it is important in our daily

lives – even for students. Her speech was

exceptionally engaging as she used many

examples to bring across her message to

the students.

This year, various changes were

implemented on NEFMQ in tandem with

its 20th anniversary. NEFMQ 2010 was

rebuilt as an elimination round concept

with a presentation round for the final 2

teams was brought in. The preliminary

rounds grading system was also revamped

to include 40% from the online mini

quizzes and 20% from online blog posting,

through which students gave their

explanations and evaluations in response

to questions. To commemorate NEFMQ’s

20th anniversary, a unique past-20-years

video was screened during one of the

audience rounds to share the history and

development of the quiz with the

participants.

The planning of NEFMQ 2010 began since

SMS A/P Ho Peng Kee giving his speech

A/P Chia Ngee Choon giving her speech

Participants focused at work

Top 4 Teams In The Team Round

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September 2009 while the quiz was

launched in May 2010. We, the organising

committee members were proud to have

successfully organized the quiz after

months of hard work and preparation. The

quiz was likewise challenging for the

participants, who had to go through a

gruelling competition as they fought

against other teams in the online mini

quizzes and blog posts, the buzzer and

flash rounds, team round, and the final

presentation round.

We were proud to have Mrs Tan Say Tin

from the Ministry of Education, Mr Tang

Wee Lip from the NUS Economics Alumni

and Mr Paul See from the Association of

Financial Advisers as our judges for the

presentation rounds. We were also

privileged to receive the support from the

NUS Economics department and the NUS

Office of Corporate Relations for this

event. This event was supported by

MoneySENSE for the third year running, E1

Technologies, the Public Utilities Board,

EmitAsia and Gardenia bread.

Although NEFMQ 2010 has come to an

end, its spirit will live on and we look

forward to an equally, if not more exciting,

NEFMQ 2011 – the 21st anniversary when

NEFMQ will officially turn into an adult!

NEFMQ 2010

Organising

Committee, L-R:

Elgiva Lin – Exco

Representative,

Khaw Kaimin –

Emcee, Teo Shih

Wan – Treasurer,

Jamie Fan – Liaison

Head, Foo Xian Yun -

Vice-Director,

Eugene Goh -

Logistics Head,

Tiffany Foo –

Questions Setting

Head, Le Phuoc Duy

– Publicity Head,

Joel Tan – Director,

Eugene Loh – Game

Master

L-R: A/P Anthony

Chin - ENS Adviser,

Joel Tan - Event

Director, Joshua Tan

– ENS Vice-President,

Guest of Honour –

SMS A/P Ho Peng

Kee, Yap Kim Leng –

ENS President, A/P

Chia Ngee Choon -

Deputy Head of NUS

Economics

Department, A/P Tan

Ern Ser - Vice-Dean,

Office of Student

Affairs

The NUS Economics Society Dinner and Dance

2010 was held at the Peninsula Excelsior Hotel

on Saturday, 19 June. Current students, old

classmates and professors made time for one

another, and together, devoted a fruitful

evening to forging new friendships and

deepening old ones. The lighthearted

atmosphere that filled the ballroom

throughout the evening was the result of a

thoughtfully planned programme. The entire

committee has been preparing for this event

for months since last year.

Relentless effort from all

committees can be shown

where some even had

sleepless nights for the final

preparation for the event!

On that night, guests chat

amongst themselves amidst

the cheery courses designed

specifically for the Singaporean palate, the

VIPs, Professor Sun Yeneng and ENS president,

Mr. Yap Kim Leng went up to the podium

respectively to deliver their speeches.

Professor Sun looked around solemnly, and

the crowd fell silent respectfully. He spoke at

length of the proud history of NUS Economics

Department, and the differences between

past and present, and also of the future. He

commended on the laudable efforts of NUS

Economics Alumni, and how all the

efforts by the undergraduates, graduates,

department and the alumni will all contribute

towards building the NUS Economics identity.

He received a round of applause when he

finished. So did Mr. Yap Kim Leng, as he spoke

words that touched the hearts of Economics

undergraduates, graduates and alumni alike.

The programme gradually built up with Mr.

John Khoo, a self-made singer and composer,

started belting out smooth ballads after

smooth ballads, along with his

co-performer, Mr. Jon Ang.

The guests, charmed by their

angelic voices, sat spellbound

song after song. Both of them

also cooperatively belted out

another song after gotten a

special song dedication from

the audience. Later, we have

invigorating break dance

performance by Recognized Studios. Everyone

in the ballroom was captivated by the

energetic 10 minutes dance performance. We

also have an enthralling magic show by Ms.

Priscilla Khong, a magician born into a legacy

of magic. Dressed in a shiny outfit that

befitted her twinkling smile, she was the

centre of of the adoring crowd, playfully

attention leading the mood of the participants.

We also have interactive games for example

Collector’s Nest where each table was given a

unique list of items to collect. The guests

laughed and snorted at what they had to do

as the Emcees for the night enthusiastically

explained the rules. Some tables had to

collect things like cufflinks and

fedora hats, while others had to

collect a kiss and bring an

alumnus along to the stage,

where the Emcees will check

that they had indeed collected

their specified items. In return,

only the top 3 that were fast

enough to collect all the items

were awarded a hamper full of

goodie sand!

On that night, we also have our

very own titled contest, “Divo

Diva”. The friendly sabotage of

arrowed couples on stage soon

tickled the roaring (and

merciless) crowd. A few were shy, and needed

encouragement and cajoling from their

partners and the Emcees. By popular voting

through the loudest applause received, the

favorites of the night would have to go to the

King of Hearts, Mr. Joshua Tan, and his Queen,

the Queen of Hearts, Ms. Dawn Lee. Second

runner-up would be the King of Ace, Mr. Yap

Kim Leng, and likewise the Queen of Ace, Ms

Serena. The chosen couples beamed at the

camera, wearing their tiaras and sashes

respectively. And especially for those who

became proud owners of brand new iPod,

hard disc and mini loud speaker from the

lucky draw, the dinner ended on an even

higher note.

It was a glorious night with everyone enjoying

themselves, professors and alumni engaging

with students, friends hugged and lingered to

chat.

There were cameras flashing the whole time

during this event as students taking photos

with friends for remembrance. It will be a

night many will remember fondly, and cherish,

years down the road when their hair has

turned white and memories grow long.

Nonetheless, there are three

things which make this year’s

Dinner and Dance particularly

successful. First is the artfully

designed atmosphere. The

lighthearted mood facilitated

interaction between the

professors, alumni and students.

Second is the insightful

arrangement for key members

of staff and the society to be

consistently on stage. Amidst

the evening of fun, students’

awareness of leading personnel

in their own faculty was raised.

