Fiscal Policy and Government Intervention

1. Fiscal Policy

the use of government spending or reduction in taxation to stimulate economic activity to the desired level. in times of recession, an expansionary fiscal policy is used, where G is increased and T is decreased.

how G is increased in singapore.

money goes to the armed forces. some get earmarked to the air force. then some of it gets earmarked for airforcecareer promotion. and then the money is used to buy a cardboard box, have some words inked on it. then inside the box, stick 3 bottles of new moon essence of chicken, and cover each bottle with some sticker so that new moon actually appears only on the bottlecap. and then employ someone to drive a van around to distribute the box inside a nice paper bag which says 'i am the wind'.

the multiplier effect kicks in. in part 1, the cardboard box makers get more money, so they spend this increase in income on durians. then the durian sellers spend it on alcohol, and then it goes on and on and trickles out. in part 2, more chickens get murdered and more bottles are made. represents a negligible increase in autonomous spending since chickens dont cost much. in part 3, the deliveryman gets more pay, probably goes and gets himself some new moon essence of chicken. and then the cycle continues until the multiplier tapers out.

government spending in essence of chicken and 2 pathetic navy batteries (btw my batteries has the navy woman stuck poorly she juts out) will cause an autonomous increase in AE=C+I+G+X-M. this autonomous increase stimulates a more than proportionate increase in NY. although some say singapore's multiplier is <1.

2. Government Intervention

Negative externalities occur when a third party is affected by an action for which the third party neither receives nor pays any compensation. the usage of roads causes the externality of pollution. the individual only considers his cost, which is time and fuel, and does not consider that he/she is polluting the environment.

solution: draw buslanes all over. so on busy stretches like upp bt timah road, 3 lanes become only 2 lanes. then the jam that stretches for about 200m now stretches to almost 300m. and then the buslane is empty and you still see 2 67s coming in a row, and then the rest of the buslane is pretty empty. no one enters the buslane, because no one wants to get fined or have demerit points.

buslanes are a good solution. buslanes help internalize the external cost. the external cost of pollution is internalized as time! how cool! previously, in the soviet cashless system, people pay up their surplus by queuing in line. buslanes are taking a leaf out of that book. instead of having the western capitalist take, that we can internalize the cost of time and charging it in monetary terms, here we assume time is the internal cost. so if people spend more time, less people will be willing to travel that stretch of the road, so there is less pollution, so the trees in macritchie will be healthier.

i think coase should come to singapore. then he can learn more about transaction costs and whether time can actually be considered part of the cost of negotiations. cool man.