Noting that enthusiasm is building up for the coming General Elections, it is timely to assess our current voting system. We use a simple plurality system where each voter may choose only one candidate and the candidate with the most votes wins. In situations with more than two candidates, this system entails the possibility of voters being in a situation where they have the incentive to misrepresent their preferences.
Consider a situation where candidates A, B, and C have 40%, 35% and 25% of the electorate in support respectively. B's supporters do not mind C, but do not want A to win. C's supporters do not mind B, but also do not want A to win. In the plurality voting system, C's supporters have the incentive to misrepresent their preferences and vote for B rather than vote truthfully and have A come into power.
It can be proven mathematically that where voters' preferences are represented by a ranked order of candidates, any voting system offers situations where voters have the incentive to misrepresent their preferences. This is an unfortunate and inescapable reality. However, where voters' preferences are represented as "Approve"/"Do not approve" ratings for each candidate, a voting system known as “Approval Voting” gives voters the incentives to vote "truthfully". In Approval Voting, voters cast "Approve"/"Do not approve" votes for each and every candidate, and the candidate with the highest approval level wins.
The truthfulness of the Approval Voting system rests on the idealized "Approve"/"Do not approve" representation of preferences. I argue that elections are not popularity contests but polls of the electorate to see who has a mandate to represent them. As such, a voter might conceivably support multiple candidates or none at all. With Approval Voting, the results of the election unambiguously describe "the mandate of the people". A winner with 90% approval can be said to truly have 90% approval from the electorate as there is no incentive to misrepresent preferences. Conversely, a winner with just 20% approval can be unambiguously seen to have a weak mandate.
In addition, this ameliorates the situation for the opposition with regards to election deposits, since a viable candidate may stand and have approval from a large fraction of the electorate, yet that same large fraction may prefer another candidate.
I suggest that such a system be considered for subsequent elections. This would be a worthy matter to debate after the upcoming elections.
Wednesday, March 2, 2011
Tuesday, March 1, 2011
Maintain a Surplus of HDB Flats
Some years ago, there was a surplus of HDB flats that was described in some quarters as mismanagement on the part of HDB arising from an over-projection of the demand for flats. I personally do not see having a surplus as a problem. A surplus of HDB flats enables first-timers to get flats sooner, perhaps a year or two earlier.
The government might like to think of the cost of empty flats as a subsidy in terms of time to first-timer flat applicants. Early acquisition of a home to call one’s own can make a positive difference to the willingness to have a children. As such, surplus flats are compatible with Singapore’s needs. The question then arises of how to manage the flat supply.
The quantity of the stock of flats should me managed so as to ensure a healthy but not excessive level of surplus flats. To do this, the key is to launch the next project only when the stock of remaining flats falls below some critical level. This critical level should be determined based on (i) the lead time from launch to the handover of keys, (ii) the number of flats to be built in the next project in the pipeline, and (iii) the estimated demand for flats over the next few years.
To manage the quality of the stock of flats, the key is to ensure that older flats get sold first by policy means (e.g.: not allowing a flat to be sold if a flat two years older is still on the market) or market means (e.g.: discounting older flats slightly).
Surplus flats can be a strategic tool to achieve national objectives, and should be used as such.
The government might like to think of the cost of empty flats as a subsidy in terms of time to first-timer flat applicants. Early acquisition of a home to call one’s own can make a positive difference to the willingness to have a children. As such, surplus flats are compatible with Singapore’s needs. The question then arises of how to manage the flat supply.
The quantity of the stock of flats should me managed so as to ensure a healthy but not excessive level of surplus flats. To do this, the key is to launch the next project only when the stock of remaining flats falls below some critical level. This critical level should be determined based on (i) the lead time from launch to the handover of keys, (ii) the number of flats to be built in the next project in the pipeline, and (iii) the estimated demand for flats over the next few years.
To manage the quality of the stock of flats, the key is to ensure that older flats get sold first by policy means (e.g.: not allowing a flat to be sold if a flat two years older is still on the market) or market means (e.g.: discounting older flats slightly).
Surplus flats can be a strategic tool to achieve national objectives, and should be used as such.