Potentially and hopefully,

students with ideas know the

right people to approach. Third, and most

importantly, is the dedication and efforts of

the planning committee. The resourceful

securing of sponsorship and meticulous

preparations, amongst an endless list of

efforts, ensured the success of the night. The

NUS Economics Society Dinner and Dance

2010 was, unmistakably, a satisfying and

spectacular success.

http://www.facebook.com/photo.php?pid=4307898&id=501384541

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The Global Economic Crisis: The story so far and what’s to come by Wang Xin-Min 30 June 2010

The global economic and financial crisis that hit the world beginning with the subprime mortgage crisis in the United States is considered to be the worst crisis since the Great Depression. While concerted efforts by policymakers around the world have steered the world economy away from another depression, the crisis has reshaped the global landscape as both developed and emerging economies undergo structural changes. Despite green shoots in the economy as global growth begins to pick up, governments need to stay focused in steering as many challenges lie ahead for the global economy.

Causes of the crisis

To attempt to chart the future course of the global economy, it is necessary to first look at how it arrived at its current condition. While many have pointed fingers at greedy bankers and lax financial regulation, the crisis was also largely a result of trade imbalances in the world economy, with developing economies (especially China) accumulating large current account surpluses and most developed economies (including the United States and Europe) racking up large current account deficits. To finance such deficits, developed economies borrowed from emerging ones, leading

to low interest rates. This resulted in strong credit and consumption growth and correspondingly, low savings rates in developed economies.

In addition, a complex interdependence between developed and developing countries was thus formed, as developing countries financed the consumption of developed ones, which in turn purchased goods produced by developing countries. The historian Niall Ferguson termed this relationship as “Chimerica”, a reference to the symbiotic relationship between China and America which exemplifies the interdependence of developed and developing economies.

How the crisis played out

Short term Responses to the Crisis

Learning from the lessons of the Great Depression, policymakers around the world rushed to prop up the global economy using fiscal and monetary injections. Central banks slashed interest rates to zero, in an attempt to and pump liquidity through their anaemic monetary systems. The Federal Reserve Bank of America, for instance, implemented a Troubled

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Asset Relief Programme (TARP), which involved the purchase of toxic assets from the nation's financial institutions to promote financial stability.

On the fiscal side, both rich and developing economies rolled out large stimulus programmes to infuse cash into their economies: America introduced the American Recovery and Reinvestment Act of 2009, which included $787 billion of government expenditure, while China pumped in 4 trillion Yuan into its economy, which was directed mainly to investment in infrastructure and social welfare.

Leading the way out

As policymakers around the world directed their fire hoses to putting out the flames of the crisis through the coordinated fiscal stimulus and government actions to ensure liquidity in the monetary system, which proved crucial in averting a deeper disaster, the global economy began to see green shoots of recovery, led by Asia’s emerging economies. Developed economies also showed signs of rebound, with an improvement in world trade and an increase in investor confidence. Beyond the immediate aftermath of the financial storm however, it seems that the old economic order has broken down, and countries are now entering a brave new economic world, with the decline of old players and the rise of new ones.

Global outlook

1. Global rebalancing of the global

economy

The financial crisis has revealed the urgent need for both global financial reform and a rebalancing of the global economy. Rich nations, now faced with

low savings rates, high unemployment and high levels of household debt, can no longer continue with their borrowing and spending binges and would have to reduce consumption and spending. Furthermore, governments would probably exercise greater fiscal prudence and impose higher taxes. These factors would hamper growth in the developed world.

Given the “Chimerica” relationship between developed and developing economies, lower growth in developed nations would no doubt impact developing ones. As rich nations must now focus on reducing their budget and trade deficits, they can no longer import as many goods from developing nations as before. This means that in emerging economies (especially Asia), there would be a gradual shift away from an export-led model towards domestic consumption as a source of growth. In addition, Asian economies, especially China, are also restructuring their economies towards higher value-added activities and investing in infrastructure. As part of the global rebalancing process, Asian currencies will also probably appreciate against the currencies of major economies, particularly the US Dollar.

2. Rise of emerging economies

That said, emerging economies have proved remarkably resilient through the crisis. Despite a predictable fall in exports, emerging economies rebounded quickly and were even the ones that led the global recovery. Looking forward, they would probably continue experiencing relatively strong growth; indeed, emerging economies are expected to account for more than half of the world’s GDP growth over the

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next decade. Emerging economies are certainly flexing their economic might, as China has overtaken Germany as the world’s largest exporter, and is forecast to overtake America as the world’s largest economy. The crisis has thus accelerated such underlying trends, which have fuelled expectations that emerging economies are likely to displace the G7 as the world’s largest economies over the next decade. Indeed, such a scenario is likely as many factors favour the rapid growth of emerging economies, such as a large pool of savings, favourable demographics (both as consumers and workers), and a large potential for greater productivity drives.

3. Greater macroeconomic

uncertainty and volatility

In the new global environment, the global economy would be subject to greater uncertainty and volatility. New vulnerabilities have been created by the size and type of policies implemented during the crisis. For instance, governments implemented fiscal policies on an unprecedentedly large scale, while some monetary, fiscal, regulatory changes that were put in place, such as the TARP and new banking regulations, are new. It is thus not clear what side effects such policies would have on the global economy.

4. Uneven recovery and coordination

Furthermore, developing and developed economies are likely to continue experiencing different rates of recovery due to the differing natures of their economies. They also face different economic situations, and are thus likely to take different, even

contrasting, demand and supply management policies. In the rich world

As the global recession was triggered by a financial crisis that disrupted the financial system’s channelling of savings into investment, recovery is expected to be slow and weak in the rich world, where the financial crisis was largely confined to.

Developed economies also currently face large public debts, which are set to rise due to the injection of large fiscal stimulus. Indeed, the United States’ fiscal policy has been described as “gas now, brake later”, that is, increasing government expenditure in the short run to prevent the economy from falling into depression, followed by reducing the national debt in the long run. The problem, however, is that while it is easy to accelerate by stepping on the monetary and fiscal gas-pedal, it is difficult, even painful, to slam on the brakes when the economy runs out of fuel.

Furthermore, the rich world cannot easily resolve their problems due to the contradictory nature of solutions required. On one hand, developed economies need to practise greater fiscal prudence to reduce their mounting debts, which involves

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lowering public expenditure and raising taxes. On the other hand, with growing unemployment and decreased consumer spending, governments have to raise expenditure to maintain GDP growth. In addition, given the high unemployment and excess capacity in developed economies, deflation seems to be a dominant threat. Should there be prolonged stagnation in employment and income growth, a vicious downward deflationary spiral may develop, leading to many other “lost years”, as consumers remain tight-fisted and are unwilling to spend. That said, governments must also guard against inflation if there is a strong recovery. Governments themselves may also be tempted to use higher inflation to reduce the fiscal deficits and debt accumulated during the crisis. With the threat of both deflation and inflation, governments must thus be skilful drivers: they need to step on the gas pedal to prevent their economies from sliding downhill, while applying the brakes to prevent them from going over the hill.

