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Sakmongkol ak 47

Monday, 17 November 2008

The Economics of the Pemuda Race

the Backward Supply Curve.

Sakmongkol has written an article about the Pemuda Race. It was titled ‘The Supply Curve and the Pemuda race’. In that article, Sakmongkol has the 3 contestants located on different points on the upward sloping supply curve. The different location they find themselves on is a function of price( read money). More money paid means they are located higher on the supply curve.

Since Sakmongkol is using analogies from the study of Economics, in particular the Supply Curve, he wants to extend it a little further. Being on the supply curve have its hidden dangers for all contestants. So here are further notes for ALL of the contestants to consider.

Perhaps the danger which KJ and the others can possibly face is the backward supply curve of labour. Treat wages as money and supply of labour as nominations. Occasionally, supply curves bend backwards. A well known example is the backward bending supply curve of labour. Generally, as a worker's wage increases, he is willing to work longer hours, since the higher wages increase the marginal utility of working, and the opportunity cost of not working. But when the wage reaches an extremely high amount, the employee may experience the law of diminishing marginal utility. The large amount of money he is making will make further money of little value to him. Thus, he will work less and less as the wage increases, choosing instead to spend his time in leisure.

The backwards-bending supply curve has also been observed in non-labor markets, including the market for oil: after the skyrocketing price of oil caused by the 1973 oil crisis, many oil-exporting countries decreased their production of oil.

Mukhriz Mahathir may have reached his inflexion point already and KT will soon reach his. KJ is moving towards it, unless , having recognise that supply curves do bend backwards, he and his team, offer labour something else in place of money. In a situation where everybody plays with money, the marginal utility of money diminishes. ( Sakmongkol isn’t sure whether money is subject to the law of diminishing marginal utility).

That’s where factors like character, intelligence, articulation, vision comes into play. In this department, Sakmongkol is suspending his views first.

the Laffer Curve

Political Money and Money Politics.

Ok, let us now admit the existence of political money. Which is the money needed for expenses. You have your campaign people- they need expenses. Maybe you even have bloggers writing for you, they get paid sometimes. Haha. You have people who work for you , they require money for expenses- petrol money, makan money, cigarettes, occasional dangdut sessions.

The term political money is coined by the dentist, Dr Khir Toyo. If ever Sakmongkol were to be treated by KT, he can be sure all his remaining teeth will be pulled out until he passes out. Because Sakmongkol has the temerity to draw parallels of KT with Herr Christian Szell( the Nazi Dentist). Entschuldigen Sie bitte, Herr Doktor!

The big problem is where to say when political money becomes money politics? The distinction is very fluid and in a state of constant flux.

Suppose you ban political money altogether. You will then be subject to what in economics is called, the Laffer curve. It is used to illustrate the idea that increases in the rate of taxation do not necessarily increase tax revenue. (For instance, a 100 percent income tax will generate no revenue, as citizens will have no incentive to work). Translated, if there is total ban in political money, then no one wants to work.

The trick then is to state clearly how much a candidate can spend. If they can do it in general elections, why cant they do it in UMNO elections?

Increasing taxes beyond the peak of the curve point will decrease tax revenue. Which means, extending the ban on political money will decrease effort by campaign workers.

The Laffer curve was popularized by Arthur Laffer (b. 1940) in the 1980s. However, the idea is not new to him. In his General Theory of Employment, Interest, and Money, John Maynard Keynes described how past a certain point, increasing taxation would lower revenue and vice versa.


ukmstudent,  17 November 2008 at 16:36  

The term "political money" was not coined by DS Dr Khir Toyo. I was introduced by Prof Madya Dr Agus Yusof of UKM in his book. I dont remember the title of the book, but I remember the chapter very well, "Politik Wang" dan "Wang Politik". I would suggest that you read the book to get a good understanding of the differences between the two.

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