Sunday, February 27, 2011
Allocation of Public Resources: A Knapsack Problem
If Singapore (or the world) were to sustain a massive peace time fuel shock and we're left with imports amounting to 5% necessary to fuel daily demand for the foreseeable future, who are we to allocate this to? Should we operate a free market and literally auction the fuel to the highest bidder (say with a generalized second-price auction)? That would be efficient in the sense defined by an economist, where the one who has the highest value for the fuel gets it. The fallacy is, this is possibly sub-optimal given that the transacted price is maximized but not the end-to-end economic output.
The high bidding CEO necessarily has had his wealth built on the backs of others. Not to discount his skills, his high value skills require a functioning operation with sufficient scale to generate real returns that "justify" his pay. In order to keep society running, we'd best allocate the fuel first to the buses that get people to work and the trucks the get commodities where they need to be processed.
In terms of resource allocation, the socially optimal solution is not, as the freshman economists are taught, to allocate to those with the highest value for the good as signified by willingness and ability to spend via the free market. Instead it is socially optimal to allocate each unit to the activity that brings the most marginal benefit to society as a whole. This is a knapsack problem of sorts.
Note that I'm not saying that rewards should be allocated in this fashion. I'm neither blindly communist nor blindly laissez faire free market crusader-ish. As a "full employment approximation", rewards should be commensurate with the difference between what is achievable with and individual and what is achievable without. This is in perfect accord with the above discussion: rewards to an individual should relate to the value that the person brings.
Allocation of public resources is a tough knapsack-type problem where the contribution of an element depends on the other elements in the basket. Still it is straightforward that some elements are in any optimal solution associated with resource levels low and high. These correspond to economic necessities: food security, transport, housing and education. These needs should be filled first before allocating resources to the more fanciful.
On this account, I think Singapore has done very well with food security and education. It has succeeded with transport and housing (With the latter, most of the griping is from people wanting more.) Yet, there is significant room for improvement for the transport and housing situation, which might be partially characterized by the saying "a monopoly is a license to steal". I'll comment on this in future.
The high bidding CEO necessarily has had his wealth built on the backs of others. Not to discount his skills, his high value skills require a functioning operation with sufficient scale to generate real returns that "justify" his pay. In order to keep society running, we'd best allocate the fuel first to the buses that get people to work and the trucks the get commodities where they need to be processed.
In terms of resource allocation, the socially optimal solution is not, as the freshman economists are taught, to allocate to those with the highest value for the good as signified by willingness and ability to spend via the free market. Instead it is socially optimal to allocate each unit to the activity that brings the most marginal benefit to society as a whole. This is a knapsack problem of sorts.
Note that I'm not saying that rewards should be allocated in this fashion. I'm neither blindly communist nor blindly laissez faire free market crusader-ish. As a "full employment approximation", rewards should be commensurate with the difference between what is achievable with and individual and what is achievable without. This is in perfect accord with the above discussion: rewards to an individual should relate to the value that the person brings.
Allocation of public resources is a tough knapsack-type problem where the contribution of an element depends on the other elements in the basket. Still it is straightforward that some elements are in any optimal solution associated with resource levels low and high. These correspond to economic necessities: food security, transport, housing and education. These needs should be filled first before allocating resources to the more fanciful.
On this account, I think Singapore has done very well with food security and education. It has succeeded with transport and housing (With the latter, most of the griping is from people wanting more.) Yet, there is significant room for improvement for the transport and housing situation, which might be partially characterized by the saying "a monopoly is a license to steal". I'll comment on this in future.
Saturday, December 18, 2010
"Paying Tuition" on a National Scale
Apparently I last posted on this blog on 8th August 2010. That's a pretty long time. I just moved. The study is filled with boxes, though I have managed to tidy up my own bedroom. I've got no wardrobe but I bought this "small wardrobe on wheels" from IKEA (the IKEA PS), which I believe can actually handle all the clothes I actually wear. I'm a little sick of all the unpacking and its currently way too hot for gardening (clearing out the old roots in the soil and replacing some of the clay with more suitable soils).