On emerging markets

Emerging economies on the other hand, are set to experience rapid growth and face a set of different problems. With strong growth, inflation, rather than deflation, seems to be the dominant risk. As their economies are now operating at full potential output, some fear they are growing at an unsustainable rate. They thus risk overheating their economies, leading to inflation and asset bubbles. To cool their economies, emerging economies need to tighten monetary and fiscal policies and employ flexible exchange rates. This is especially

crucial in Asia, as fears of asset bubbles, especially housing, have surfaced.

Challenges ahead

Growth or Inflation?

While it is clear that it is crucial to sustain the global recovery and spur greater growth, policymakers are in a bind as to how to do so. During the crisis, central banks implemented loose monetary policies while governments injected huge amounts of cash into the economy to avert a second Great Depression. However, with the global economy now picking up, there needs to be a delicate balance between encouraging growth and guarding against inflation. The timing of policies is thus essential as premature tightening of policy may cause a double dip recession (where the economy falls back into a recession after a short period of initial recovery), or even deflation (as Japan experienced when it attempted to balance its budget by reducing government spending too early) while too lax a monetary policy may cause inflation.

Europe’s financial crisis

Furthermore, barely after the global economy has navigated its way through the choppy seas of the global financial and economic crisis, another financial storm is now brewing in the Eurozone area over fears of possible debt defaults by Greece and other Eastern European countries. Currently, European policymakers have cobbled together a “stabilisation fund” of around €500 billion to allay fears of a halt to foreign financing for indebted countries. However, it is uncertain whether this is sufficient to prevent yet another financial crisis. Given the current

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fragile state of the global economy, further strains could potentially cause its collapse. Moreover, with the uncertain future of the euro (many economists are already predicting its death), there would be greater macroeconomic volatility and uncertainty.

Coordination from all sides

The level of international coordination during the breakout of the crisis should indeed be lauded. In the post-crisis situation, greater international cooperation is just as important to ensure financial-sector stability and restore public confidence. Furthermore, global growth needs to be rebalanced, through strong recovery of international trade.

However, this is easier said than done as collaboration will become more difficult in future. First, there exist differences on when macroeconomic policies should be tightened; if some countries tighten too soon, this could slow the global recovery. Second, policy solutions for rich nations may be detrimental to developing ones. Developed nations should gradually tighten fiscal policy before allowing a period of low interest rates. However, this will encourage a greater capital flow to emerging economies (with higher interest rates), thus increasing

their risk of overheating. Even in developed nations, poor coordination of policies may pose a threat to global recovery. For instance, if the Euro appreciates before the US Dollar does, this could affect exports from the US. Third, as rising economies jostle for power with existing powerhouses (especially between China and America), exchanges on international economic affairs may be heated. For instance, America’s frequent calls for China to allow its exchange rate to appreciate have led to outcries in China.

Long term policies

The global economic and financial crisis has unveiled the deep structural problems in the global economy. With globalisation, the fortunes of both developed and developing nations are now inextricably tied to each other, and both have important roles to play in ensuring sustainable global growth. Developed economies need to undergo structural reforms by introducing supply-side measures that increase potential output and export competitiveness, such as introducing financial reforms to strengthen credit and capital markets (which support consumption and investment), labour market reforms to enable workers to switch to higher-value added activities and measures to boost productivity (such as education and training). Developing economies need to improve credit access, strengthen their social safety nets and allow their exchange rates to appreciate.

Conclusion

The global economy has weathered the financial storm relatively well, having averted a second Great Depression

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through coordinated international action and sound economic policies. However, the stimulus packages and policies introduced during the crisis cannot simply be a Band-Aid over deeper problems. Instead, developed and developing economies need to address the underlying structural problems in the global economy through sustainable long-term innovations and suitable reforms. Policymakers need to switch from fire-fighting mode to that of rebuilding damaged houses. While much uncertainty lies ahead with the rapid changes in the global landscape, there exist many opportunities to lay the foundations of a more balanced and stable financial and economic global system, thus ensuring sustainable global economic growth.

References:

The Economist. “A Stick Gas-pedal.” May 27th 2010

The Economist. “A Special Report on America’s Economy: Time to Rebalance.” Mar 31st 2010.

International Monetary Fund. “World Economic Outlook (WEO): Rebalancing Growth.” April 2010.

The New York Times. “A Surge in Trade in Some Countries, but Others Lag.” May 14 2010.

Congressional Research Service. “The U.S Financial Crisis: The Global Dimension with implications for U.S Policy”

Eswar Prasad. “The World Economy is Recovering.”

Photo Credits

Finalcall.com

The Form of Money

2012Predictions.net

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Eco-Nomics - The Economics of Climate Change by Wang Xin-Min

ENS Publications Discussion Forum 2, AY 2009-10 Date of discussion: 8 October 2009

From fashionistas toting “I am not a plastic bag” bags to politicians debating on environmental policies, it is clear that the green wave has swept over the globe and many feel that something should be done to combat climate change. With rising sea levels and a spike in natural disasters, there is a global consensus that it is imperative to take action against climate change. Yet, while there is agreement that something should be done, there is heated debate over what should be done. As economists, we can use economic concepts to analyse and evaluate the problem of climate change and propose policies to combat this problem.

Why is climate change an economic problem?

The essential problem of climate change is that too much carbon and greenhouse gases are being emitted into the atmosphere, thus raising world temperatures and leading to a host of other problems. For economists, climate change is a classic problem of market failure, as the negative externalities of pollution and the emission of carbon (such as poor health and potential natural disasters) are not borne by individuals and firms. While consumers receive the full private benefit of driving their cars and firms receive the full benefit of producing products that emit pollutants, in the process of doing so, they do not bear the full social costs of the increased pollution. This is because they have no economic incentive to act in ways that minimise pollution.

What should we do?

Economists have devised policies to solve the problem of climate change. The aims of economic policies to combat climate change are straightforward: they should create incentives for future good behaviour (such as developing clean technology) and punish bad behaviour (such as over-polluting or over-consuming) by enabling consumers and producers to realise and bear the full costs of their actions. That is, policies should discourage harmful behaviour by raising the cost of doing so. Policies

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should send clear messages to the public about the likely costs and benefits of climate change control. In current economic debate, two key policies stand as the most effective curbs on pollution by firms: the cap and trade system and carbon taxes.

Cap and Trade

In a Cap and Trade system, a governing body (usually the government) “caps” emissions of pollutants and then lets firms “trade” permits that allow them to pollute within those limits. In a global context, countries set a limit on how much carbon dioxide firms can emit and then allocate permits to them. The permits are bought and sold in an open market. The economic rationale behind this system is that greenhouse gases and carbon are scarce.

