Preventing Floods in Your Garden

A long time ago I wrote to the Straits Times Forum grumbling about (irresponsible/deceptive) subcontractors of property developers who leave all manner of building waste, discarded food containers, wires, and so on buried in the garden plot in landed homes. Furthermore, the garden soil would be low quality clay with a thin layer of top soil covering it. Last year, my dad bought a terraced house along Corporation Walk, and I took charge of the garden. That was when I discovered, first-hand, these shady practices. That is not the point, but it paints the backdrop for this post on small-scale flood prevention.

Clay soil is horrid for planting, digging and draining water. My garden flooded horridly when I first moved in. I did a bit of clay removal last year, which improved the situation, but there was still flooding, albeit acceptable. Today, inspired by the potentially visionary point made by Minister for MEWR Vivian Balakrishnan that a prolonged drought would be more worrying to him than flash floods, I have decided to exercise my mechanical engineering muscle for the first time in real life (fluid mechanics, in particular; I transitioned to being something of an engineer of data-driven decision support systems from my third year as an undergraduate, but still got my degree in mechanical engineering).

Over time, I noticed that one area of the garden drained well, while another was dismally horrid, ponding (*snigger* *snigger*) with even low levels of rainfall. So I decided to channel some of the water from the former area to the latter. Now, a pipe would clog, and I didn't have the material. As a result, I settled for a sand channel. Sand is rather porous and a channel of sand would behave like a pipe. Now, fluid flow through a porous material is governed by Darcy's Law, which basically says that the flow rate is proportional to the gradient of the channel. So I dug a channel with a small gradient, and filled it with sand and prunings (just because), then covering it with some soil.

Long story short, when it rained moderately to slightly heavily just a while back, there was no more flooding. Now, with a little more civil engineering expertise (and a hundred million dollars), I'm sure we can get flooding under control in the city area. All it takes is a suitable application of engineering principles.

Improving the Verification of Credentials for Foreign Professionals

In view of the fact of endemic college application fraud in China and India (supported by a cottage industry of "Application Agencies"), it would not be surprising that application fraud from those countries would extend to the realm of work permit and Permanent Residency applications. In fact, it seems that the most distrustful of college applications from China turn out to be college professors who are themselves China nationals. (I put it down to it being likely that they have encountered the "Application Agencies" on their visits home.)

Perhaps higher verification standards should be used by the Singapore government for verifying the credentials of foreign professionals. The both applications for Permanent Residency and Employment Passes require documentary evidence of degrees and diplomas. This takes the form of originals which are viewed and returned. The high level of professionalism of the fraud industry would make it hard for ICA staff to detect fraud even with their training and experience.

Now, applications for postgraduate studies typically require original transcripts, either with the application or before an offer is made (scans are accepted as a preliminary in those cases). These transcripts are required to have been sent directly from the degree awarding institution to the assessing body at the applicant's own expense (typically less than SGD 20). This additional layer of security might reduce fraud. Or, it might turn out to be another iteration in the fraud arms race. Ultimately, I see a business opportunity for Chinese and Indian university registrars. (Which may end with fraud penetrating the university registrar, leading eventually to fraudulent grades, and finally a painful bursting of the fraud bubble.)

The future has always been bright for the street smart and amoral.

Reimagining the Kampung

When I was an undergraduate, I stayed in on-campus housing. The place I stayed in was set up like a "large apartment" which comprised a corridor flanked by personal rooms with a shared kitchen and bathrooms. The set up resulted in a natural place for hanging out (the kitchen) and private places to retreat to when one happened to feel less sociable.

There is a sense in which the Kampungs of old, or at least my picture of them, were like that. The use of common facilities led to people from different familial units leaving their private spaces and gathering in common spaces to use these shared facilities. While waiting for these to become available or after using them, people would hang around to interact with each other.

Why does this not happen in HDB apartments, landed developments and just a bit in condominiums? To me it seems that there are too many steps to take. Locked doors. Distance. Socializing is not as easy, and opportunities are not so readily available due to more daily functions being performed with private as opposed to shared facilities.