As I typically do, I read what people have been talking about on the ST Forum this morning (well aware that the editorial team of the forum does a lot of agenda setting). I came across a letter on how the Singapore Tourism Board should factor in cost to evaluate whether an event was successful on some measure ("Going by tourism receipts? Then count the costs of events too", ST Forum, 18 Dec 2010). This is makes complete sense to any business owner: perhaps the two most important numbers are cost and revenue. I am typically critical of bad project management, which I believe the huge Youth Olympic Games (YOG) budget overruns amounted to (S$387 million over a budget of S$105 million, with about 70% or S$260 million going to local expenditures which should be relatively easy to budget for). However, as anyone who has played games such as majong should know, to get good at something one needs to "pay tuition". In majong that tuition entails losing money as you learn the niceties of the game and how to read your opponents; in large event organization, it is experiencing the unforeseen, paying for it and learning.
Singapore's narrative is one of surviving. Being small, this entails punching way above our weight. We have done this militarily. In fact we die this in a very intelligent manner, building up fast enough to gain security but quietly enough to avoid reprisals (it also helped that we were between Malaysia and Indonesia who were jostling for power). In this day and age however, survival is a matter of maintaining relevance to the world rather than avoiding annexation. Again we have to punch above our weight.
Our drive to become a world X hub (where X might be "biomedical", "logistics", "water technology", etc) is an indicator of sound strategic judgment on the part of the government. While I feel that the efforts are lacking in terms of execution, the strategy will work as people learn from experience. Organizing large events falls neatly into this framework, and like most of Singapore's major efforts, it seems that there is "tuition" to be paid. The magnitude of the "fees payable" have been alarming (c.f. YOG), there are grounds to argue (shaky though they might be) that when operating on a totally different scale, things change and past experiences are no longer such a useful guide. An organizational structure good for an organization of 100 staff will probably not be as effective at 1000 staff. Whether this holds or not, we are paying tuition to learn, what has to be done is to ensure that we are learning.
It is natural that initial cash flows are negative in a large project, however the net present value of the project should be positive. It is key that our event organizers not be so embarrassed about operating losses that all the lessons learnt are swept under the carpet. These experiences are what we have paid for. I believe the organizers should, with the public and the services sector, pick apart the execution of past large event to distill the experiences that we have paid so much for. This way, we may start getting positive numbers in our cash flows and turn "Large Event Organization" into a profit generating machine.
Now back to the work of unpacking.
As I typically do, I read what people have been talking about on the ST Forum this morning (well aware that the editorial team of the forum does a lot of agenda setting). I came across a letter on how the Singapore Tourism Board should factor in cost to evaluate whether an event was successful on some measure ("Going by tourism receipts? Then count the costs of events too", ST Forum, 18 Dec 2010). This is makes complete sense to any business owner: perhaps the two most important numbers are cost and revenue. I am typically critical of bad project management, which I believe the huge Youth Olympic Games (YOG) budget overruns amounted to (S$387 million over a budget of S$105 million, with about 70% or S$260 million going to local expenditures which should be relatively easy to budget for). However, as anyone who has played games such as majong should know, to get good at something one needs to "pay tuition". In majong that tuition entails losing money as you learn the niceties of the game and how to read your opponents; in large event organization, it is experiencing the unforeseen, paying for it and learning.
Singapore's narrative is one of surviving. Being small, this entails punching way above our weight. We have done this militarily. In fact we die this in a very intelligent manner, building up fast enough to gain security but quietly enough to avoid reprisals (it also helped that we were between Malaysia and Indonesia who were jostling for power). In this day and age however, survival is a matter of maintaining relevance to the world rather than avoiding annexation. Again we have to punch above our weight.
Our drive to become a world X hub (where X might be "biomedical", "logistics", "water technology", etc) is an indicator of sound strategic judgment on the part of the government. While I feel that the efforts are lacking in terms of execution, the strategy will work as people learn from experience. Organizing large events falls neatly into this framework, and like most of Singapore's major efforts, it seems that there is "tuition" to be paid. The magnitude of the "fees payable" have been alarming (c.f. YOG), there are grounds to argue (shaky though they might be) that when operating on a totally different scale, things change and past experiences are no longer such a useful guide. An organizational structure good for an organization of 100 staff will probably not be as effective at 1000 staff. Whether this holds or not, we are paying tuition to learn, what has to be done is to ensure that we are learning.