This system has received support from government, businesses and environmentalists. This is because they set firm limits on actual emissions, thus enabling governments to control and determine the level of emissions. In addition, the flexibility of carbon markets enables businesses to figure out the cheapest way to reduce overall emissions. The concept of Cap and Trade is not mere academic theory, as some nations have already implemented such a system. For instance, under the Kyoto Protocol, targets are set for nations to reduce greenhouse gas (GHG) emissions. This is achieved through three mechanisms: emissions trading (similar to Cap and Trade), Clean Development Mechanism (CDM) and Joint Implementation (JI). The emissions trading system has been implemented by the European Union,

which has embarked on an Emission Trading System (EU ETS), the largest multi-national, emissions trading scheme in the world. Under this

scheme, firms may trade allowances directly with each other, or may buy or sell via a broker, bank or other allowance market intermediary.

The United States maintains a rather successful cap-and-trade market in sulphur dioxide permits. In 1990, the government enacted laws requiring emissions to be reduced to 8.95 million tons by 2010, down from 17.5 million tons in 1980. To date, emissions are down to about 10.5 million tons annually. The estimated annual cost of the reductions will be about $3 billion, while the annual benefits (lower mortality, improved visibility and a cleaner environment) will exceed $100 billion.

However, not all economists favour the Cap and Trade system. For instance, some have criticised the initial failure of the EU’s carbon trading market. Initially, allowances to emit CO2 traded for around 10 Euros per ton. A year later, the price for allowances had risen to 30 Euros per ton. At that price, the market was hailed as a success, as

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higher prices would be an incentive for companies to cut their emissions.

However, it was later found that several EU governments had issued permits for 66 million tons more CO2 than was actually being emitted.

Soon, an allowance to emit a ton of CO2 was selling for less than a euro. This shows the potential pitfalls of Cap and Trade, as it is not easy to estimate the optimum level of emissions.

A global carbon market?

Nevertheless, many of supported the idea of a global carbon market, where countries would trade permits across international borders. However, even the creators of concept of Cap and Trade have raised doubts on the feasibility of the system. One of them, economist John Dales, pointed that carbon emissions are a “global problem with myriad sources.” Cap-and-trade, however, is better suited for “discrete, local pollution problems,” and it is not clear how a permit system could be enforced internationally as there are no institutions that have that power. Furthermore, there is debate over the contributions of developed (DCs) versus that of less developed countries (LDCs). While DCs argue that LDCs should reduce their emissions, LDCs counter that since DCs had first emitted pollutions, and that a certain amount of pollution is needed for economic growth. Limiting big polluters in some countries but not in

others will diminish the impact of caps as firms may relocate existing and new production of CO2-emitting industries to countries with no limits. This is known as carbon leakage, and may lead to trade anarchy.

Carbon Taxes

An alternative to the cap and trade system is the levying of carbon taxes. Carbon taxes serve two functions. First, they punish bad behaviour by making polluters bear the full costs of their actions. Second, they reward environmentally friendly practices, thus encouraging a shift toward such practices. Elementary economics tells us that any negative externalities should be taxed to align private incentives with social costs and benefits and to serve as a disincentive to future bad behaviour. Thus, if the government imposed a tax on carbon-based products, firms would have an incentive to shift their production away from pollution and the emission of carbon (which are negative externalities) should be taxed. Furthermore, firms and consumers would have an incentive to shift their production and consumption toward environmentally-friendly practices. Advocates of carbon taxes include economists such as Greg Mankiw, Gary Becker and Alan Greenspan. They have argued that carbon taxes raise large revenues which governments can use to reduce other unpopular and more distorting taxes, or finance spending programs. However, carbon taxes have never been used internationally, that they are politically difficult to establish because consumers and businesses dislike taxes,

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and that they do not establish an actual firm limit on emissions.

Cap and Trade versus Carbon Taxes

While both cap and trade and carbon taxes aim to reduce harmful emissions, a carbon tax avoids the process of allocating allowances to countries internationally and among companies domestically. Carbon markets are susceptible to corruption, especially in LDCs, where legal frameworks are not well established. Even in DCs, politics may get in the way of good policy as big businesses and special interest groups may lobby to obtain a larger carbon credit. A carbon tax, on the other hand, offers less opportunity for corruption because it does not create artificial scarcities and monopolies. On the other hand, cap and trade allows governments to control the quantity of emissions produced, thus providing certainty. Some have suggested auctioning carbon permits. This solves the problem of how to allocate carbon credits as firms bid for the price they are willing to pay to pollute, thus reflecting the price that firms place on pollution. However, this is a relatively new idea, and has not been widely implemented yet. For now, it is unclear which is a better system, though there is a slight preference among economists for the use of carbon taxes. Nevertheless, regardless of which policy is implemented, the details of the policy, such as its costs and benefits, valuation of costs, social and political considerations and the nature of the industry, must be carefully examined.

Table: Comparison between cap-and-trade and

carbon taxes

DCs and LDCs

The economics of climate change also involves understanding the tradeoffs, such as that between growth and environmental conservation. While some may criticise the reluctance of LDCs to commit to reduce their emissions, LDCs indeed require a certain level of pollution to achieve growth. In developmental models, the first stage of growth is usually industrial in nature. This means LDCs typically engage in heavy manufacturing, which tends to raise the level of pollution. Kyoto Protocol recognises this, as it places a heavier burden on developed nations under the principle of “common but differentiated responsibilities.” According to the Environmental Kuznets curve (EKC), as countries develop they generate large amounts of

Issue Cap-and-Trade

Carbon Taxes

Control on emis-sions

Sets a firm limit on emissions

No firm limit on emissions

Poli-tical

Possible to establish

Politically difficult to establish

Applica-tion evi-dence

EU ETS, US market in sulphur dioxide permits

Lacking

Corrup-tion

Susceptible to corruption

Less susceptible to corruption

Alloca-tion

Businesses and special interest groups can lobby for larger carbon credit. When excess permits are issued, the market fails.

Avoids process of allocating allowances to countries internationally or among companies domestically.

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pollution, but this shrinks as they approach economic maturity. It is thus in the global interest for DCs to aid the environmental development of LDCs by imparting technological know-how. It is also crucial for LDCs to establish the rule of law and reliable legal frameworks to enforce strict environmental standards.

Singapore and Climate Change

In recognition of the importance of building a sustainable environment, the Singapore government has set aside S$17 million to test and develop talent and to identify products and services for the renewable energy sector. Under the support of the Clean Energy Research and Testbedding (CERT), the government is seeking providers and proposals for test sites. In Singapore, S$350 million worth of public funding has been committed to green technology, from solar power, fuel cells, and wind power. The Clean Energy industry is expected to create S$1.7 billion in value-add and 7,000 jobs by 2015. The Urban Redevelopment Authority of Singapore has also drawn a Sustainable Blueprint, which contains the strategies and initiatives for Singapore to achieve both economic growth and a good living environment over the next two decades.

Climate change in the future

In the future, the green sector looks set to grow, as more workers are employed in jobs in the green sector. It is estimated that the global market for environmental technologies will grow to some

US$700 billion by 2010. Perhaps economists would also devise more accurate ways of measuring the costs and benefits of policies on climate change, and invent innovative solutions to reduce pollution without compromising growth. The fight against climate change would not be an easy one and requires a concerted effort on all levels, from government to business to individuals.