In my undergraduate "home" on-campus, the main door to the "apartment" was secured by "transponder access" (horribly insecure, I know), so those of us staying inside were comfortable leaving our doors open and stroll out to the kitchen to see who was there. I would imagine that a similar process would take place in a Kampung where the village would be "secured" by the property of everyone knowing everyone else (thus, everyone knowing who did not belong and to be wary of them), so homes would be open and people would step out and look to see who was around in some "central plaza". The lack of private facilities would force people into a shared space to socialize. Social interaction, in turn, generates friendships, attachments and mutual assistance. This was what happened when I was an undergraduate too. (Well, there were one or two anti-social people who kept to themselves and we did not reach out to. Amusingly, there are always a few people who keep to themselves in every village.)

I think such a housing concept might work. Multiple families which are not necessarily related sharing a mega apartment with shared facilities. The fact that appliances like washing machines are not fully utilized implies that cost savings (earth savings) will be accrued. The generation of mutual assistance would create an additional social safety mechanism which could supplement public assistance schemes and not suffer from the same "awareness" problems.

There are, of course, (many) implementation issues, but this idea looks interesting and might be good to explore.

Towards a Ministerial Salary Scheme Designed for Inclusive Growth

I would like to talk about developing KPIs that are robust to manipulation. Before beginning, I would like to apologize in advance that this article will be slightly technical. It has to be as KPIs have to be properly designed to be aligned with social objectives (such as "inclusive growth").

This alignment with social objectives has to be done with the maximizing behaviour of individual policy makers in mind. It is thus natural to begin with a discussion on how systems of KPIs are "gamed" by those who are the subject of measurement, since their pay-offs (salaries) are essentially (increasing) functions of the KPIs.

Following the discussion on how KPIs are manipulated, I will cover why KPI manipulation should be taken into account. Then, I will comment on the manipulability properties of the current salary scheme. Finally, principles by which robust KPIs may be designed will be discussed. In the annex, I will run through the process of creating a salary scheme aligned with the objective of encouraging "inclusive growth".

Preliminaries on KPI Manipulation

As a preliminary to what follows, it should be stated clearly that the process of manipulation of a system of KPIs is essentially one of performing optimization to maximize one's pay-off. (Here, the term optimization is used here in the sense of attempting to maximize some pay-off function over all possible decisions.) In practice, optimization is based on manipulating the (policy) levers that one has control over.

Having spoken briefly about manipulation, let us consider "growth". One might summarize all forms of economic and technological engineering as effort directed at two objectives that may be concurrent: (i) improving efficiency to reach the efficiency frontier (where it is possible for every aspect to be improved without making any aspect perform more poorly; "transitioning to a better indifference curve"), and (ii) making the trade-offs that maximize one's benefit. Of the two, only (i) may be thought of as true growth and happens to be the more challenging objective, while (ii) is the task of selecting, from economically efficient alternatives, the one most beneficial to oneself.

Now, we are concerned about policy makers trading something that benefits them less for something that benefits them more. In other words, KPI manipulation. When a policy maker does that to increase his own pay-off, winners and losers are created. In simple economic (game theoretic) analysis (which assumes self-interested behaviour), the pay-offs for those winners and losers do not matter to the policy maker, who is only interested in his own pay-off.

Why Bother?

We cannot be so naive as to assume that intelligent people will not optimize for their own benefit. This will happen, and our policy makers are, at the very least, not stupid. As such, incentives have to be set up such that the maximizing behaviour of policy makers are aligned with social objectives.

To be cynical about the present government, a peg to the salaries top earners generates the incentive to implement precisely two types of policies: (i) those that encourage higher salaries for top earners and (ii) those which trade the welfare of non-top earners for higher salaries at the top. The only defence against this behaviour would be "human goodness" or "the threat of non-election". Game theory and common sense would tell us that appeals to the former are nothing but cheap talk. This configuration of incentives is undesirable. Incentives should be in place to directly support "inclusive growth" (or whatever policy objective is articulated) rather than leaving the objective out of the incentive system (which makes sense to office holders only if it is there for public consumption and is not, in fact, the true objective).

The current and proposed ministerial salary systems are textbook examples of incentive systems which are not aligned with the stated policy objective ("inclusive growth"). Subsequently, I will do a cursory analysis of the current ministerial salary scheme, which I will abbreviate as MSS.

