What's In A Word: Dictionary vs Translation

What a difference a word makes!

It was Dr. Samuel Johnson's dictionary - which he wrote singlehandedly, bar a few scrawny Scottish helpers, over a period of nine years - which laid the foundation of the English dictionaries that we have today.

Johnson's was not the first English dictionary, and earlier dictionaries were unsatisfactory because they tried to define what a word means, and not how a word has been used or is being used today. An unsatisfactory dictionary tries to fossilise a word in its historical usage, whereas a proper dictionary should try to demonstrate how a word is being used today - which may be very different from the way it was used before.

For me, the one word that has changed drastically in usage is this lovely simple word "gay." I like this word a lot. It tells of a condition in a person that is light and happy, not quite exuberant or just contented. Today, the word "gay" has a heavy sexual connotation.

Johnson's dictionary was significant because it tried to give example of how a word had been used or was being used. Words which had been used before was quite easy for him to discover, by borrowing books from friends and marking them so that his clerks could copy out. Words which were being used could be found out from current publications, and if he could not find one example, he simply gave his own version of the word. The most famous example was the word "Oats: a grain which in England is generally given to horses, but in Scotland supports the people"

The greatness of Johnson's dictionary is to present for posterity the right to use words in the way as we so choose, which then make words living words rather than dead words, as opposed to giving the right over the usage of words to grammaritarians and some external linguistic authority.

So, if one were to do translation, how would one translate. Does one merely refer to the dictionary on the meaning of the word (as one would think of the nature of a poor dictionary) or does one try to understand how the word has been used or is being used and how it now can be used.

At the end of the day, the meaning of a word can be discovered only within the context that it is being used. The word does not define the context; but the context, the word.

It is only by opening words out for variations that we encourage creativity and innovation in the way we think. We can create new words for new ideas but we usually find that what we think is new is not really that new and that it could be the same old thing that now has taken a more modern facade.

If we are not allowed to think freely and express ourselves freely, then we may not be using words to master our thoughts; instead, we may find our thoughts being enslaved by words.

The way we use words betray our hidden innermost feelings about ourselves and how we see life.

Economic Relativity: Stocks & Exchange Rates

So much for the stock market to play the role of risk-taking in order to create a market for the trading of stocks in according to the expectations by investors of their future earnings. The stock market takes risks which ordinary men and women including entrepreneurs with their high sense of business would not even touch with a ten-foot pole. This is, in essence, the idea behind the establishment of the stock market in each country around the world - to help boost actual investments by real investors in order to provide an orderly basis for growth in an economy.

Now, the Malaysian stock market called Bursa Malaysia has its chief executive officer expressing dismay by the low 12% participation by the young 20-29 age group in Malaysia in "investing" in the stock market. He calls for a better business model by the stock market to attract the young.

As a parent, I am appalled by such irresponsible thinking on the part of the manager of a major market in the Malaysian economy. I would not advise my young children to think of investing in the stock market as the way forward in their career in living.

The current dismal state of the Malaysian economy is due to the overwhelming success of the stock market in enticing the best talents and the most precious of our resources into something of a zero-sum game akin to the casino. We have lost the woods for the trees. We have turned the means to investment into the only avenue for investment.

The thinking of the stock market does not jive with that of an economist. In the stock market, inflation of asset value is seen as an investment opportunity, whereas an economist will try to avoid introducing inflationary pressures into the system so that there will not be a huge wedge between monetary values and real values.

Unfortunately, today, expansionary monetary policy is seen not to be inflationary because the increase in monetary values is considered to be stable without much escalation. In economics, a constant rate of increase in monetary values is inflation and an increase in the inflation rate is an escalation of monetary values - both of which are only possible by a constant expansion of the money supply, most often inititated by external flow and later justified by the steady and rapid expansion of loans by banks.

The only fear in this twisted thinking is deflation, the decline in monetary values, because of the difficulty of stopping the price decline - as would be the case of inflation. It is therefore conventional wisdom in economics that we do not try to stroke inflation because we have to suffer deflation later.

But after having encouraged inflation (which we all are quite happy about it, especially those with physical assets), policy makers and politicians now do not allow deflation to occur. There is no downward adjustment to correct for any overshooting of prices in a market run-up in stocks or real estate.

(There is probably universal agreement on such a tacit no-deflation zone because everybody has inflated, the the deflation-ridden economy will be the worst-hit re Japan for the last twenty years.)

Be that as it may, we must recognised that monetary values around the world are all inflated, thanks to the easy money policy - easy because it makes life easy for politicians and those who have made it and do not wish to lose what they have easily gotten.

In economics, we know that the only other relative value that has to adjust downwards to be in some some eqivalence with real values (read: productivity growth and newly invested industries) is the exchange rate.

The policy issue around the world today is the correct adjustments and realignment of the exchange rates which are reflective of the underlying economic fundamentals, in an enviroment when everybody has to adjust downwards.

This policy decision boils down to choosing a scapegoat - the one currency that must appreciate when everybody must depreciate or be seen to have depreciated, in a world of economic relativity.