Economists’ role

As with all other economic problems, economists have formed and advocated normative economic policies to mitigate the effects of climate change, which have generated great debate. In

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future, economic analysis should hopefully yield new estimates of mitigation benefits and improve our understanding of costs in the presence of various market distortions. It should also create better tools for making policy choices under uncertain conditions, and alternate mechanisms for good environmental policy. A better understanding of the economics of climate change would greatly enhance the formulation and implementation of innovative climate change policies at domestic and international levels.

Conclusion

The effects of climate change will have far reaching impacts on our lives, and there is no doubt that it is an uphill task to resolve this global issue. While there are no clear answers to the best means of mitigating the effects of climate change, it is nevertheless a positive sign that people around the world recognise the severity of the climate change problem. Indeed, many countries have pledged to join the fight against global warming by reducing their greenhouse emissions and adopting environmentally friendly policies, including China, one of the world’s largest emitters of greenhouse gases.

On the micro level, firms and consumers have also rallied toward recognising the importance of building a sustainable environment for our future. Firms have adopted cleaner technology while consumers have displayed greater environmental awareness and activism, such as by switching to more fuel efficient cars.

Governments have recognised the importance of building a sustainable

blueprint for the future. International agreements such as the Kyoto Protocol also show the urgent need for global cooperation. It is hoped that the United Nations Climate Change conference in Copenhagen this December would lead to a new international agreement on climate change, as the Kyoto Protocol expires in 2012. Will our actions today translate into a cleaner and greener future? Perhaps only posterity can tell. Nevertheless, it is crucial to take action now to create a better environment for ourselves and our future generations.

References:

The Kyoto Protocol on the UN FCCC website Emission Trading System (EU ETS), Cap & Trade's Unlikely Critics: Its Creators Sustainable Blueprint

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The Economics of Happiness

by Suhas Bhat

ENS Publications Discussion Forum 1, AY 2009-10 Date of discussion: 16 September 2009

What does happiness mean to most people? Can we measure happiness? Does increasing income help you obtain more happiness? Why are rich countries relatively less happy than poor countries? Is it wrong to rate governments that focus on (and succeed in fostering) economic growth highly? Is it possible that governments compromise their economic potential and still make their citizens happier?

Happiness is a mesmerizing concept. We all would like to have as much of it as possible yet we are always left with the sensation that we do not really have enough of it. We plan out our lives and spend considerable amounts of energy in ensuring that we have more of it in the future but what exactly do we mean when we use the word ‘happiness’ and is possible to have a cardinal system such that we can know for certain the exact value of the incremental changes of this quantity as caused by the actions that we take?

How do we measure happiness?

Homo economicus knows what makes him happy. He calls it utility (which is not exactly the same thing as there are things that would increase happiness but not utility as utility only depends on that which can be consumed) and he knows his preferences over goods such that a certain good would make him happier than another good. But homo sapiens, on the other hand, has a hard time being just as confident.

We have used many techniques such as surveys, neurological methods of measurement (imagine a doctor tickling you and then checking if any part of your brain lights up!), bio-chemical measurements (serotonin is well-known as a mood elevating drug as Dan Piraro points out) and many, many other ways. But the general perception is that we cannot rely upon these crude, subjective methods for two reasons – firstly, the particular chemical/neurological indicator of happiness may be correlated with happiness but it may not necessarily be the same thing and secondly, we really cannot know for certain if the subjects themselves truly understand or realize what happiness is or whether the subjects are likely to be influenced by outside factors (such as whether it was a Monday when the survey was answered) i.e. the subject is consciously or unconsciously biased.

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But these arguments are fallacious (or at least not as debilitating as they seem) even if they may seem compelling enough to convince you that measuring one’s happiness is futile. If you think of something such as optometry, for example, you will find that the same problems exist there yet we have no problem trusting an optometrist with prescribing the right lens strength for one’s eyes. The optometrist isn’t sure if you understand how the eye works and what eyesight really means as well as he does and neither can he completely be sure that you are being honest to him when you tell him that you can see the alphabets clearly but by asking the right questions and by doing exhaustive tests, he can pretty much be sure that you will not walk out of his store and bump into a glass door every other minute. And while he may not be able to prescribe glasses that are exactly the right strength such that your vision is completely corrected, the approximation is so close that you don’t really notice the difference.

So if you are convinced that it is possible to measure happiness, you would naturally ask whether it is possible to define happiness such that we can begin this ambitious quest of figuring out people’s happiness levels.

We discussed many different definitions in our discussion forum and associated many factors with happiness – health, income, family, friends, goals, love were the most common. It may be impossible to list out all the different factors possible (and it varies from person to person as you may not be happy reading this article as much as I may be) but it is safe to assume that there exist a select few that most people would concur as being important to ensure any one person’s happiness.

Money is not the be-all or end-all as much as rational theory would like us to believe (to be fair, they only see it as being positively correlated but it is true that there seems to be an unnecessarily high importance placed on one’s purchasing power). But it is nevertheless very important as it is very closely related to most of the other factors (one’s health may be a function of one’s income and, quite possibly, one’s friends as well).

So it is theoretically possible to have a “happiness function” that would measure happiness much in the same way that utility functions measure utility. But it would probably be far too complex for an average person to grasp or mathematically formulate.

Reassuringly, there indeed do exist many indexes that try to define happiness in a particular way by associating weights to the factors they consider important and thus helping us rate people and countries’ level of happiness. The Satisfaction with Life Index is a prominent example and according to it (in 2006), Denmark ranked first and Singapore 53rd, the United States 23rd, Lithuania 155th and Malaysia 17th.

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Why is it important to measure happiness?

It may seem like a trivial question and one might think that there is no real necessity to find out happiness but from a philosophical point of view, measuring happiness is of significance in many different fields, applications, theories, policies and in one’s very own life. Ultimately, one of the important goals of knowledge itself is to advance this metaphysical quantity. Public policymakers try to increase the happiness of society itself, economists try to utilise resources effectively so as to increase it to the largest extent possible, scientists try to study and understand the world such that it is better manageable and utilised for our own wants and needs. So in this way, finding out a way to measure happiness really helps in figuring out the yardstick such that we know for certain if all our efforts and pursuits are actually taking us in the right direction and are thus worth the while. And that quote, "the pursuit of happiness", isn't just a movie either. It is one of the most famous lines in history and outlines exactly what humans should be entitled to inspiring generations of leaders and decision-makers.

A fundamental and narrow focus that might help illuminate this vague, bombastic declaration would be to check whether economic growth, with all the positive connotations and the high esteem that most individuals place on it, is really helping improve the lives of the people who are supposed to benefit from it. So what we are basically asking is whether we, as citizens of the world, are becoming too economistic (a type of thinking that places economic assumptions above all other forms of

rationale). Is the rat race, the run after ever-increasing amounts of money worth it? Do governments that increase the wealth in the country make their citizens happier than other governments that don’t?