It is natural that initial cash flows are negative in a large project, however the net present value of the project should be positive. It is key that our event organizers not be so embarrassed about operating losses that all the lessons learnt are swept under the carpet. These experiences are what we have paid for. I believe the organizers should, with the public and the services sector, pick apart the execution of past large event to distill the experiences that we have paid so much for. This way, we may start getting positive numbers in our cash flows and turn "Large Event Organization" into a profit generating machine.
Now back to the work of unpacking.
Sunday, August 8, 2010
We Need a Clean Slate Analysis of the Economy and a Road Map
I've just watched The Yes Men Fixed the World (P2P Edition). The synopsis:
Economies attempt to increase efficiency by progressing up and right within the production possibilities, where one group can be made better off without making anyone else worse off. It's not possible to stray out of the set of production possibilities (those are "possibilities" after all). Economies can only progress along a continuous curve. Therefore to get over the "Humps" in the Pareto frontier, considerable sacrifice may be necessary. This is not easy.
Free market advocates say that economic shock (disasters) are "useful" for producing economic progress. Economic progress, on the above diagram, entails helping getting us over the humps. Disaster based "shock" enables this by shaking the economy so far from the Pareto optimal frontier (into the production possibilities set) that it ends up to the left and below the hump, from which it can progress up and towards a more improved economy. But is "shock" truly the only way?
Future envisionings exist that show, in reasonable detail, how the options for a possible future, given the current state of technology, would be better than those that exist today. On the diagram, technologists in a world of Region 1 or 2 might be able to envision Region 3. The question is how to progress on a continuous trajectory towards it. (Let's not nitpick how the regions are depicted and whether they are the frontier or the area, I used MS Paint to draw it.)
The fact is, it is politically difficult to move towards it. Asking constituents to make sacrifices is difficult. However, it might be possible if there was a (public) road map with projected progress towards that future (over time) being charted.
We need a clean slate analysis of the economy, independent of where we are today, to show where we can go. Then we need a road map to show in detail how we might get there. Finally, we need to move in that direction with will and conviction.
The one political point I want to make: The situation with renewable energy (as brought up by the movie) falls squarely into this category. On 27 Jul 2010, the US House Majority Leader unveiled the "Clean Energy Jobs and Oil Company Accountability Act" with the two most powerful clean energy provisions missing: a cap on carbon emissions from the electric power sector and a national Renewable Electricity Standard, which would require utilities to generate at least 15 percent of their electricity from renewable sources by 2021. No doubt, this was influenced by the old economy energy firms (fossil fuels) that are now rich with the pickings of their full product life cycles and using these resources in a harmful attempt to extend these life cycles via lobbying. The Aug 2 - Aug 8 2010 edition of Bloomberg Businessweek warn that this will result in USA losing out to China in the renewable energy race. (In the above framework, China's economy might be operating at a point left and below its hump, which its status as a "developing" power might support.)
In summary, a clean slate analysis reveals the possibility and what we must sacrifice, over some time horizon, to get there. A road map is a plan to get there. Political will and awareness of where we are going will get us there. Visibility of where we at all times in the process are will help maintain that will.
- THE YES MEN FIX THE WORLD is a screwball true story about two gonzo political activists who, posing as top executives of giant corporations, lie their way into big business conferences and pull off the world's most outrageous pranks. This peer-to-peer special edition of the film is unique: it is preceded by an EXCLUSIVE VIDEO of the Yes Men impersonating the United States Chamber of Commerce.
Economies attempt to increase efficiency by progressing up and right within the production possibilities, where one group can be made better off without making anyone else worse off. It's not possible to stray out of the set of production possibilities (those are "possibilities" after all). Economies can only progress along a continuous curve. Therefore to get over the "Humps" in the Pareto frontier, considerable sacrifice may be necessary. This is not easy.Free market advocates say that economic shock (disasters) are "useful" for producing economic progress. Economic progress, on the above diagram, entails helping getting us over the humps. Disaster based "shock" enables this by shaking the economy so far from the Pareto optimal frontier (into the production possibilities set) that it ends up to the left and below the hump, from which it can progress up and towards a more improved economy. But is "shock" truly the only way?
Future envisionings exist that show, in reasonable detail, how the options for a possible future, given the current state of technology, would be better than those that exist today. On the diagram, technologists in a world of Region 1 or 2 might be able to envision Region 3. The question is how to progress on a continuous trajectory towards it. (Let's not nitpick how the regions are depicted and whether they are the frontier or the area, I used MS Paint to draw it.)