An Analysis of the Current Salary Scheme

One important observation that can be made about the MSS is that some aspects of the growth objective are weighed much more heavily than others. In the MSS case, the ratio of the weight given to the salaries of top earners to those of low-income workers is extreme. Without bonuses (which is based on GDP growth), this ratio is infinity (i.e.: the income of low-income workers do not matter at all). Thus, the underlying optimization problem might be framed (polemically) as such:

maximize Expected Salaries over: Feasible Economic Policies subject to: Probability[Re-election with Comfortable Majority] ≥ 1-δ

An over-simplified, but concrete, (and still deliberately polemical) version of this might look like:

maximize 0.6 Expected Median Salary of Top 1000 Earners (EMS) over: non-negative EMS and Expected Median Salary of Singapore Citizens (EMSSC) where: α EMS + β EMSSC ≤ γ (Efficiency frontier type Constraint) subject to: EMSSC ≥ λ ("Re-election Constraint")

which has optimal solution [EMS, EMSSC] = [(γ-βλ)/α, λ]. This solution informs us that (i) only the bare minimum will be done to "ensure re-election" and (ii) all other economic capacity will be directed towards boosting the salaries of top earners.

It should be recognized that this is a simple model designed to be polemical. However, it highlights the fact that when (intelligent) policy makers optimize for their own benefit, it can negatively affect general welfare unless their incentives are aligned with the general good.

Principles of Design for a KPI System/Salary Scheme

"Inclusive growth" is a policy objective of the "general welfare" type. The other being of the "narrow quantum leap" variety such as "putting an man on the moon by the end of the 1960s". The former entails spreading out resources and the latter entails focusing them. Presently, I'd like to make suggestions of the kind of ingredients that might go into KPIs/salary formulas for policy objectives of the "general welfare" variety.

To ensure that no one is left behind, it is important to ensure that the KPIs do not make it profitable to lower the welfare of one group in favour of another. For instance, with a KPI such as C₁ [Factor A] + C₂ [Factor B], and a technological/economic aspect that allows trading of 1 unit of [Factor A] for 2 units of [Factor B] using 1 unit of "policy effort", unless the coefficient C₁ is close enough to 2 C₂, trade offs will be made that lower one of the factors to its minimum level. (For this example, if C₁ - 2C₂ exceeds 1, [Factor A] will be increased and [Factor B] decreased; and if 2C₂ - C₁ exceeds 1, [Factor B] will be increased and [Factor A] decreased. Also, for the more mathematically inclined, this example clearly brings out how "linear" KPIs without feasibility conditions/veto criteria can be dangerous.)

Trade offs are the essential mechanism by which KPIs are manipulated. (I know of no others and would be keen to learn of others.) If the effort to make a trade off is worthwhile for the self-interested policy maker, the motivation to make that trade-off will exist. This principle has other serious implications in the public sector which I decline to touch on at this point.

Now, the converse to the aforementioned principle (which is also true), is that if the effort to make a trade off is not worthwhile for the self-interested policy maker, the motivation to make that trade-off will not exist. I believe that if growing the pie becomes the only practical means of increasing their rewards and remuneration, policy makers' efforts can be focused to that end and it will be possible to promote objectives like "inclusive growth".

As a rule of thumb, the more broad-based a KPI is, the more effort required to make gains due to trade-offs. Furthermore, a broad-based KPI is precisely what is needed to measure "inclusive growth". (The more mathematically inclined might think of using a function of the minimum of a set of subsidiary KPIs, or a function of the a set of the "order statistics" of subsidiary KPIs, which would require that all/most sub-KPIs rise in order for the parent KPI to rise.)

Conclusion

I hope the forgoing discussion was useful and helped stimulate thought on how to design KPIs or a salary scheme to achieve policy objectives. We have discussed how the ability to make trade-offs allows policy makers to optimize their KPIs without growing the economic pie (or the per-capita economic pie) and how this can be dangerous. It has been suggested that if these trade-offs are no longer easy to make, it would be more profitable for policy makers to work on "increasing the general welfare" (as a chief means for increasing their pay-offs).

I would like to close with a suggestion of a Ministerial Salary Scheme that I believe is more compatible with "inclusive growth" than the existing and proposed ones. I will describe the development of that scheme and what motivates the various components of it. I hope that the principles outlined in this article will eventually be used in the development of an improved (and more rigorous) salary scheme. (The reader should be warned that math will be encountered.)

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Annex: A Proposed Ministerial Salary Scheme Designed for Inclusive Growth

Note that this does not consider MP allowances, which are (rightly) paid over and above ministerial salaries. The salary scheme will be based on a benchmark salary paid to a junior minister, with senior grades getting (arbitrary) multiples of that salary. This benchmark will move in response to changes in economic conditions and the economic performance of Singapore. Let us denote the benchmark salary for the year Y, as S_Y.

