Genius = 1 % inspiration + 99% perspiration

From New Scientist: How to be a genius.

Also see this blog commenting on the Cambridge Handbook of Expertise and Expert performance.

I might have shared the articles above before but I think it's important enough to share again. The book "Outliers" by Malcolm Gladwell touches on a similar topic, that research seems to show that genius is really 1 percent inspiration and 99 percent perspiration. It's interesting to think of this in the context of the Singapore education system, where students are channeled from a young age into "Gifted" education streams on the basis of their high performance on IQ tests. Students in these streams generally receive more education resources and opportunities to develop their talent.

What might be more effective would be for individuals to have their unique talents or interests identified at a young age, and then for the system to provide the appropriate resources and mentors to develop these interests intensely for the rest of their lives. In essence, have more Arts schools, conservatories, science and sports schools.

A potential problem I can see arising from such a practice might be the emergence of castes/classes, and the segregation of society. Still, bearing the lessons of history in mind, I wonder if we can devise a way in this day and age to capitalize on the advantages of such focussed talent development without the creation of classes.

"High Science" to create new economic niches (blue oceans), rather than compete in crowded old ones (red seas)

From the ST, June 6, 2009:

FINANCE MINISTRY'S 50TH YEAR Building more world-class S'pore firms

By Ngiam Tong Dow

THE year 1959 was a fateful one for Singapore. It was granted self-government by the British after 140 years of colonial rule. Other than foreign affairs and defence, the new Singapore Government led by Mr Lee Kuan Yew was free to pursue its own social and economic policies. Mr Lee chose Dr Goh Keng Swee, the only economist in his team, to be our first finance minister. The Ministry of Finance (MOF) was housed in Fullerton Building. The General Post Office occupied the ground floor; MOF occupied the second to fifth floors. As MOF alumni, we can be proud of belonging to the pioneering team, led by the inspiring Dr Goh, our minister, and by the late Mr Hon Sui Sen, our permanent secretary. We worked our guts out to pull the economy out of stagnation. The Finance Ministry that Dr Goh established was not your traditional Treasury. Together with Mr Hon, he created the Economic Development Division to spearhead our economic development. The Economic Development Board (EDB) was set up as the operating arm of this division, tasked with finding jobs for the thousands of young students pouring out of our schools each year. The EDB was given a grant of $100 million to get going. In return for the freedom to operate, its performance was continuously assessed. It was rated on outcomes more than outputs. The EDB chairman had to report annually the dollar value of the foreign direct investments committed to Singapore. He still does. MOF's fiscal policy has always been to stimulate growth through investment. As Permanent Secretary (Budget), I accorded higher priority to the development over the recurrent budget. The development budget invests for the future. In the early stages, the development budget was spent mainly on building infrastructure. Over the last 50 years, we have seen Singapore's budget priorities move from physical infrastructure to defence capability and now, education and training. Though we are not totally free of 'white elephant' boo-boos, MOF's track record in allocating scarce capital is good. Our current revenue was enough to pay for both operating as well as development expenditure. If the Government were a private corporation, we would have been able to finance all our capital expenditure without a cent of debt. Was Singapore's MOF more virtuous than our counterparts elsewhere? The fact of the matter is that we did what we did because we had no alternative. Without oil or other natural resources, budget surpluses and CPF savings were our only sources for accumulating reserves. Except in extremis, reserves are not intended to be spent on rainy days of the business cycle. The fundamental role of reserves is to serve as backing for our currency. A stable and convertible Singapore dollar is our lifeline to international trade on which our very survival depends. In spite of the immense pressures exerted by the rest of Government on the MOF, I would be wary of dipping into our reserves to tide us over the troughs of business cycles. I remember the first global oil crisis of 1972. Mr Hon, by then Minister for Finance, refused to subsidise consumption. He thought it better for Singapore to swallow the medicine of inflation in one gulp. The cost of living index stabilised within 18 months. MOF's mission as guardian of the national budget will be more challenging in the future. For instance, before we can decide on how to allocate the research budget, we need to have some idea of the knowledge domains that Singapore has a more than even chance to compete in. Is it biotechnology, nano-engineering, solar energy or something else? Spending on R&D in my view is too narrow a focus as a growth strategy. In any case, we do not have the breadth and depth of talent to compete successfully with the Americans, Europeans, Japanese, Russians, and in the near future, the Chinese and Indians. We may be able to hire a few superstars to head our research institutions. But a Nobel laureate cannot work in isolation. He or she needs teams of young researchers to do the basic experiments. Young PhDs in China work for a fraction of the wages we pay our young dons at our two research universities. Ms Oliver Lum of Hyflux told me that the core membrane research work of her company was done at Hyflux laboratories in China. Rather than pursuing high science whatever the cost, we may have to adopt a less lofty approach. We should ask ourselves: What are the knowledge domains we can excel in? Singapore has a fair track record in building townships, industrial parks, container ports, submersible oil rigs, vocational and technical education and water treatment installations like Hyflux. As the example of Singapore Airlines shows, it is possible to build up a world-scale Singapore company on our own. SIA's founding board had no foreign director or CEO. The way forward for us is to have the guts to build another 25 world-scale 'SIAs' in the knowledge domains where we have a competitive advantage. I learnt many lessons in economic policymaking from Dr Albert Winsemius, Singapore's first Economic Adviser. The most valuable lesson he taught me was that you have to do the things that matter yourself. After pulling ourselves up by our own bootstraps in the pioneering years, we now outsource the CEO jobs to foreign talent. The irony is that when trouble looms, the foreign CEO just dusts off the seat of his pants and walks away with his sign-off bonus negotiated when he first signed on. I refuse to believe that the Singaporean has so lost confidence in himself. The pyramids of Egypt were built by the Pharoahs' Hebrew slaves. The Egyptian Pharoenic race is now lost in antiquity. The Jewish Hebrew nation continues to thrive. Quo Vadis Singapore? The above is an excerpt of a speech Mr Ngiam, a former senior civil servant, delivered yesterday to mark the 50th anniversary of the Ministry of Finance. My response: I see the advantages of leveraging existing capabilities: developmental cost advantage - lower additional infrastructural and training costs. It all seems to make simple dollar sense. However, what happens what happens when our existing capabilities become increasingly crowded and competitive economic spaces? I examine the examples Mr Ngiam cites: Manufacturing is our traditional strength, and we have a well-established research institution - SIMTECH - supporting innovation to sustain the competitive edge in that industry. Very obviously though, we aren't going to be sustainably competitive in manufacturing, at least not on the scale of India and China. Marine technology (oil rig building and ship maintenance) - technologically still dominated by the Scandinavians. Building townships - is this a sustainable source of income, and will it create jobs for more than a select few?? Vocational training - again, whither the jobs? So, I believe we have to invest in "high science" to create new economic spaces that are less crowded for us to occupy. The best chance we have of getting good, economically useful innovations is to have enough bright, passionate minds working on important problems. We do have a fair shot at creating a vibrant scientific community, though we really need to get that critical mass of smart, interested and willing people. Will we be able to get enough people interested in this by tackling smaller, incremental problems? I personally wouldn't be very interested in those. Disclosure: I'm a scientist-in-training and have a vested interest in seeing the scientific industry prosper in Singapore.