Exclusiveness vs Oneness

I have often been intrigued by the concept of exclusiveness - the idea that one is different from everybody else - the specialness that one has that other people do not have. How does one distinguishes oneself from everybody else - the idea of being unique.

In the land of the poor, the rich person is unique.

In the land of the rich, the poor is unique.

Even among the poor, it is still quite possible for the poor to compete among themselves to see who is the poorest.

In the same way, among the rich, each will compete with the other to see who is the richest.

But between the apex and the bottom most, if the distance between the two poles can be made large enough, it is quite possible for us to see that among those who are in caught in between, there will be sufficient space between each that makes one different from the other - and hence it is possible to say everybody is unique by being different from the next, no matter how small the difference.

In such a case, then the only truly situation is a tie, where one is the same as another - for that one is unqiuely different from the others by being the same as another - as in identical twins.

It will then be unusual and hence truly unique when a third or a fourth is unique with others - as in identical triplets and quadruplets.

As in the case of uniquely different viruses, we probably should enbark on a method for resolving the problem of naming elements in an environment of all uniquely different elements - a1, a2, a3, a4 - similar like viruses but different as in strands.

In the land of diversity, the only solution to true uniqueness is exclusion - by disallowing the existence of others, or disallowing others the use of the same symbol or word to identify one particularisation.

But, in the land of the happy people, commonness is embraced where none exists - the outside acceptance of similarity is only possible by the blatant discregard of the noticeable differences, banishing into oblivion in the mind by their insignificant of the differences.

Oneness can really only exist in the mind, when the mind accepts the concept of all being the same - even the pimple and the pus are the same, even if they are of grossly different colour and texture.

Paul A Samuelson & the Keynesians

The great economist Paul Samuelson died last Sunday 13 December 2009 at age 94. He brought mathematics to economic analysis along the line of Keynes. His textbook, "Economics" brought him wealth but it was his PhD thesis on 'The Foundations of Economic Analysis" which brought him fame and the Nobel prize.

There are many excellent orbituaries written on him around the world.

Below I will put in some thoughts on what I was taught about his theories, for the purposes of talking about economic analysis in the hope that it will not be taken as an attempt at a cheap shot at a giant at such a sad moment, which this is not. It is about ideas, not person.

Samuelson can be credited for bringing mathematics into analytical rigour in economic theorising. While many major implications can be brought out from the established framework (or paradigm), nonetheless, the danger, in the views of his opponents, was that it prevented people from thinking outside that established box. Here, Keynes' theory degenerated at the initial attempt by Hicks (with his ISLM model) through Alvin Hansen (Samuelson's teacher) to Samuelson into what is now called the Neoclassical Synthesis.

The Neoclassical Synthesis is an attempt to incorporate Keynes' ideas into a Neoclassical model, resulting in a Neoclassical model with Kynesian characteristics, principally in the form of the demand for money function which replaces the demand for loans equation. The rest remained essentially unchanged.

Disatisfaction by the "true" disciples of Keynes over the Neoclassical Synthesis rages in the form of the Capital Theory Controversy which attempts to show the tautology in the Neoclassical construction. If the profit rate is the return on capital, what is "capital" and how do you calculate it without the resorting to the return on capital which is the profit rate and the rate of interest, in equilibrium. Joan Robinson, followed GC Harcourt and then Paul Davidson won't let go.

The capital theory controversy still lingers in the minds of bored Keynesians, while the rest of the world happily ignores this logical inconsistency and runs the global economy down to ground with zero interest rates. Is there no such a thing as "profit" except the extraction of surplus value?

What Is So Sacrosanct About the Stock Market?

Greg Mankiw picked up a piece by his old prof, the one who wrote A Random Walk Down Wall Street, who recently argued that a transaction tax on the stock market will kill the economy by discouraging stock market speculation and hence the inflow of cash into the US to fund its budget deficit. Is the stock market so sacrosanct?

The only major reason for economists to argue that there should be no tax on stock market incomes is that there is no value add in stock market incomes - that the people involved in the stock market do not add any value to the economy. What they are engaged in is merely the transfer of income from one pocket to the other.

But the current argument by the stock market guru that there should no a transaction tax on stock market trading because it will hinder the functions of the stock market.

"Transactions taxes would make most current high-frequency trades unprofitable since they depend on the thinnest of profit margins. Trading volume would collapse, and there would be a dramatic shortfall in the tax dollars actually collected by the government. Market liquidity would decline, bid-offer spreads would widen, and all investors would pay significantly higher costs on their trades."

But brokers do get paid for doing transaction work for investors. But the article argued that transaction costs have come down due to technology and a transaction tax on stock market trading will raise the transaction cost and make that market uncompetitive.

So the argument is really not about whether there should be a tax or not, but how much.

Which means that the stock market is not sacrosanct.