Suppose a target salary is computed using a scheme like that suggested by former NMP Siew Kum Hong and call it C₂₀₁₂ (where the 2012 refers to the year of the original benchmark and "C" is for consumption). For those who have not read Siew Kum Hong opinion piece, S₂₀₁₂ is the price of a basket of goods and services that amounts to a decent standard of living for someone of a minister's social standing. Now let C_Y be cost of the same basket of goods in year Y.

I would suggest that a minister's salary be partially inflation adjusted to make it robust to market changes. (This would be one perk of office, and is entirely arbitrary.) Suppose that (arbitrarily) that amounts to one third of the original basket of goods. The rest should move with the wage levels of Singaporeans.

Define the income at the α fractile (highest income among the lowest earning 100α % of working Singapore citizens.) in year Y is I_α,Y, and determine K_α such that 2/3 C₂₀₁₂ = K_α I_α,Y.

So we find that S₂₀₁₂ = C₂₀₁₂ = (1/3) C₂₀₁₂ + K_α I_α,2012 for all values of α, and we can benchmark ministerial salaries as

S_Y = (1/3) C_Y + K_α I_α,Y

for any value of α. However, this pegs salaries to a particular income group, which introduces the motivation to manipulate public policy to increase the incomes of that group. Thus, we should broaden the base.

Suppose α were drawn from the set A = {0.05, 0.06, 0.07, ..., 0.99}. I start from the 5% level to avoid pathological low-income cases (such as refusal to work) and end at the 99% level. Now for any set of positive weights w_0.05, w_0.06, w_0.07, ..., w_0.99 corresponding to the elements of the set A such that they sum to 1 (Sum[α in A] w_α = 1), the following holds: C₂₀₁₂ = (1/3) C₂₀₁₂ + Sum[α in A] w_α K_α I_α,2012. This leads to a fairly broad based benchmark:

S_Y = (1/3) C_Y + Sum[α in A] w_α K_α I_α,Y.

The weights w_α should be reasonably even, perhaps even equal. However, I am of the mind that income inequality should be reduced, so it might make sense for there to be a small variation in weights for instance such that w_α decreases with α and w_{0.05 =} 2 w_0.99.

Unemployment can be incorporated in this framework by including unemployed people in the income distribution. However, care should be taken to not build in the incentive for policy makers to introduce policies that introduce disincentives for home making and other economically valuable but unpaid work. This would require a lot more work to flesh out, so this will be left as an idea.

The final modification might appear a little complicated, but the idea is simple. We would like broad income growth and not income growth focused on the "easiest" part of the income distribution. Thus, we should consider the fractiles which have had the lowest growth since the benchmark year. Since A has 95 elements (95 possible values of α), we could perhaps consider 60 elements every year.

Let G(Y) be the set {I_α,Y/I_α,2012 : α in A} and let B(Y) be the set {α in A : I_α,Y/I_α,2012 is one of the bottom 60 elements of G(Y)}. Let the normalizing constant for the weights used, M_Y := 1 / (Sum[α in B(Y)] w_α). (This ensures that M_Y Sum[α in B(Y)] w_α = 1.)

Now, we arrive at the salary benchmark:

S_Y = (1/3) C_Y + M_Y Sum[α in B(Y)] w_α K_α I_α,Y.

To arrive here, we have done the following:

1. Determine a benchmark standard of living, an associated basket of goods and services and its price in the benchmark year.
2. Split the benchmark salary into an inflation adjusted component (perk!) and a market adjusted component which depends on the incomes of Singaporean workers.
3. Made the benchmark depend on multiple income fractile points to account for the standards of living of a broad range of Singaporeans.
4. Set the weights associated with each salary benchmark to promote the reduction of income inequality, while ensuring that the weights are not "badly skewed". (Note: In effect, this is a weighted average of all the salary benchmarks of item 2.)
5. Decided to use only a sub-set of the elements of A to compute the weighted average. The elements used relate to the income levels which have grown the least since the benchmark year. This promotes the raising of all income levels, and punishes ministers (with stagnating wages) for stagnating wages of their constituents.

Consider the following examples of how the "performance" term (the second term) varies with changes in income. (i) all incomes rise {fall} by 1%, the "performance" term rises {falls} by 1%; (ii) income levels at 60 of the fractiles in the set A remain the same and the rest rise, the "performance" term remains constant (since the worst 60 fractiles are used). These examples illustrate the idea of inclusive growth.

