Evaluate the economic policies currently used by the Singapore government to correct imperfect information and the immobility of the factors of production, two major causes of market failure. [15]

Adapted from an actual H2 'A' Level Economics examination paper

Just like many other countries, Singapore has also been experiencing problems of imperfect information and immobility of factors of production thus leading to market failure. The Singapore government has come up with some policies in hope to improve the situation. This paper discusses the economic policies used by the Singapore government to correct imperfect information and the immobility of the factors of production. 

               

First, to reduce imperfect information, the Singapore government has tried to improve the flow of information through the use of the Internet. As more people do their research on the Internet to find out more about what they really want or need, putting more information on the Internet can help to improve information flow, though it may be more helpful to only the younger generation.

               

The Singapore Government also implements rules and regulations of compulsory food labels on all packaged food. They also introduced the healthier choice and safety labels  on food and appliances respectively to help consumers to make better decisions when consuming a product. As for the insurance company, there is a certain guideline where consumers have to report their medical condition or the company will not cover for them. Although it is easy to implement these regulations, there is a high regulatory cost to it.

               

The Singapore Government also set up many job agencies like Recruit Express and JobsCentral to improve the flow of information so that workers and employers can find a job or worker more easily and efficiently.

               

The Singapore Government can also initiate campaigns to raise awareness among consumers to read up on the product and look for labels on them before consuming a product in order to make a better decision. However, this might have time lag and it is difficult to for them to start making it a habit instantly.

              

As for occupational mobility, since workers do not have the right skills to work, government can provide tax cuts for employers who send their employees for courses to upgrade themselves or learn a new skill so that they will be more efficient and have better ability to handle their tasks better. Nonetheless, this may not be a popular policy among employers as they are making a loss by sending their employees for courses as it will result in a smaller workforce working thus lesser production while having higher cost incurred due to the course fees. Although, the firm will most likely benefit in the long run, employers cannot be certain that the employees will stay with them for a long time, therefore losing the long term benefit.

               

The Singapore Government has also set up the Workforce Development Agency (WDA) where they work with the unique tripartite trade union that Singapore has to subsidise firms that send their employees for courses to upgrade themselves or individuals to pick up a new skills so as to increase job opportunities for especially the unemployed. WDA will also try to link up the unemployed with a job during the training sessions so as to reduce the amount of lag time. Furthermore, government has set aside a Skills Development Fund to aid these people since Singapore is a small and open economy that often experiences structural unemployment due to an ageing population with many older workers. However, this may not be effective as it is difficult for older workers or less educated individuals to pick up a new skill especially since they have no basics to build on. Also, many workers will only see these courses as a waste of their time since they can be using the time to earn more money in order to cover their living expenses.

               

In addition, the Singapore government has implemented compulsory primary education for all citizens. Being educated will help them to take up new skills in future since Singapore’s small and open economy forces us to adapt to changes quickly by developing new comparative advantages to catch up with time. However, this requires a large amount of budget to be placed into education in order to make education affordable for all.

               

Lastly, the Singapore government has come up with urban planning to solve the problem of geographical immobility. We started to have small regional business areas like Tampines rather than all firms to concentrate at City Business District (CBD). This will not only help individuals to travel less since most housing estates are in the East, it also helps to divert traffic away from CBD.

                

In conclusion, the Singapore government should use a combination of market-based and non-market based solutions, as well as consider their long term and short term effects, in order to better achieve pareto optimality and reduce market failure.

JC ECONOMICS ESSAYS - Economics Tutor's Comments: This economics essay has a lot of good material on the Singapore government, economic policies, and the Singapore context, which is excellent - always address your material to the context of the question. Answering the essay question with reference to real world, relevant, and specific examples is an incredibly effective exam strategy in economics examinations. Remember always to have good examples alongside excellent understanding of economic theory and models. However, the usual questions apply - how would you improve upon the essay introduction? What is good or what is not so good about the body of the paper? What is good about the essay conclusion? Take note of the excellent use of signposting in the conclusion. However, how could the conclusion be buttressed and developed? What else could the student have written, or how could the student have written the evaluative conclusion better? Think about how you would write a better conclusion to make this economics essay the best that it can be.