The obvious answer is that of course money matters. And it is obviously true that having more money gives one access to whole new levels of happiness. But we are blinded by the allure of this artificial paper creation and we forget to consider the alternative – it may be possible to actually make people more happier in other ways aside from giving money. An extra hundred dollars may make you much more happier but there are some things that money can’t buy and, unfortunately, there is no MasterCard for them either. Governments can actually make their people happier, goes this radical notion, by using the same amount of money that is invested in creating economic growth and reinvesting in the other non-monetary aspects of happiness that we discussed earlier. You can never truly buy happiness but you can buy things that help you achieve it but oftentimes, we ignore the things that don’t need to be bought at all such as an adequate amount of time in one’s day for spending with one’s family.

Singapore used to have a 6-day week in the past but the government, in a bold and, in my opinion, wise move, decided to shift to a 5-day week paradigm. If you try to do a rough calculation of the value of that that one day per week per year that would have been lost, the cost to the country would be in millions. This conservative estimate reveals how this country lost much economic value but surely you cannot imagine that you

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would be willing to forfeit half your weekend and all that quality leisure time for whatever figure that results. You should consider yourself lucky because in many other countries, the government actually does think that losing almost a day’s worth of leisure time is worth it because of the economic value that is created for the country. [Note: There are arguments, though, that 6th day was abandoned not really for increasing people’s leisure but instead to increase the probability of births such that Singapore’s future labour force isn’t compromised. Ultimately, the government is still thinking in economic terms and not in a people-friendly fashion]

I personally would believe that the Singaporean government has done a better job increasing the general happiness level for the country by abandoning that 6th day of work than other countries and so it is of interest to find out if there are other similar paradoxes present where governments actually serve their citizens better by not obsessing over economic indicators and other statistics but by actually thinking on a holistic level and concentrating on those very aspects that makes people’s lives better. The former King of Bhutan, in 1972, called for countries to be rated by a Gross National Happiness index such that countries that truly succeed in improving the quality of life within the country be celebrated as ideal examples instead of those with GDP growth rates exceeding 10%.

This is not to say that economic growth and efforts to increase income should not be abandoned altogether, however. They are definitely important but neither are they the perfect means and

too many people assume that they are. The reason why increasing income may not necessarily increase one’s quality of life is because of an important psychological observation that I will just nickname as the ‘treadmill effect’. It is not increased income that matters but instead relative income. This means that if your income increases but so does your neighbour’s (such that you have to keep with the Joneses all the time) then you really don’t feel that much better off as one would assume you would. You are just running in order to stay in the same place.

Similarly, increased income brings with it a host of new obstacles to happiness as well. This is something that most people are far too familiar with. If you get a new car, you suddenly have maintenance, driving, fuel and a host of other costs to deal with. So the richer you are, the more you feel like you have your hands full. So increasing income may not necessarily make you happier. It may do so when you are very poor but after a certain point, increasing income does not make you happier or does so at a decreasing rate.

But let’s take this hypothesis to the next level and empirically analyse it. Can it be established that increasing income cannot make people happier once they reach a certain threshold? There is an economist by the name of Richard Easterlin who did analyse this claim in 1974 and argued that it really did. He had data to back this assertion and demonstrated that richer countries were actually getting unhappier (or it did not affect their happiness level) as their income increased as compared to poorer countries.

The Easterlin Paradox

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The Easterlin paradox really kick-started the field known as happiness economics. Positive psychology (the psychological study of why the mind gets influenced positively) also had a spurt in this era and so there was quite a bit of research and study.

If the Easterlin paradox is true, it makes one wonder if governments should just focus on economic growth. Up to a point it does definitely make sense but as the increases in happiness associated with increases in income are modest, it is thus economically inefficient to aim for economic growth! This is such a stark departure from rational economic theory that it may make you think twice about what your books say.

But it is important to not forget that not everyone is on the same economic level and so while you may have reached the point where increases in income may not make you much better off there exist many that still are far off from where you are. And so increasing the economic pie, even if a few people feel gorged and nause, may be worth it and thus this is a normative and subjective topic that each person can

only answer for themselves.

This brings to mind Maslow’s hierarchy of needs which stated that humans need to fulfil several different levels of needs in order to be satisfied. They range from the basic (food, safety) to the more sophisticated (self-actualization, intellectual progress). And so, in this vein, economic growth may be a blunt instrument but it may be the only way to ensure that the country as a whole climbs up this pyramid.

But recent analysis has claimed that the Easterlin paradox does not hold and that the data that Dr. Easterlin analyzed was erroneous. They corrected it and stated that the results from the data stay consistent with the standard economic claim that money matters. Money isn’t necessarily the root of all evil and so let’s not make a big a deal of it all, thank you very much.

The new findings are still quite new, however, and even if they were valid, I am sure that although much of what Easterlin and other psychologists and economists predicted and found out may sound surprising to you, you may somehow be finding yourself agreeing to it. It may not necessarily be the whole truth but it sounds so intriguing that it almost becomes plausible. I do think there must be some substance to all the research and documentation. I personally think that this is not the end of the story and there lie many more interesting results out there waiting to be discovered altering our perceptions of the very basic fabric of economic reality.

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For now, however, the Easterlin paradox may be safely assumed to be ambiguous but it sure makes for an interesting conversation topic and a reason to demonstrate to others the fascinating insights that economics has to offer!

Conclusion

So what do you think? Do you think that it is worth it to work as hard you do in order to earn that extra buck? Are countries that do well economically lauded a little too needlessly? Can governments really do better by refocusing some investment into non-monetary aspects of happiness? Are richer countries not as happy as poor countries or, if they are, then are they becoming more unhappy by the day? Can happiness be measured? Much of my personal opinions are just my own and so they do not necessarily have to be the final word on the matter.

Many of these questions may also not really have an answer. But they are important questions and so while we, as economists, go out there prescribing solutions and learning theories, you should remember that there exist other branches out there that concern themselves with studying the economics of happiness. Economics is the study of scarcity, indeed, but perhaps we are not really making the best use of our scarce resources after all and there might be better ways out there. And perhaps, developed countries like Singapore, Denmark should not pay so much attention to the economic growth and concentrate instead on non-monetary improvements (like more free time, longer holidays and so on), that might

help its citizens get even higher in the pyramid.

Recommended related articles :

The CPI and the Rat Race by Paul Krugman, The Science of Happiness by Daniel Gilbert, Does Economic Growth Improve the Human Lot?

Some Empirical Evidence by Richard Easterlin Reassessing the Easterlin Paradox by the Justin

Wolfers (a blogger on the Freakonomics blog)

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Laksa or Nasi Biryani: how do we decide? by Aidas Masiliunas

ENS Publications Discussion Forum 3, AY 2009-10 Date of discussion: 15 October 2009

What associations come to your mind once you hear the term “economics”? Money supply?