I hope this portion has been informative and interesting. I must emphasize that this is just an example of how to apply the ideas in the forgoing article. However, I hope that such ideas might be used to develop a salary benchmark in a more rigorous fashion.

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Afternote 1: A final element of this scheme would be conditions for when a re-benchmarking can be called for. My sense is that it would be sensible for this to be done after each election. Also, I feel that the President's pay should be entirely inflation adjusted.

Afternote 2: It does strike me that a 1% rise in part of pay for a 1% overall rise in income seems stingy. However, it is arguable that while government policies are able to torpedo incomes, the dominant cause of rising incomes are drive and intelligent action on the part of individuals. To postulate a further bonus for income growth does not make much sense.

The problem with this is that indifference to facilitating income growth might be encouraged on the part of office holders. It this makes sense is to add loss aversion into the mix (c.f.: prospect theory, which led to a Nobel Prize in Economics), where drops in income at the reference fractiles are penalized more heavily than increases are rewarded.

Afternote 3: It is entirely possible to use a similar mechanism to allow salaries to rise to match that of top earners if national income growth targets are met. (Naturally, I refer to stretch goals.) The functional form of such a benchmark, R_Y ("R" for reward), might look like the following:

R_Y = S_Y + (I_Target,Y - S_Y) f(G_Y, G_Target )

where I_Target,Y is some target "top rate" income for the year Y,

G_Y = {M_Y Sum[α in B(Y)] w_α K_α (I_α,Y / I_α,2012) } - 1

is a measure of "inclusive growth", G_Target is its associated (stretch) target and f is a non-negative function that is increasing in the first parameter and decreasing in the second. (e.g.: f(x, y) = Max(0, x/y)² or f(x, y) = Min(Max(0, x/y)²), Max(0, 2x/y - 1)) which is more reasonable.)

Afternote 4: It is appears that the idea of designing KPIs to make effortful manipulation non-profitable has not been mentioned in the academic literature. I would like to pre-emptively coin the term "friction" for it.

Coordination Problems and Approval Voting

I came across the following abstract. It is not too technical, and highlights the coordination problem that Approval Voting solves (i.e.: vote splitting leading to a strictly inferior outcome for most voters).

This paper shows that information imperfections and common values can solve coordination problems in multicandidate elections. We analyze an election in which (i) the majority is divided between two alternatives and (ii) the minority backs a third alternative, which the majority views as strictly inferior. Standard analyses assume voters have a fixed preference ordering over candidates. Coordination problems cannot be overcome in such a case, and it is possible that inferior candidates win. In our setup the majority is also divided as a result of information imperfections. The majority thus faces two problems: aggregating information and coordinating to defeat the minority candidate. We show that when the common value component is strong enough, approval voting produces full information and coordination equivalence: the equilibrium is unique and solves both problems. Thus, the need for information aggregation helps resolve the majority's coordination problem under approval voting. This is not the case under standard electoral systems.

The conclusion the authors arrive at is not surprising (though the math might be novel, noting that the journal it is published in is regarded as top-tier in the economics establishment).

In the article, the benefit the majority perceives for the two preferred candidates is modelled as a combination of a "common value component" (with different values for the majority and the minority) and an "individual component".

What the authors conclude is that when the "common value component" for the majority is "large enough", then the use of approval voting produces a outcome with a perfectly coordinated majority (as if there were perfect information) where the candidate with the largest number of expected (approval) votes is the majority candidate preferred by more (majority) voters.

The intuition behind it is that the "common value component" serves as a signal of the possibility of a bad outcome is the majority does not coordinate itself. When the inferior outcome is a threat, the majority unites; when it is not, the majority falls into partisan voting.

The citation information of the article is as follows: Bouton, L. and Castanheira, M. (2012), One Person, Many Votes: Divided Majority and Information Aggregation. Econometrica, 80: 43–87. (Here is a link to a recent pre-print.)

On the Ministerial Salary Review

The recent ministerial salary review has sparked substantial discussion on the principles upon which political leaders should be remunerated as well as how this remuneration should be quantified. The Terms of Reference (TOR) of the committee appointed by the Government to perform this review stated that they were to (i) "take into account salaries of comparable jobs in the private sector and also other reference points such as the general wage levels in Singapore", as well as (ii) to recommend Ministerial salaries at "a significant discount to comparable private sector salaries to signify the value and ethos of political service".