The argument against Conscription

I stumbled across an extremely interesting article on conscription today. The same Bryan Caplan @ Econlib, who below praised Singapore's reduction of employer's CPF contribution as a way of reducing labor costs, asserted that he would not move to Singapore for the simple fact that it has military conscription.

Beyond his lambasting the unpleasantness of military service - "State slavery/full-time Physical Education" - he mentions briefly the existence of textbook arguments against the draft as economically inefficient. Now, that's potentially a rational argument, more substantial than the usual griping I was used to during my time in the same "hell on earth". He links an August 2005 paper by David Henderson titled "The Role of Economists in ending the Draft".

The Henderson paper gives a rather longwinded account of the historical events leading up to the abolishment of the US draft system in the early 1970s. What I found most interesting were the nuggets of economic arguments buried in the history-noise. For instance, one of the first empirical studies of the economics of the draft and of ending the draft was apparently produced by Walter Oi, an econ don then at the Uni of Washington and later at the University of Rochester's Graduate School of Management. Oi argues as follows:

Oi distinguished clearly between the budgetary cost of military manpower and the economic cost. Oi granted the obvious, that a military of given size could be obtained with a lower budgetary cost if the government used the threat of force to get people to join—that is, used the draft. But, he noted, the hidden cost of this was the loss of well-being among draftees and draft-induced volunteers. Using some empirical methods that were sophisticated for their day, Oi estimated the loss to draftees and draft-induced volunteers and found it quite high— between $826 million and $1.134 billion. While this number might seem low today, Oi’s data were in mid-1960s dollars. Inflation-adjusted to 2005, the losses would be $4.8 billion to $6.6 billion.

Other economists who contributed to the literature at the time were Stuart Altman (1969), the late David Bradford (1968), Alan Fechter (Altman and Fechter 1967), Anthony C. Fisher (1969), and W. Lee Hansen, and Burton Weisbrod (1967). Their articles appeared in such prestigious economics journals as the American Economic Review and the Quarterly Journal of Economics. The main idea was that "Conscription is a Tax", elegantly described by William H. Meckling, an economist who was head of the Gates Commission and dean of the University of Rochester's Grad Sch of Management, below. In essence, he argues that the opportunity-cost of military conscription on the general population is a non-equitable tax that exacts a greater toll on the poor than the rich. The actual paragraphs are reproduced below:

Any government has essentially two ways of accomplishing an objective whether it be building an interstate highway system or raising an army. It can expropriate the required tools and compel construction men and others to work until the job is finished or it can purchase the goods and manpower necessary to complete the job.

