About Nick: i am an economist based in malaysia. I write about development economics, while sneaking in a pop culture reference or two.

2016: Our Collective Obligation

Published in The Edge Malaysia, 4 - 10 January 2016, as "Our Collective Obligation in 2016".

From a macroeconomic perspective, 2015 has been a particularly challenging year for Malaysia, and indeed, most emerging markets. From the plunge in oil prices to the severely depreciating Ringgit (not necessarily a good thing as I argued on two occasions in this newspaper) to the slowdown in Chinese growth to a wide variety of negative political news flow, it certainly has not been the easiest of years for Malaysia. Furthermore, it also is not necessarily clear that 2016 will be better. Oil prices may not have bottomed out yet – and hence, the Ringgit may not have depreciated fully yet – and there are further impending (albeit predicted) United States Federal Reserve rate hikes to come. This is on top of national issues such as rising costs of living, crime, political uncertainties, taxis versus ride-sharing services, vaping, and other tensions.

Far be it for me to predict what will happen in 2016 in terms of GDP growth, the Ringgit, exports growth and so on – frankly, anyone who tells you they can predict with certainty should be taken with a grain of salt (see: plunge in oil prices that nobody saw coming) – it would perhaps be better for me to opine on how we can continue to play our part to grow our ‘commons’ amidst very challenging times.

The ‘tragedy of the commons,’ first coined by ecologist Garrett Hardin and later popularised in the Economics field by Nobel Prize winner Elinor Ostrom, is a case of how, left to our own individual devices, people may end up destroying their collective resources. A common example is that of a fishery zone; it is in the interest of each fisherperson that the zone be constantly replenished with a healthy amount of fish. Thus, each fisherperson would not want the zone to be overfished. However, it is also necessarily true that for every fish that a given fisherperson catches, it reduces the pool of fish available to all other fisherpersons. Therefore, from an individual perspective, each fisherperson would want to catch as much fish as possible in that zone even if they agree that, collectively, everyone would be worse off. When individual incentives overpower collective incentives, we get overfishing and hence the ‘tragedy of the commons.’

The common solution – at least in textbooks – in solving the tragedy of the commons is to institute property rights. This way, the zone would be divided among the fisherpersons and since they now own a particular part of the zone, they would not overfish their zone and thus, the overall commons will be preserved. While this is the textbook solution, there are other ways as well to solve this conundrum. The way that I like best and am most optimistic about is that of establishing a bottom-up culture of citizen-led collective action. This means building a culture where individuals care both about their personal incentives but also the incentives of the collective.

Thus, treating our nation as our collective ‘commons,’ it is plain to see that while many may wish for the government to solve this issue and that issue, the truth is we, as citizens, do not have to wait for the government to solve our problems. Indeed, not only are government finances stretched, but if government capabilities are also stretched, as many believe, then surely the onus is also on the citizens to solve our collective problems. It boggles me how many people perceive the government to be incompetent yet still expect the government to solve their problems. Surely collective action is more than the responsibility of the government.

Here are a couple of examples of how we, as agents in the economy, can help to overcome some of the current issues that we collectively face. In the case of crime, a simple way to improve neighbourhood safety and security is simply to be better community members and neighbours. Perhaps it is time to bring back, into the mainstream, the concept of Rukun Tetangga. I am not advocating vigilante justice (unless you are Batman), but simply to be more watchful of our neighbourhood. Call the police if something is amiss. In the case of traffic, rather than waking up super early to beat traffic as some may suggest, perhaps we can develop a carpooling mobile application that enables us to take turns to drive and splits our petrol and toll costs. These options are all available, but as long as we keep thinking individual instead of collective, we will never embrace them and therefore, we will never embrace our role as citizens in optimising our commons.

We need to remind ourselves that we live in a society. As members of that society, we are obligated, as well, to participate in and contribute to that society rather than wait for the officeholders of that society to manage all our issues. Yes, that is what they are paid to do and elected to do and, certainly, they should fulfil their responsibilities in the highest manner of responsibility, accountability and integrity, but that does not mean that we, as citizens, should not play our part. We have to take collective responsibility for the society which we want to build. We may not agree on exactly what society that may be – that is fine – but I am willing to guarantee that, in thinking of our ideal society, there are more similarities than there are differences. The government must play its part – and we must hold it accountable – but that does not excuse us from our obligations.

This notion of thinking of the collective may seem contradictory to standard homo economicus thinking, the fundamental assumption behind much of neo-classical economics. However, as we have seen over and over again, homo economicus is false and has never existed. Furthermore, if we think more of others than of ourselves, and if we think of the collective more than of our individual incentives (not saying that individual incentives should be eliminated altogether), perhaps our elected representatives will be more solid and perhaps our shared commons will be stronger. Thus, as we move forward to 2016 – amidst turbulent times – let us remember that we, as individuals, do have a role to play in solving the issues of our day; indeed, it is our responsibility and, even, our obligation.

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Distributional Outcomes of a Falling Ringgit