It can be said that the committee did well within the ambit of their TOR. They proposed technical improvements such as reducing the volatility of the benchmark by basing it on a larger pool of top earners in the private sector and a slightly better metric for national progress which does not rely entirely on Gross Domestic Product (GDP), itself discredited as a measure of the size of a modern economy. Their report is available here. However, it is clear that their proposals were not well received by all. Many recent commentaries on the subject opine that the proposed ministerial salaries are still too high, and also that the TOR of the committee were too limiting and essentially presupposed a salary structure.

The intent of this article is to summarize the various positions taken on the ministerial salary review. I will compare the proposals of the government appointed committee (henceforth, GAC) with those in the November 2011 report by the Singapore Democratic Party (SDP) and the positions taken by the National Solidarity Party (NSP), those of the Reform Party (RP), those of the Workers' Party (WP) as well as those of others.

A Comparison of Proposals

I begin by comparing the guiding principles behind the two reports proposing systems for ministerial remuneration. These are presented below and they could not be any more different.

Guiding Principles
GAC	SDP
Take reference from comparable jobs in private sectors and other reference points. Recommended wage levels should be at a significant discount to comparable private sector salaries to "signify the value and ethos of political service".	"Place greater emphasis on public service." Propose a system that promotes transparency and accountability.

It is apparent that the TOR of the GAC greatly restricts the kind of solution that the GAC can present. At first glance, one might assume (correctly) that the resulting report would recommend a refinement of the current system and a tweaking of the parameters therein to incorporate the "significant discount" stipulated in the TOR. It turns out that this happens to be the case.

The SDP report, in contrast, begins by surveying practice in selected countries (with healthy Corruption Perception Indices) and distilling the principles underlying those remuneration systems. This methodology, essentially presupposes that ministerial salaries will not be pegged to those leading earners in the corporate world, but rather to either general wage levels or to salaries in the civil service. The recommendations of the report reflect this, adopting the former peg. In addition, the SDP report sets out to propose a system that promotes transparency and accountability, which is an institutional objective. The GAC report, however, does not include such an objective in its TOR and, as such, does not report on this matter.

The following table summarizes proposals on basic pay made by the GAC, SDP and others.

Proposals on Remuneration
GAC	SDP	NSP, RP, WP, Others
Pay for a entry-level minster (MR4) with good performance pegged to 60% of the median income of the top 1000 in the private sector. Allowances of MPs and salaries of other political appointments as multiples of the MR4 salary level. President's monthly salary will be set to be equal to that of the PM, but no performance bonuses will be given. No pensions.	Allowance of a Member of Parliament (MP) should be pegged to ten times the mean wage of the bottom 20th percentile of the workforce. Salaries of ministers and the president to be pegged to MP allowances.	(NSP) Median wage as a benchmark. (WP) Salaries of ministers should be pegged to MP allowances. MP allowances should be pegged to the salaries of divisional directors in the Civil Service. (RP) Small fixed component with larger variable component linked to a broader set of KPIs. (RP, WP) Introduce deferred components to address the time lag in impact of policies.
MP: $192,500 Minister of State: $770,000 Senior Minister of State: $935,000 Minster (MR4): $1,100,000 Minster (MR4): $1,100,000 Minster (MR3): $1,320,000 Minster (MR2): $1,540,000 Minster (MR1): $1,760,000 DPM: $1,870,000 PM: $2,200,000 President: $1,540,000	MP: $168,000 Cabinet Minster: $504,000 PM: $672,000 President: $756,000 (It is clear that these numbers are intended to be indicative, so the same resolution as in the GAC's report is not necessary.)	(Former NMP Siew Kum Hong) The salary should be enough for ministers to maintain a reasonable lifestyle. i.e.: "comfortably cover mortgage payments for a reasonably-priced landed property in a reasonable location; payments for 2 cars for the family; education for a minister’s children (including overseas education); some retirement savings; and so on." This will be politically defensible and allow the minister to do his/her job without undue financial distractions.

There isn't much to say about the proposals by the GAC. As previously mentioned, the report proposes some technical improvements but does not deviate much from the pre-existing system. The underlying assumption that ministers sacrifice high corporate salaries (in the non-government-linked private sector) requires proof in the form of leaders from private sector taking pay cuts to serve as ministers. Only given such proof would the opportunity cost argument, underlying the system proposed, be acceptable. While the absence of such proof does not demolish the argument, it significantly weakens it.