Under the first alternative, only the persons who own the property seized or who render compulsory services are required to bear the expense of building the highway or housing project. They pay a tax to finance the project, albeit a tax-in-kind. Under the second alternative, the cost of the necessary goods and services is borne by the general public through taxes raised to finance the project.

Conscription is like the first alternative—a tax-in-kind. A mixed force of volunteers and conscripts contains first-term servicemen of three types—(1) draftees, (2) draft-induced volunteers, and (3) true volunteers. Draftees and draft-induced volunteers in such a force are coerced into serving at levels of compensation below what would be required to induce them to volunteer. They are, in short, underpaid. This underpayment is a form of taxation. Over 200 years ago, Benjamin Franklin, in commenting on a judicial opinion concerning the legality of impressments of American merchant seamen, recognized the heart of the issue, and even estimated the hidden tax. He wrote: “But if, as I suppose is often case, the sailor who is pressed and obliged to serve for the defence of this trade at the rate of 25s. a month, could have ₤3.15s, in the merchant’s service, you take from him 50s. a month; and if you have 100,000 in your service, you rob that honest part of society and their poor families of ₤250,000. per month, or three millions a year, and at the same time oblige them to hazard their lives in fighting for the defence of your trade; to the defence of which all ought indeed to contribute, (and sailors among the rest) in proportion to their profits by it; but this three millions is more than their share, if they did not pay with their persons; and when you force that, methinks you should excuse the other.

“But it may be said, to give the king’s seamen merchant’s wages would cost the nation too much, and call for more taxes. The question then will amount to this; whether it be just in a community, that the richer part should compel the poorer to fight for them and their properties for such wages as they think fit to allow, and punish them if they refuse? Our author tells us it is legal. I have not law enough to dispute his authority, but I cannot persuade myself it is.

It seems likely though, there are several key assumptions underlying the argument:

(1) a large enough population exists for there to be sufficient numbers of people won over by the monetary incentives to volunteer for the military yet not disable other sectors of the economy.

(2) the supply of people is elastic - the population will respond to incentives to join the military. This is untenable if the population has severe cultural biases against joining the military, like in a population with a majority of Seventh Day Adventists for instance.

Right now, I still can't persuade myself that Singapore's population is big enough for probability to allow a big enough army. Would sufficient incentives (a substantially higher pay, greater prestige) bring in enough people to compensate for the drain from the loss of the draft?

Singapore: "Automatic Stabilizers" Done Right

Here's some rare praise for Singapore on the international scene. There're some merits to a strong government that isn't afraid to do what's fiscally correct and not what's politically expedient. Strong governments are needed to for harsh corrective measures. For instance, think of India's feticide problems: strong laws and active enforcement are needed to break the cruel cycle that roots in the unreasonable dowry each family pays for its girls to be married out, and which ends in active sex selection and feticide.

In a sense, Singapore's government really does strive for the best of both worlds - a strong government with pervasive societal influence and active spending on it's people but also pro-business.

Now, if only the Singapore government would release the wing-clips on the population's political maturity...different forms of government for different stages of a society's growth eh?

From Bryan Caplan @ Econlog,

Imagine my surprise, then, when I discovered that Singapore has figured out a stunningly clever way to use tax cuts to reduce unemployment. Instead of focusing on stimulating demand, Singaporean tax policy hits the margin that matters: labor costs. When there is a surplus of labor, they cut employers' share of the payroll tax (known in Singapore as the CPF). Details appear in Henri Ghesquirre, Singapore's Success:

The government directly intervened to temporarily lower the cost of business in Singapore through... its power to lower the CPF contribution rate of employers...

Elsewhere, substantial nominal currency devaluation is often the last and only resort in the face of downwardly sticky nominal wages, often with higher inflation as an undesirable side effect. In contrast, Singapore uses the direct intervention methods at its disposal. In addition, there is built-in wage flexibility, because an important portion of workers' remuneration is automatically lowered if GDP falls short of target.

With flexible wages, of course, it doesn't matter who legally pays the a tax. But the whole problem with recessions is that wages are somewhat sticky - you can have surplus labor for years before wages fall enough to restore full employment. By cutting employers' share of the tax, the Singaporeans greatly speed up the wage adjustment process.

We should expect the Singaporean system to work very well. Suppose we conservatively assume that labor demand elasticity is only -.4. Then a 1 percentage-point cut in employers' share of the payroll tax will roughly increase employment by .4 percentage-points. With a more optimistic elasticity of -1.0, every percentage-point cut in taxation would raise employment by 1 percentage-point. This approaches the Lafferian dream of tax cuts that fully pay for themselves. (In savings-obsessed Singapore, unsurprisingly, they also raise the payroll tax during booms).

The original article can be found here.