tim's experiment

I am a regular reader of Jake van der Kamp’s stuff in the English newspaper you have to pay for. I am sure Mr van der Kamp is a sociable fellow, kind to children and animals, generous to charities and so on. I usually agree with him. But he has one curious habit which grates. His attitude to any scheme to improve the lot of the poor is the same as my dog’s attitude to fire hydrants – he just can’t walk past one without peeing on it.

Sometimes the attack is no doubt justified. Measures to change society are often ill-designed, and even if well-designed can lead to unexpected consequences, sometimes profoundly disappointing ones. On the other hand if the quality of a writer’s criticism varies considerably it generally means we are dealing with a prejudice, not a reasonable opinion. Consider Jake’s line on the government scheme to offer travel subsidies to workers who live in distant new towns. They are, officials suppose, discouraged from taking jobs in more central areas by the prospect of giving a good deal of their hard-earned wages to Kowloon Motor Bus, or one of that crowd. Jake’s line, to which we have now been treated twice, is that the travel subsidy will be completely futile. He explains that the employer of such a worker will simply reduce his or her wages by the amount which the government is supplying.

This is nonsense. There are three ways of showing that it is nonsense. One is to try to imagine how it works out in practice. “Good morning Mrs Wong. As you are now receiving the government travel subsidy I am going to cut your wages by $600 a month to make up for it.” I yield to nobody in my willingness to believe the worst of bosses, proprietors, taipans, moguls and “the fat man, the very fat man, who waters the workers’ beer”. But can you really imagine a local Scrooge coming out with a line like that?

The second way of showing it is nonsense is, oddly enough, to refer to Adam Smith. In German economic circles they have a special term “the Adam Smith problem” for people who have read the Wealth of Nations but neglected the companion work on “Moral sentiments”, by which Smith meant the fact that people do not actually behave in the way that economic theory suggests they should. This is a point which economists have rediscovered recently, or some of them have. People are not mere automatons pursuing wealth at all costs. There is an innate sense of fairness in most of us, and Jake’s idea would have it wide awake and rattling the bars of its cage. It would, after all, be manifestly unfair if a worker who lived in Central were paid $3,000 a month and one who lived in Tin Shui Wai was paid $2,400 on the grounds that the government was paying her bus fares.

The third way of looking at it, I suppose, is to ignore all this new-fangled nonsense about human nature and just apply traditional economics. If bosses in Central are paying $3,000 a month for cleaners then the lady who finds herself suddenly getting only $2,400 will change her job for one which attracts the going rate. It is true that the going rate may come down a bit, because more people from Tin Shui Wai will be interested in working in Central. For the same reason there should be a rise, albeit no doubt microscopic, in the wages paid in Tin Shui Wai because some people who were formerly in the job market there are now working in Central. But in the traditional view of these matters the market reaches equilibrium at a particular price level, and there is no room for bosses to deduct the workers’ other income, any more than they can, for example, cut the wages of someone whose son becomes old enough to go out to work and help the family.

I do not expect the government’s scheme to be enormously effective, because commuting a long way involves time as well as money. But I do not believe the money will effectively subsidise employers. There is quite enough of that going on already.

While we are on transport matters I must also respectfully disagree with Mr van der Kamp’s view of suggestions that the MTR should not raise its fares. Jake says that the result of this is that travellers will be subsidised by the taxpayer. But nobody is suggesting that the MTR should receive a subsidy to help it keep its fares down. They are suggesting that the money should come out of the MTR’s ample profits – most of which it pays to the government, which already has more money than it knows what to do with. They’ll be shovelling it down a hole next. The hole is calle the High Speed Rail Link.