The fact is, it is politically difficult to move towards it. Asking constituents to make sacrifices is difficult. However, it might be possible if there was a (public) road map with projected progress towards that future (over time) being charted.
We need a clean slate analysis of the economy, independent of where we are today, to show where we can go. Then we need a road map to show in detail how we might get there. Finally, we need to move in that direction with will and conviction.
The one political point I want to make: The situation with renewable energy (as brought up by the movie) falls squarely into this category. On 27 Jul 2010, the US House Majority Leader unveiled the "Clean Energy Jobs and Oil Company Accountability Act" with the two most powerful clean energy provisions missing: a cap on carbon emissions from the electric power sector and a national Renewable Electricity Standard, which would require utilities to generate at least 15 percent of their electricity from renewable sources by 2021. No doubt, this was influenced by the old economy energy firms (fossil fuels) that are now rich with the pickings of their full product life cycles and using these resources in a harmful attempt to extend these life cycles via lobbying. The Aug 2 - Aug 8 2010 edition of Bloomberg Businessweek warn that this will result in USA losing out to China in the renewable energy race. (In the above framework, China's economy might be operating at a point left and below its hump, which its status as a "developing" power might support.)
In summary, a clean slate analysis reveals the possibility and what we must sacrifice, over some time horizon, to get there. A road map is a plan to get there. Political will and awareness of where we are going will get us there. Visibility of where we at all times in the process are will help maintain that will.
Monday, July 5, 2010
Road Congestion: Physical Limits vs Information-based Orchestration
On 1 July, the Straits Times published a report titled "ERP system: From gantries to satellites" describing LTA's intent to invite technology firms to test such a system next year.
The article notes that the new system "will allow LTA to extend its ERP coverage to congested roads anywhere on the island, without having to install more gantries, which cost about $1.5 million each" and that "the system can be adjusted so that motorists pay only if they are approaching a section of congested road. The in-vehicle unit can also be used to notify them that they are about to enter a stretch of road that attracts a charge".
However, a rudimentary analysis of our transportation system would lead one to conclude that given its current characteristics (that is to say: road network, vehicles on the road, etc), road congestion is highly insensitive to information-based methods of congestion reduction such as ERP.
There are physical limitations to the level of throughput a given infrastructure can provide. Even if we were capable of optimally orchestrating traffic (centrally routing all vehicles to ensure optimal performance for the transportation system), a network of heavily jammed roads would be better ameliorated by, for instance, widening a few major roads or reducing the number of vehicles on the road.
In fact, a study of the major means of transportation (bus, train, private vehicle) would clearly show that the current transport infrastructure is operating at or close to its limits. The promotion of information-based systems in tune with building an "information economy", but we should not lose track of reality, bearing in mind that it is the physical system providing the service. When a system is operating near its limits, its capacity should be increased or its load decreased. Only where an information system can be shown to provide a clear improvement in throughput should any investment be made. Currently, both satallite and land-based ERP fail this test.
Contrary to the claims of the July 1 report, it is not the gantries that have hit their limits, it is the road network.
The article notes that the new system "will allow LTA to extend its ERP coverage to congested roads anywhere on the island, without having to install more gantries, which cost about $1.5 million each" and that "the system can be adjusted so that motorists pay only if they are approaching a section of congested road. The in-vehicle unit can also be used to notify them that they are about to enter a stretch of road that attracts a charge".
However, a rudimentary analysis of our transportation system would lead one to conclude that given its current characteristics (that is to say: road network, vehicles on the road, etc), road congestion is highly insensitive to information-based methods of congestion reduction such as ERP.
There are physical limitations to the level of throughput a given infrastructure can provide. Even if we were capable of optimally orchestrating traffic (centrally routing all vehicles to ensure optimal performance for the transportation system), a network of heavily jammed roads would be better ameliorated by, for instance, widening a few major roads or reducing the number of vehicles on the road.
In fact, a study of the major means of transportation (bus, train, private vehicle) would clearly show that the current transport infrastructure is operating at or close to its limits. The promotion of information-based systems in tune with building an "information economy", but we should not lose track of reality, bearing in mind that it is the physical system providing the service. When a system is operating near its limits, its capacity should be increased or its load decreased. Only where an information system can be shown to provide a clear improvement in throughput should any investment be made. Currently, both satallite and land-based ERP fail this test.