The SDP report, having surveyed international practice, highlights that ministerial salaries are typically not pegged to those of the highest wage earners, but rather median incomes of citizens or to those of certain ranks in the civil service. It proposes pegging MP allowances to the mean wage of the lowest 20% of earners in the workforce and pegging ministerial salaries to MP allowances to link living standards of ministers with those of their constituents.

While I feel that this is a reasonable proposal, it is, like that of the GAC, entirely arbitrary. In this respect, a proposal by former NMP Siew Kum Hong strikes me as a more realistic method for arriving at numbers. He sketches how to ensure that a minister's salary should support a certain standard of living (as a function of his/her rank), which amounts to a system which will be simultaneously politically defensible and allow the minister to do his/her job without undue financial distractions. It also links the living standards of ministers to the prevailing cost of living.

Moving on, the following table summarizes proposals on performance bonuses made by the GAC, SDP and others.

Proposals on Performance Bonuses
GAC	SDP	NSP, RP, WP, Others
Annual Variable Component: up to 1.5 months Performance Bonus: up to 6 months (good performers typically get 3 months) National Bonus: up to 6 months	Discontinue variable bonuses.	(NSP) Include a variable component tied to national vote share, vote share being a "composite KPI, encompassing all issues that Singaporeans care about" (RP) Small fixed component with larger variable component linked to a broader set of KPIs. (RP, WP) Introduce deferred components to address the time lag in impact of policies.

The National Bonus Matrix (below) gives the payout levels for the National Bonus proposed by the GAC. The 100% level for each component corresponds to a payout of 0.75 months for a maximum total National Bonus payout of 6 months. Notably, it has been argued that the bonus targets are too easy to meet.

The SDP report recommends no performance bonuses as ministerial pay is remuneration for "public administration performance rather than private sector achievement". This argument is somewhat unconvincing. On the other hand, it might be argued that a well selected peg to incomes incorporates bonuses in the salary as income growth increases pay for ministers. (Furthermore, income growth is strongly positively related to growth and the standard of living.) I am under the impression that they have, in fact, made this alternate argument after the GAC published its report. However, I can't find a statement to that effect on the SDP website.

I feel that some element of pay for performance should be present. However, it should not be along the lines of the National Bonus which I feel is, to put it frankly, wimpy and uninspiring. Is an unemployment rate of less than 3.5% truly a stretch goal? A broad-based National Bonus would incorporate the diverse interests of the various groups of Singaporeans. One might develop such a bonus scheme though doing a massive survey of Singaporeans and distilling all that is important. Such a bonus scheme would be very broad based and robust to gaming, leading to office holders giving up gaming the system in favour of pursuing truly inclusive growth. Such a scheme would not deter public spirited individuals from stepping forward, but it might cause apprehension in those who are more concerned about easy money.

Furthermore, I believe that individual performance bonuses should be split into a discretionary component (decided by the PM) and a well defined KPI-based component. To properly measure relevant performance, the KPIs should be individualized based on the mission of each minister's ministry. Such KPIs might be easy for ministries like Transport to develop, but good KPIs are not so easy to develop for those such as Education. This is a challenge that I cannot shy away from. Furthermore, noting the (possibly long) time lags associated with the introduction of a policy and its impact, deferred payouts are not unreasonable and should be considered.

Finally, I come to the institutional proposals that have been made. Notably, the GAC makes none since their TOR makes no mention of institutions.

Institutional Proposals
GAC	SDP	NSP, RP, WP, Others
	Establish independent salary commission. Ministers to make public, through the commission, their commercial interests, shareholdings, directorships and other financial interests.	(NSP) Ministers to make public, through the commission, their commercial interests, shareholdings, directorships and other financial interests.

A major thrust of the SDP report are recommendations to the build government institutions that are robust to misbehavior. Aside from the recommendation to set up an independent salary commission, the SDP report also recommends that the Corrupt Practices Investigation Board (CPIB) be moved out of the Prime Minister's Office and be made directly answerable to Parliament. I agree with these proposals. Strong institutions provide an important layer of defence against a misbehavior and are important to have for a well-functioning government.