Fiscal policy? Cobb-Douglas utility function? What about mee goreng or cheese prata? No? Actually, economic theory can be applied to a great deal of situations, even though one might not see any connection at first. And so we set out to find a topic where not only the theory of economics could be applied, but which would also be relevant to our readers. And with all the variety of foods in Singapore, the answer was obvious – can economics help us understand how students choose foods in a canteen? And so, equipped with the results of the survey and the some knowledge of microeconomics, consumer behaviour and behavioural economics from all the NUS courses, we tried to create a model that would clarify the seemingly simple process that most of you experience at least once every day. Decision-making Process

A standard model of consumer decision

making indicates a five step process that a

buyer goes through when making a choice:

first she recognizes a problem or a need

(e.g. “My workplace is on the other side of

Singapore and I have to get there every

day, so I need some kind of transport”),

then searches for information (asks friends,

looks up internet, catalogues etc..),

evaluates alternatives (public transport,

leasing a car, buying a car, Toyota or

BMW..), makes the decision (“Hummer!”)

and finally experiences some post-purchase

consequences (“maybe I didn’t really need

a Hummer in Singapore as it’s such a gas

guzzler, next time I’ll buy Toyota ”). Let’s

check whether all of these steps are

relevant to the students making their

decisions in the canteens:

Need recognition

Hunger is a basic need, and not much

thought is put while trying to recognize it –

NUS Prince George Park Canteen

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usually the stomach announces about that

in advance. Even though there might be

some secondary needs that could

sometimes push students into a canteen

(e.g. one might be full, but decides to eat

again in order to speak with his friends,

meeting social needs), we concluded that

they are largely irrelevant. Furthermore,

the process might start without even

recognizing the need - a student might

note that it is already quite late and decide

to eat, even if he does not feel hungry. As a

result, this step becomes very

straightforward and irrelevant for the

decision itself.

Information search

There are two ways that buyers can obtain

information: by internal or external search.

Knowing that decisions on food are done

very frequently, and most of the

alternatives are already known, we believe

that internal search would be the primary

source of information. That is, students

would remember their own experience and

buy accordingly. A more interesting

question is what role is played by the

external search. Even though one rarely

collects information just before making the

decision, many collect it at other times -

when they do not even feel the need of

hunger. The best example is informal

sources of information (mainly friends),

who might advise on some good stalls and

foods that are worth trying.

However, we came up with a conclusion

that external sources do not play a

significant role – students are more likely

to rely on their own judgment and

experience than on the advice of their

friends. Indeed, about half of the

respondents in our survey claimed that

they chose their preferred stalls based on

their own experience, whereas the other

half received some kind of external

information (friends or strangers) as well.

This finding came as a small surprise to us

– most of the students (more than 80%)

usually or always eat together with their

friends, and we believe that they surely

share their experiences once in a while.

Knowing a great variety of foods in NUS, it

is impossible for one to test all of the foods,

so we believed that external information

would be more relied on in order to make

the selection process faster. It seems that

NUS students are less influenced by their

environment, or at least they say they are

not.

Evaluation of alternatives

Having obtained information, individuals

have to come up with a set of stalls and

foods that they could choose. Let's first

speak about the concept that is known as

an “evoked set” – that is all the items that a

consumer ends up choosing from. This set

is not equal to the total number of stalls in

a canteen simply because it would be

impossible for anyone to evaluate all of the

items when making a decision. Survey

reveals that most of the respondents (80%)

shortlist all the possible choices into a set

of 1-4 items, while almost half of them

choose from only 1-2 stalls. That shows that

most of the stalls are rejected before the

decision.

Having come up with the list of

alternatives, individuals have to find the

one that would maximize their utility. To

do that students have to know what are

they expecting from an item; that is, they

have to know the criteria that will be used

to compare the items from the evoked set.

In the survey, we provided respondents

with a list of possible criteria and asked to

indicate the importance of each of them.

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The top 5 most important criteria, based on the average importance assigned by all the respondents, are: (1) taste of the food, (2) price, (3) length of the queue, (4) how hungry people are, and (5) mood.

The first observation that we might make is

that NUS students behave in a rather

rational way. The most important factors

are taste and price, which remain constant

for a given meal. Economists would

conclude that the utility function of the

agents is rather stable, and optimal choices

should stay the same every day. However,

we can see that situational factors are

important as well – like hunger, length of

the queue or mood, and all of them may

fluctuate substantially making it hard to

predict the choice that consumers will

make. Presence of these factors does not

show that consumers are irrational, just

that they adjust their actions according to

the changes in the environment.

The theory of consumer behaviour

indicates that routine problems are usually

dealt with using quite a few criteria. Our

results support this finding as only the first

two factors are real criteria that one can

use to evaluate the alternatives. Hunger or

mood are just external forces that have

influence on decision, but they cannot be

used to evaluate the foods. Respondents

also indicated that other factors that could

be used to compare the meals (such as how

healthy the food is or the size of the

serving) are largely irrelevant.

We might also wonder whether these five

criteria are different from the criteria that

people use when buying food off campus.

Even though we did not do a research on

this topic, we hypothesized that the length

of the queue should be more important for

the students. The main reason is that the

foods on campus are generally cheaper,

making the relative cost of standing in a

queue higher (compared to the benefits of

better taste).

Furthermore, there might be a similar

effect caused by the decreasing marginal

utility (more precisely, increasing

disutility) associated with standing in a

queue. That means that time spent in a

queue is an economic “bad” and every

additional minute of waiting adds more

dissatisfaction than the minute before. If

we hypothesize that individuals sum up the

time spent in the queues during a longer

period of time (e.g. a few days), we would

see that NUS students, who spend more

time in the queue (as queues are longer in

the university than off campus) are lower

in their disutility curve (see inset figure); as

a result, they are more sensitive to the

waiting time in the queue, and this factor

becomes more important. On the other

hand, queues should be less important to

the students as the opportunity costs for

spending time in a queue are lower

compared to the costs of the working

people. That is a reasonable explanation

why we see such long queues at some stalls

in our canteens.

Another interesting finding that was

discovered was that the frequency of

having eaten a particular food was

indicated as the least important factor.

That came as a surprise to us – knowing

the wide variety of meals, stalls and

canteens we expected students to refrain

from buying a meal if it was frequently

eaten in the previous days. The conclusion

that NUS students do not seek variety was

confirmed by subsequent answers: more

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than a third reported visiting only 1-2

different stalls per week and more than

40% buy at 1-4 different places throughout

the period of one month. Interestingly,

there was little difference between the

answers of students across different years –

freshmen are just as likely to pick the same

foods as are the senior students.

