LTA and regulatory capture? HSA are you listening?

A week ago in the Sunday Times Senior Correspondent  Christopher Tan write a nice article about the recent SMRT wayang and the LTA, raising the issue of a regulatory capture occurring between the transport regulator LTA and the transport industry.

The concept of regulatory capture is very much assocated with Economics Nobel Laureate George Stigler. It refers to the type of government failure when a public sector regulator has a cosy cosy relationship with the regulated service provider, to the extent that the regulator becomes a promoter of the regulated rather than a protector of the public needs.

Is the LTA a victim.... or are we, the public, victims of the regulatory capture between LTA and the transport industry.

This is actually not an isolated problem affecting the LTA, but can be seen to exist in many of Singapore's regulators.

The HSA (Health Sciences Authority) for example may be in such a predicament. Formed in the past from all the disparate MOH subunits in the Ministry of Health that the MOH wanted to decant from the Ministry, the functions of the various parts of the HSA range all the way from service provision, regulatory and promotional. Regulatory capture?...certainly many opportunities for this to develop in the HSA. Successive Board Chairmen and CEs have not made any attempt to deconflict all these functions, choosing instead to keep the easy and cosy relationships which made their work easier. However, unless this regulatory captures are dismantled, one has to question to what extent public needs are sacrificed to meed the needs of the industry.

By the way, George Stigler was also well known in medical circles for his attempt to optimize the daily recommended diet. Like all economic solutions, the result was totally unpalatable.

Death blow to the idea of gene patents

Finally!

In a landmark ruling, the US government has finally come out to declare that patent genes are not legal. This is the tail-end of a struggle which began earlier this year with Myriad Genetics claims to the breast cancer genes BRCA1 and BRCA2. No doubt Myriad will appeal the ruling. And they have a lot of muscle on their side, given that another 2000 or so genes are also under patent cover elsewhere, with an industry worth billions of dollars at stake. Also covered under the ruling are diagnostic tests based on gene sequences.

This blogger cannot be more pleased with the ruling.

Hopefully it may also recalibrate the research funding towards more understanding rather than just chasing after patents and the fast buck.

Lilly Singapore Center for Drug Discovery gets the chop

In 2001 the EDB inked a deal with Eli Lilly to set up a research facility for systems biology in Singapore. Along the way the systems biology bit was morphed into a Center for Drug Discovery. Now after 8 years, Eli Lilly has given the Center for Drug Discovery the chop. About 130 jobs will be on the line, although it is not clear how many of these jobs are local jobs, and how many are 'foreign' talents.

The EDB has a mission to bring in big names to 'buzz up' the local R&D environment. For this it has been given a fairly massive war chest. The strategy appears to be to throw money at big named companies to entice them to set up research facilities in Singapore. Create a buzz, has been the buzzword. Eli Lilly was not the only company to have tasted of these low lying fruits. Now after sampling these fruits for 8 years Lilly has decided that it is better off elsewhere, especially after the EDB grants wear off.

I am personally not so convinced of the EDB's strategy to just throw money at these companies for dramatic short term buzzes. I am unsure how much real benefit follow from such extravagance. A high end research facility employing how many locals? Did the research facility really benefit the local research environment; really result in long term enhancement of the local research infrastructure? I am more than skeptical. The money could have been better spent developing real quality in home grown efforts. Methinks this would have had more enduring effects than the printing of glossy annual reports.

Who audits the EDB, I wonder?

Alan Greenspan - ''Savant Idiot''?

Alan Greenspan

The title of the post is taken from Michael Thomas' op-ed in Forbes.com about the iconic former US Federal Reserve Chairman Alan Greenspan, who yesterday admitted before the House Oversight Committee to having made mistakes in regulating the financial markets. [ A savant idiot, according to Thomas, is unlike the idiot savant, "... one who is festooned with credentials, diplomas, laurels and prizes both professional and academic, who pontificates and expounds impressive-sounding "truths" and explanations--what a friend of mine used to call "chinstrokers"--that in the fullness of time and markets prove to be utter b.s. The idiot savant produces substance out of apparent ignorance; the savant idiot produces ignorance from apparent substance.]. His 'mistakes' benefited many during the boom past years, but have led to the 'worst financial crisis in living memory'. Once regarded as the 'greatest central banker' of this generation, Mr Greenspan has fallen from grace, and has increasingly come under attack as the financial crisis unfolds on a daily basis, revealing its roots to his flawed policies of deregulation. Clearly, all this was due to US fiscal imprudence.

But Mr Greenspan's folly is related to something much more insidious. For many years the world has very much admired the US's freewheeling spirit which has led to the development of the world's largest economy. It's dynamism and spirit of entrepreneurial adventurism, has been the envy of many a developing country, including Singapore. Mr Greenspan's philosophies with respect to the economy and financial regulation, although drawn from Ayn Rand's views of laissez faire capitalism, should be seen in this larger socio-political context. While this free-wheeling individualistic culture has inspired and led the world for many years, its negative consequences have become more apparent in recent years as US self-centredness repeatedly lead us into crisis after crisis.

What lessons for Singapore? Apart from having to deal with this engulfing financial tsunami (interesting article here from across the causeway, NST), Mr Greenspan's follies should perhaps give us something to think about. Perhaps the US model is not necessarily the best model to so blindly emulate. The US, for the moment the world's largest economy and much envied epitome of wealth and capitalism, does not clearly hold a monopoly on common sense, ability and wisdom. Otherwise, Greenspan's folly will be Singapore's.

We have too easily and comfortably just followed the US model, imagining it would lead us into roads paved with gold. Perhaps the time has come for us to re-evaluate that strategy. In this tsunami, some Asian paternalism and clear regulatory leadership, seems much more comforting than the free-wheeling, everyman-for-himself culture the US has tried to foist on the world.

Secondly, despite the supposed openness of the democratic system the US is so proud of, there was far too much invested in the wisdom and authority of just one man, the Federal Reserve Chairman. Because he had assumed such a elevated stature and reputation, few had the academic strength to challenge his assumptions or to overrule his decisions. As a result, his assumptions and ideas about the superiority of the free market system held sway even as the bubble grew. None had the temerity to deflate a bubble that was on the verge of bursting.

We should therefore be cautious about investing too much power in the personality and/or the intellectual strength of one man, or some small exclusive group of insiders. No one person knows everything. While a narrow power pyramid may make for swifter decision making, it also predisposes to tsunamis of a different sort, if the narrowly perceived wisdom proves wrong.