Other Comments

While income from directorships are included in the tax returns used to estimate the incomes of top earners in the private sector, directorships for ministers would provide additional income over their salaries. This provides an easy means to circumvent the pay cut. In fact, additional board appointments in Statutory Boards and Government-Linked Companies might be easily used to increase effective incomes. This is clearly open to abuse. I would regard service by ministers on the boards of Statutory Boards and Government-Linked Companies to be an important part of government. As such, no additional remuneration should be given to ministers for their service on such boards. In addition, to avoid conflicts of interest and unseemly chasing of private sector board positions, ministers should not be allowed to take up board appointments in private sector companies.

In addition, democratic values might also be a factor in remuneration. A "re-election top-up" for ministers who held ministerial positions in the last term could be a component of remuneration that reflects whether the electorate want a minister to continue as a minister. (This would be equivalent to a "freshman discount".) The NSP has made a similar proposal, noting that vote share was, in effect, a composite KPI. In contrast to them, I think it should be an element of basic pay.

Conclusion

This has been a somewhat long article (for a blog), and I thank the reader for joining me up to this point. I have summarized notable proposals for the review of salaries and presented our own perspectives. I hope that this has been interesting and/or useful.

In closing, I would like to quote a paragraph from the citation for the Man of the Year award by The Guardian (Nigeria). I think this is fitting as it would be ideal for our national leaders to be men and women who are, to put things in local public-service lingo, of "Man of the Year calibre"; men and women who leave lasting positive legacies of thought and action; men and women who are, simply, great:

Greatness is an attribute much in retreat in our society these days. But it is the quality that is imperative for a nation, for a people to make progress. Greatness is the depth of character that is unswayed by material attraction and superficial rewards, especially of the sort that is flaunted by persons of lesser pedigree, and craved by many, including sundry jobbers and petty crooks. Greatness is the strength to say no when everything and everyone else seems swept away by a certain madness that benumbs the senses. Greatness is the ability to look past the present and see beyond the future. It is the courage to envision a better society, to insist on what is right, on what is proper to realize that better society.

Comments on the Education and it's Goals

What are the immediate aims of education? Do we seek, through education, to (i) create good workers, (ii) equip the young to become good citizens, or (iii) place them on the path to a flourishing life? Presently, to pick any one of these options would require a polemic to follow. I'd like to avoid that. Also, rather than delve deeply into operational methodology in a field which I'm no expert in, I'd like to engage in more high level commentary.

Education has multiple objectives, the service of which can have differing impacts on the interests of various parties in that society. They maybe described in terms of preparation for participation in different classes of activities. Analogous to the list above, they are (i) preparation for participation in the productive economy, (ii) preparation for participation in politics, and (iii) preparation for immersion in the world of experience. Allow me to introduce them in reverse order.

Preparation for immersion in the world of experience is, by no means, the actual immersion in that world of experience. There is no polity with the resources to run an effective educational program seeking to do that (ostensibly). Rather, this is about broadening horizons so the young can, later, pursue experiences which will enrich their lives and inform their major decisions. This requires that the classroom be connected with the world at large. There is a lot more to say about this, but I'd like to go on to the other two.

Preparation for participation in politics means equipping the young with the basic skills necessary to discern the merits of competing policies. That is to say, it is about basic logical and statistical reasoning, as well as bringing critical thinking to any proposal. It also entails teaching the young that they often should assess the veracity of evidence and the credibility of sources, that is to say, to have sufficient awareness not to be played for a fool. In a sense, this would be incomplete without some immersion in the wider world, which would give a perspective on different socio-economic environments and the outcomes arising from the policy decisions that have been made in each locale.

We now come to the element of education which most think about when sending a child to school: preparation for participation in the productive economy. This entails instruction in the foundational building blocks of technical and business knowledge. It should be noted, however, that without a dash or critical thinking and exposure to the wider world, such education would not be able to effectively prepare individuals to be innovators or good leaders. Depending on where a society is on the ladder of development, the capacity to think critically (and hence, innovate or lead well) may vary in importance from vital to good-to-have, and even to better-not-to-have.

At this point I would like to close. It is not my place to recommend some detailed allocation of effort between these three goals of education. However, it is important to have clarity on the societal goals that underlie the need for education. With that, a program can be crafted that takes precise aim at those goals, and, with sufficient resources fueling it, will achieve the goals set for it.

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Afternote: If a knowledge-based economy is sought, then effort has to be dedicated to all three aspects, the second and third especially. While achieving the third goal might be said to be simple, achieving the second is very difficult, requiring deliberate effort from both educators and their charges. Singapore is taking steps to improve on its historically horrid record on the second goal, so it would be interesting to see the state of things in a decade.