It seems that the converse should be true:

students should seek variety because there

are no additional costs of alternating

choices (all the stalls are located close to

each other) and the costs of making the

wrong decision are very small (in case one

does not like the food, he would end up

losing only a few dollars). How can we

explain the observed behaviour? Here is a

list of possible explanations that we came

up with:

Risk aversion. It is possible that students

want to avoid risks of choosing a meal that

they do not like. Data confirms our

hypothesis that for Singaporean students,

variety is of least importance: full time

Singaporean students rate this factor as

30% less important compared to the full

time students from other countries. So we

might think that non-variety seeking

behaviour is a special cultural factor

applicable to all Singaporeans. However,

research on cultural differences rejects this

hypothesis: a famous study done by Geert

Hofstede indicates that Singapore is the

most risk seeking culture in the

world! Therefore, the difference in the

consumption patterns probably results

from the fact that Singaporeans have

already tried many of the foods in the

canteens whereas foreigners are eager to

experiment even though they might end up

eating less tasty foods.

Rationality. We may think that such

behaviour once again confirms the

rationality of NUS students - they have

rather fixed preferences and choose the

meals that maximize utility despite the fact

that the same food has been chosen very

often before.

Ethnic variety. Knowing the diversity of our

students we might suspect that many of

them would be more attached to their

native cuisine. In other words, Chinese

people would be more likely to stick to the

Chinese stalls simply because they are

more used to it. Furthermore, ethnic

variety means that some student groups

will have a limited choice – e.g. vegetarians

or Muslims.

Higher risk of making a wrong decision. The

problem with the selection of foods in the

canteen is that they differ among

themselves a lot. That could result in two

kinds of behaviour – variety seeking

behaviour in order to try all the foods or an

opposite action – seeking stability. It is

obvious that latter effect dominates in the

NUS canteens. One reason is that a wide

selection of very different dishes might

confuse students and require too much

effort if one wants to choose the best

option. As this decision is not that

important, it is just easier to find a tasty

meal and buy it every day. Another

implication is that large differentiation

increases the chances of choosing a food

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that one might not like. Therefore, even

though students would be willing to seek

variety by choosing slightly different meals

from the same stall, they might not want to

experiment with something completely

different.

Timing of the decision. Read and

Loewenstein (1995) summarize series of

experiments that were conducted to clarify

some of the reasons for the variety seeking

behaviour. They noticed that the

importance of variety varies depending on

the timing of the decision and the act of

consumption. For example, in one study

subjects chose three snacks for

consumption of three specific dates. The

group that made the decision on all three

snacks in advance demonstrated a much

more variety seeking behaviour than the

group that chose items on each day (64%

chose all the snacks to be different in the

first case compared to 9% in the second

one). The tendency to choose more variety

when making combined choices for future

consumption compared to making separate

choices immediately preceding

consumption was named “diversification

bias” and is applicable to our study as well.

If a student lives with his family, foods are

usually prepared at home and products are

bought a few days in advance. As a result,

eating at home would result in more

variety compared to the same student

choosing meals on campus.

Product choice

Lets continue our discussion on the buyer’s

decision making process. Having evaluated

all the alternatives, one has to make the

final decision. Our survey results

demonstrate that around 60% of students

make the food choice in the canteen. We

believe that this percentage show that

people are indeed influenced by the

situational factors and stall owners should

pay more attention to the point-of-

purchase promotions and the way the food

are presented. Another potential source of

influence are friends (80% answered that

they always or usually eat with their

friends) though only a small percentage

believed that peers do have influence to

their own decisions. The effect of peer

pressure would be more precisely evaluated

by a field study as such influence is usually

indirect and respondents might fail to

identify it in the survey.

Post-purchase behaviour

The process does not end with the

purchase of the product: having finished

their lunch students will evaluate their

experience – was food tasty or not? Such

evaluation is much more important for the

new foods and determines whether to

include that dish in the evoked set next

time. How do NUS students behave if they

enjoyed the food? Do they develop loyalty

towards that dish and stall? Or would they

easily substitute it with something else?

To answer this question we asked our

respondents to indicate whether they

would lower the consumption of their

favourite food if the price increased by $1 or

$2. Average reduction in consumption was

roughly 30% and 60% respectively. If we

assume that an average lunch meal costs

around $3, we would notice that a 33%

increase in price lowers consumption by

30% whereas a 66% increase corresponds

with a decrease of 60%. Interestingly, the

drop in demand is roughly equal to the

increase in price, or as economists would

say, the price elasticity of demand is

unitary and the slope of the demand curve

is equal to -1. That also means that demand

for foods is neither elastic, nor inelastic.

We might guess that the drive towards

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elasticity is caused by the wide variety of

substitutes and the main cause of

inelasticity is the loyalty towards the

favourite food. In our opinion, unitary

price elasticity of demand shows that the

loyalty towards the favourite foods is not

strong.

Conclusion

Our final model of food choice is depicted

in the figure above. Its main differences

from the standard model of buyer’s

decision making process are the timing of

the information search step and the

irrelevance of the need recognition stage.

The main source of information is internal,

mainly coming from the post-purchase

evaluation phase. External information is

used to expand the number of items in the

evoked set, but not to choose among them.

Search for external information is

undertaken during the whole process and

even beyond that. There are only a few

items in the evoked set and they are

evaluated by two main criteria – price and

taste. Having made the decision consumers

evaluate their experience manly based on

the taste. However, as students buy similar

dishes every day, the importance of the

evaluation step is diminished because the

taste of the food remains the same. As a

result, the post-purchase evaluation step is

mainly relevant to new items that might be

added to the evoked set. To sum up, the

process can vary from as little as two steps

if a well known food is taken (evaluation of

alternatives and product choice) to four

steps if a new dish is tried out.

An important finding is that NUS students

choose foods in a rational way. They are

little influenced by external information

and decide based on their own experience.

The items in the evoked set are rather fixed

and the ultimate decision is being made

mainly according to the price and taste of

the food. Students are not subject to the

variability bias and do not mind eating

similar foods as long as they offer better

taste at a lower price than the other

alternatives. The presence and behaviour of

their peers when the decision is being

made has little impact on the choice as

well. Items are added or dropped from the

evoked set infrequently, and such a change

is a result of the negative outcome of the

post purchase evaluation. One of the likely

explanations for the rationality is that

students have been choosing meals

throughout their whole lives and therefore

have experience in doing that in the most

optimal way. Such a finding means that

learning takes the behaviour of individuals

closer to the rational model assumed by

the microeconomic theory.

References:

Singaporean Cultural Dimensions Explained by

Geert Hofstede

Diversification Bias: Explaining the Discrepancy in

Variety Seeking Between Combined and Separated

Choices by Read, D. & Loewenstein, G.

For suggestions on food in Singapore, do read

Harris Chai's(NUS Political Science) superb blog "the

simplest aphrodisiac"

With Compliments

NUS Economics Society Department of Economics National University of Singapore 10 Kent Ridge Crescent, Singapore 119260 Tel/Fax: 6777 9117 Email: econs.soc@gmail.com Editorial Team CHIEF EDITOR Cheok Wei Yong EDITOR

Wang Xin Min WRITERS

Suhas Bhat Aidas Masiliunas Humair bin Md Omer Yap Kim Leng ADVERTISING & PR DIRECTOR

Wong Jun Jie