Contrary to the claims of the July 1 report, it is not the gantries that have hit their limits, it is the road network.
Friday, May 7, 2010
On Simulations and the Future
Simulations are interesting things. They are the business world's stock tool for understanding and conducting dry dry runs of proposed operational plans. They have little of the analytical beauty of the analytical trajectory of a dynamical system, but businessmen do not bother about matters like that.
The question is whether simulation is a tool that will be able to cope with future demands of it, in view of the future. This little note seeks to highlight some thoughts I had while discussing the matter on the MIT alumni Linkedin discussion board.
Computational Workload
Computational complexity is always a problem. Even when simulating rational human decision making, let's say where a simulated agent has to "make a choice" the simulation solves a convex optimization problem (may be a linear program), solves a dynamic programming problem, or perhaps uses some search algorithm to arrive at a decision. This can be computationally taxing.
Where things are probabilistic, you need about 26500 monte carlo samples to ensure that the probability that the empirical distribution resulting from the simulation is more than 1% off is at most 1%. That is painful.
I recall that on one of the evenings when I was heading home from campus on the "Big Silver Van" one of my housemates quipped that it was interesting how things deemed to be interesting were usually at least in the NP complexity class. This probably would summarize much of the difficulties in embedding decision making into simulations.
Complexity issues hurt and linear speedups and improvements do not look to help as the demand is for growing sophistication. A successful simulation study requires discipline in modeling to avoid being swamped by complexity and ending in failure.
Business Matters
In the business world, simulations make sense of the effects of a proposed set of operations under some dynamics and under uncertainty. Indeed, projects these days tend to phrase requirements to the tone of "... shall report the service level with 99% accuracy" which is an appeal to the use of monte carlo algorithms rather than simulations of the single run deterministic variety.
Of course the bulk of simulations in engineering remain the "this is my structure, here are my loads, will it break?" type, but to a very large extent, problems in that regime tend to be of "low complexity" in terms of the rate at which workload scales with desired accuracy.
An interesting point was also raised on the board:
The Customary Conclusion
Simulation has its work cut out for it, its future success requiring control of both computational complexity and human interface complexity. It will be interesting to see how things go.
The question is whether simulation is a tool that will be able to cope with future demands of it, in view of the future. This little note seeks to highlight some thoughts I had while discussing the matter on the MIT alumni Linkedin discussion board.
Computational Workload
Computational complexity is always a problem. Even when simulating rational human decision making, let's say where a simulated agent has to "make a choice" the simulation solves a convex optimization problem (may be a linear program), solves a dynamic programming problem, or perhaps uses some search algorithm to arrive at a decision. This can be computationally taxing.
Where things are probabilistic, you need about 26500 monte carlo samples to ensure that the probability that the empirical distribution resulting from the simulation is more than 1% off is at most 1%. That is painful.
I recall that on one of the evenings when I was heading home from campus on the "Big Silver Van" one of my housemates quipped that it was interesting how things deemed to be interesting were usually at least in the NP complexity class. This probably would summarize much of the difficulties in embedding decision making into simulations.
Complexity issues hurt and linear speedups and improvements do not look to help as the demand is for growing sophistication. A successful simulation study requires discipline in modeling to avoid being swamped by complexity and ending in failure.
Business Matters
In the business world, simulations make sense of the effects of a proposed set of operations under some dynamics and under uncertainty. Indeed, projects these days tend to phrase requirements to the tone of "... shall report the service level with 99% accuracy" which is an appeal to the use of monte carlo algorithms rather than simulations of the single run deterministic variety.
Of course the bulk of simulations in engineering remain the "this is my structure, here are my loads, will it break?" type, but to a very large extent, problems in that regime tend to be of "low complexity" in terms of the rate at which workload scales with desired accuracy.
An interesting point was also raised on the board:
- "When a sim can let me add and subtract new variables as quickly and easily as a spreadsheet, then I get interested."
The Customary Conclusion
Simulation has its work cut out for it, its future success requiring control of both computational complexity and human interface complexity. It will be interesting to see how things go.
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