The stock market survives on two major factors in descending order of importance:
1. Value of the companies on the stock market. No amount of speculation will raise that intrinsic value which is based entirely on correct investment and value addition.
2. Liquidity which will arise if the corporate values are intrinsically good and when the central bank becomes silly by pumping loads of cash into the system to inflation market prices which result in a diversion of focus from investment in companies to speculation in the stock market.

We have seen from the Malaysian experience of the 1990s, and the US and Europe today, how an extremely active stock market has ruined the resolve of corporate investors in undertaking proper business plans.

In a highly liquid global market that we are in today, the fear of not illiquidity but lack of investment ideas - which leads to an oversupply of the same old stuff that everybody has already.

Furthermore, the stock market leads to a massive redistribution of wealth (since there is no income generated), and a transaction tax can be seen as a mild wealth tax, on the argument that traders on the markets are savers and investors with the wealth to invest.

A transaction tax will hopefully divert investor focus from the frail financial world to the real economy.

GST & Tax Reform for Malaysia

In the current furore over the GST, I have been having a rethink on the tax regime in Malaysia.

1. It is not a good reason for the government to tax the people for the purpose of building a bureaucracy or to stimulate the economy. The only good reasons are: affordable or free and good quality education and healthcare for everyone, urban public transport, security and law and order.

2. If the government have to raise taxes, how can it do it most efficiently, in the sense of with minimal cost to the government but without overburdening the people to the extent that the economic growth suffers.

3. In the past, the thinking on tax was that the rich should be taxed more than the poor. The progressive income tax regime of today was designed precisely for the reason of redistributing income. The wealth tax and the property gains tax are to redistribute wealth.

4. The current fashion in tax thinking is to tax consumption rather than income. A major reason for doing this is to reduce consumption and encourage income, so that savings and investment will rise. If this is the reason, then income tax should be abolished and be replaced with the consumption tax which is a tax on both goods and services bought.

5. Abolishing the income tax is not that far-fetch an idea. Many big companies are exempt from paying the corporate income tax, for one reason or another, as an incentive to invest. It is just a matter of extending that privilege to the many small companies as well as salary-earning employees.

6. In turn, the GST can be imposed across the board, although there are many potential problems of implementation. (It creates a huge load of paperwork for many small establishments. Presumably, this can be computerised which implies the need to itemise every transaction. The GST is also subject to abuse by establishments who happy impose a service tax and a government tax. There seem to be no enforcement on extraneous charges on bills.) The poor can be compensated by increasing their allowance, if they have any.

7. The GST may not be the main source of revenue. Other sources should be explored, including taxing stock market transactions.

8. In the absence of the income tax, the government can really go into the Public-Private Partnership (PPP) by designing and specifying public projects which the corporate sector or rich individuals can offer to finance.

9. There should also be a freeing up of government restrictions on areas of entry by the private sector, such as healthcare and education, so that more of these services can be privately funded as charities or business organisations.

10. Alternatively, another way to reform the tax regime is for the government to do a 5% across the board - on corporate incomes, personal incomes, retail transactions on goods and services, stock market transactions, without exemptions for big companies. This will really broaden the tax base.

Scarcity & Markets

Economists talk of scarcity of resources and the role of the market in ensuring the efficiency of resource allocation. Is this true in real life?

To a certain extent, scarcity exists when we talk of what is available at our disposal today, and our ability to transform those available natural resources into things we want or desire.

In reality, given what we already know, there is still immense scope for people to produce the things that we want or desire. It is just a matter of unleashing the productive talent, and things will be produced. A whole new world is being created in China just by the stroke of the pen, and the freedom for people to follow their instinct for survival or security.

The efficiency that economists talk about is really the efficiency of production or getting what we want from the same amount of resources. This reflects our technological knowledge.

Of course, market efficiency can be obtained if the market is not controlled so that more output and lower prices can be obtained by consumers as producers compete to survive.

If we have businesses controlling policy, then the tendency is for policy to ensure prices high enough for business to make money, not matter how inefficient they may be.

But the markets we have in the world today is an exchange market. The market is where different producers of different products exchange with each other their products.

The market is an attempt at diversity, to exchange what we have plenty with others for the little or nothing that we have but where they have plenty. It is not an attempt at unity except probably for the price, and even this is possible only under very special conditions.

But the market does not spread efficiency between those who have with those who have not. Those who have not are excluded from the market. They are outside the market. They cannot participate. To participate, they must attempt at production, and hopefully something which they like and which others like as well. They must also be able to increase the production, so that there is a surplus to trade.

There can be no advantage to be obtained by restricting others in production, so that one can have the market. This will merely result in a lower output level.

The only way that restrictions can work is in commerce, where one can trade but others cannot trade. This assumes that both the market demand and supply are available, without any productive work involved. In this case, with market restrictions, market demand may not be sustainable because there is a constant leakage from the system in the form of rent or profits from restrictions, and the tendency is for the economy to go down on a vicious cycle.

A temporary way out of that vicious cycle is by printing money, when the central bank lends to the government or when banks lend to consumers.

A better way out of the vicious cycle is by increasing confidence and investment, aided by banks lending to businesses and investors.