A netizen called out commentator Facebook page Critical Spectator for its misleading post about the Workers’ Party (WP) elected Member of Parliament (MP) Jamus Lim’s quote of economic theory.
Critical Spectator, which is run by Polish national Michael Petreaus, in a Facebook post on 29 July had criticised Mr Lim for using Paul Krugman’s – an American economist – opinion as a reference to his point on Singapore’s productivity growth as well as the politician’s suggestion on using Total Factor Productivity (TFP) to propel wages.
In fact, Mr Petreaus also uploaded an image showing both Mr Krugman’s quote and Mr Lim’s statements on Singapore’s productivity growth.
“You see, both Krugman and Jamus Lim reference a measure known as Total Factor Productivity. It’s basically a tool aiming to dissect the impact of increased input of labor (i.e. people) and capital (machinery etc.) and discover the underlying growth in productivity of the nation (e.g. due to greater knowledge).
“On this basis Krugman claimed that Asian economic growth is a myth and, today, Jamus Lim claims that Singaporean productivity growth hovers around zero. Worst of all, he also claims that whatever growth in productivity did happen it was not reflected in Singaporean salaries over the past decade.
“This is patently untrue, because we know median incomes in Singaporean economy and they have grown by over 55% in nominal and around 33% in real terms over the past ten years, while GDP per capita increased by about 66%. At the same time, productivity – measured by the government as value added per hour worked – has also increased by about one third, as explained by senior minister Tharman Shanmugaratnam,” he asserted.
Claiming that Mr Krugman tends to make “grandiose statements” that later on would turn out to be “completely inaccurate”, Mr Petreaus said it is “worrying” that Mr Lim had used Mr Krugman’s methods and opinions as a reference point guiding WP’s policy proposals.
“As I mentioned before, the problem with someone like Jamus Lim is that he’s not a frothing populist but a sophisticated academic who knows how to pick often obscure economic data points or tools to support his otherwise flawed, shaky political proposals,” he wrote.
Following that, a netizen commented on the post, noting that Critical Spectator has cropped out Mr Lim’s tweets where he has precisely explained on why he had suggested using TFP in Singapore’s productivity.
“In his original post he was trying to state though productivity increased, human capital didn’t because most of the productivity was done by physical capital and because you need to break even on your investment on physical capital, wages can’t rise much,” said the netizen.
The netizen pointed out that there is an increase in wages but not as much as the Gross Domestic Product (GDP), adding that it would be “a very superficial assessment” of the economy if it is solely being measured by median income.
“Is like saying a growing obese teenager who has a high BMI tries to diet to lose weight but instead of going down his weight went up. This may seem a failure at start but it might be a mission accomplished because he didn’t lose weight instead, he gained more muscle than fat loss and had a growth spur due to puberty,” he explained.
To support his point, he also inserted a link to a Facebook post by Yeoh Lam Keong, suggesting Mr Petreaus hear it from the senior economist and strategist at the Singapore Government Investment Corporation (GIC).
He then quoted Mr Lim’s statements in his comment, while saying, “Lastly, if your gonna throw shade on academic economists, can you say the same for Albert Winsemius?”
Critical Spectator responded to his comment by asking him on whether he had even “read the post at all” as it has “specifically described TFP and its flaws”.
In response to that, the netizen listed out the order of the post based on his own understanding. He noted that the commentator page had firstly questioned “the legitimacy of Paul Krugman” by detailing out his false predictions.
“Okay, but that’s attacking the messenger not the message. Also just because someone was wrong once doesn’t mean he can’t be correct at other times right? E.g. Ray Dalio, Bill Ackmen,” said the netizen.
He added that Mr Petreaus had explained the definition of TFP in the second point of his post which stated that TFP is “dissecting the main contributors of productive output”. To this, the netizen asked, “What’s wrong with that?”
“Because, if the main source of productive output is technology and not labour alone then we know that where the share of profits should go to because we need to break even on our investment in technology because if we don’t, it would be giving a higher proportion of the growth wage share to labour which is not justified by the productivity of labour which leads to wage inflation. So I see nothing wrong with TFP,” he opined.
This means that the median income growth mentioned in the Critical Spectator’s post may be due to misrepresenting productivity growth that was originally from machinery capital to labour, said the netizen.
“That means we don’t understand where the sources of productivity and where we should support and what not. This is means we don’t know where which factors of production we should allocate our resources to achieve greater growth. Isn’t that the problem TFP tries to address?” he noted.
Mr Petreaus had also pointed out that the increase in median income and GDP showed the growth of the economy, and even quoted Senior Minister Tharman Shanmugaratnam’s remarks on 7 July, saying that Singapore’s productivity has increased by about one-third over the last 10 years.
“I don’t support it because even if you don’t have growth from domestic consumption or private investment, GDP can still rise due to fiscal spending aka broken window fallacy. I don’t support the notion that GDP gives accurately describes the growth of an economy.
“Also median income rise doesn’t describe the whole situation of the economy it just a metric. There are many other factors involved that’s why like Gini coefficient, social mobility and the income levels of each strata of society,” the netizen stated.
The netizen also noted that Mr Petreaus had indicated TFP as a “bad” measure due to its “probability of inaccurately estimating true capital stock”.
“Please tell me which statistical model doesn’t has a reasonable bandwidth of error? Like even in our past arguments for PWM [Progressive Wage Model], you said that productivity is hard to measure. By that principle, you should say that the PWM is illegitimate,” he added.
Additionally, Mr Petreaus had also commented on Paul Krugman’s “The Myth of Asia’s Miracle”, saying that the economist “drew ridiculous parallels between the growth of modern Asian countries and the Soviet Union of the 1950s and 60s”.
Referring to Mr Petreaus’ comment, he said, “Just because Krugman didn’t predict recent economic situations properly doesn’t discount his analysis of the Asian Miracle. In that’s sense, you are saying that the analysis is dependent on the person, not the methodology and the point is both situations are of different circumstances.”
He then highlighted the distinction between the two explanations on the growth of productivity, saying that Mr Petreaus was actually referring to the “productivity growth of a nation”, while Mr Lim was referring to the “productivity growth of labour”.
“You are referring to growth of a nation, he’s referring to the productivity growth of labour, that’s why if you see his original post, he shows a graph where productivity from human capital level decrease while productivity from technological capital increases by a greater extent leading to a net increase in growth for the nation. It shows that the argument is based on definition of the metrics.
“If annual TFP being low was insignificant to the health of the economy, then why would MTI [Ministry of Trade and Industry] be focused on growing it?” the netizen asserted.
He also cited the Minister of MTI Chan Chun Sing’s oral answer to PQ on total factor productivity which was published on 10 January.
“Though Jamus cited the annual TFP growth was 0.1% from 2008-2019 while CCS says it’s 0.5% from 2008-2018, it shows two things: 1) TFP is a econometric that is taken account for Singapore’s economic growth by MTI, 2) It has been stagnating and MTI intends to raise it (which is what Jamus wants as well)” the netizen explained.