It is appropriate to consider whether the pension scheme should be reintroduced as well. Operating both a staff provident scheme for new staff and a pension scheme for old staff leads to confusion over the purposes of deferred compensation. The deterrence incentive of a deferred compensation scheme is an important disciplinary tool that governments have over their civil servants. It should not be merely a retirement benefit.

Has Hong Kong lost its magic? The old magic kept the economic and social policy agendas delicately balanced through deft political fine-tuning. The new order has tried but we have not found the magic in a political system that is still in transition.

The most obvious and disastrous outcome of these circumstances has been the decision to adopt a system of proportional representation in elections to the legislature. This has created conditions that encourage and foster the fragmentation of representation. An aggregation of public opinion was difficult to begin with it but it has now become an impossible task. Instead of finding a proper balance for a new set of economic and social policy agendas, it produces permanent disagreements among sectional, narrow and self-serving interests that dig in their heels and harden their positions. Society becomes more politically divided over time as disagreements lead to policy stagnation. Unresolved economic and social issues pile up and society becomes more divided not only economically and socially, but also politically.

Social service providers, interest groups, and political advocacy groups perceived these changes as a threat. They instinctively favored the injection of more public resources in the old MacLehose tradition, and they were deeply suspicious of and hostile to the government’s new proposals to re-engineer service delivery and social organizations. The government’s approach of reengineering the social policy agenda and preserving the balance between the economic and social policy agendas turned out to be incredibly difficult to implement. In the end the government had to aim for compromised and limited goals.

In the area of economic policy the British colonial government was committed to free and open markets, limited government, low taxes, light handed regulation, and respect for private property rights. In the area of social policy it developed a social welfare system in which education, welfare services, health care, housing and other areas were to varying degrees based on the British model of relying on both direct public provision and subsidies to non-profit voluntary organizations. Any excessive aspiration for creating a lavish welfare state was kept in check, not only because it threatened fiscal prudence, but also out of fear it could lead to an appetite for greater participation in political life. . . . The transition to a more open access political system promised under the Basic Law has redrawn the terms of engagement between the social and economic policy arenas. The balance in the tug of war between the economic and social policy agendas has been tilting against the economic agenda; positive non-interventionism is increasingly under attack.

The economic opportunity presented to Hong Kong through China’s rise and opening would create dislocation and disruption in our own community. Amidst rising prosperity there would be losers and laggards. These people would not be able to partake in the new opportunities. Their condition would have to be addressed so that it would not present an obstacle to future economic progress, as they gained a stronger political voice under an increasingly more open local political system. Bold and visionary choices would be required to address this situation. The aim would be to achieve three goals: (1) manage continued economic prosperity as an open city through dual integration with both the Chinese economy and the world economy, (2) attain shared prosperity within the community so that populist politics would not become overly divisive, and (3) nurture ever widening opportunities for mutually advantageous cooperation between Hong Kong and the Mainland for “one country, two systems” to have growing vitality.

The economic life of the black people subsequently took a turn for the worse and their political life was not improved. A century had to pass before racial equality and the black vote would be taken up seriously again as a policy concern in America. . . . . The movie Lincoln shows the President at his best not only as a master heresthetician but also as a politician struggling with the enormous moral burden of working out a solution to a colossal and almost impossible challenge.

Rhetoric is thus merely the linguistic expression of heresthetics, with manipulation and misrepresentation revealed in language. Heresthetics cannot be avoided if collective decision-making has to take place given that the common will is a fiction. In modern economic language it is the consequence of the intransitivity of social preferences.

Rather than focusing on the morality of the slavery issue, Lincoln’s role in American history should be seen in the context of other historical shifts. . . . . In 1860, Lincoln was swept into power in the most momentous election of American history that ended almost 60 years of Democratic dominance over presidential elections. The Republican Party would hence dominate American presidential elections for the next 72 years. . . . . Passage of the Thirteenth Amendment . . . . ushered in the Republican era that laid the foundations for America’s rise to become the greatest economic power in the twentieth century.

Research studies on the disincentive effects of generous welfare programs are few and should be undertaken. Today society is poised to expand these programs further amidst concerns of rising poverty and a widening income and wealth gap. This should be undertaken with caution to avoid creating even stronger incentives for individuals, especially young workers, to withdraw from the labor force.

We now know that using household income to measure income inequality and define poverty has many flaws. On balance Poverty Line B is preferable to Poverty Line A for one basic reason. Comparing individuals and households of the same age cohort is far more likely to be meaningful because we are comparing households with their peers who are at the same stage of their life cycle, have grown up in the same era, and have the same vintage of schooling. Age is the better choice for anchoring the poverty line.

There is reason to be immediately concerned about this. Some of the heaviest construction works for the ten major infrastructure projects will be in full progress this year. A labor shortage due to the low productivity of local construction workers will create a major bottleneck for satisfactory progress in these works. This will add to the burden of completing planned housing construction in future as announced in the Chief Executive’s Policy Address last month. Unless the importation of construction workers is planned to help keep these current and past ambitious projects on deadline, they are unlikely to be completed successfully on time.

In the long term, Hong Kong needs policies that have a good understanding of how poor households are formed and what incentives and interventions can help them exit poverty. Passion has taken society to this stage. If genuine progress is to be made, then cool heads and apolitical analysis is vital, for otherwise, we would have learned nothing from the greatest failure in humankind’s attempt to alleviate poverty – that of America’s Great Society Program.

Anchoring the poverty line on age provides a fairer yardstick in identifying those who are truly in poverty. It also avoids the arbitrariness inherent in comparing households who are at different points of their household life cycle. Age determines to a large extent household size, but it is not influenced by household size and other factors.

We found that in the period 1976-1996 never-married women earned an average of about 12.8% less than never-married men per month. During 1996-2011, their pay differences in monthly earnings had dropped to around -1.4%; representing a narrowing of 11.4%. But given that the estimated -12.8% pay difference is not a large number, the adverse effect of sex discrimination on pay cannot have been very large before 1996. Today we have reached the stage where single women are getting higher pay than men. It is no surprise that more men are staying home. The significance of these developments is unknown and has hardly been studied. What can be concluded is that sex discrimination in the labor market is unimportant today. Given that women still continue to have disrupted careers due to marriage and fertility they will probably still lag behind men in senior positions. But the gap will continue to narrow as marriage and fertility rates continue to fall and women’s education surpass men’s.

Enhancing and protecting family investments in children is central to China’s long-term economic vitality and growth, and to rebalancing its economy away from investment and towards consumption. Important steps in that direction may include reforming divorce laws, repealing the one-child policy, liberalizing banking and financial markets, and supplying more low cost housing using the Singapore approach (not the Hong Kong approach). In Hong Kong and on the mainland, state intervention through marriage laws, government housing programs, financial sector regulations and old age retirement schemes have had an incredibly large detrimental impact on how families save, have children and invest in them. Fortunately the family is fighting to survive for there is no other alternative. The experiences of the Western industrialized economies offer lessons on what to avoid, not embrace as many in Hong Kong think.

The essential division of labor between spouses in a family is the production of “own children”. It cannot be simply dismissed. On this issue there is a sea of difference between same-sex and opposite-sex marriages. . . . the family is man’s institutional creation to provide the best chance for this desire to be fulfilled so that the interests of future generations can be safeguarded. Marriage is the contractual arrangement that provides the best protection for the family to survive and thrive.

Providing data in a convenient form is an enabling approach to supporting industry, and it is an appropriate role for government to perform. . . . The purpose of a competition policy is to promote a more vibrant market so that more economic activities are encouraged, especially innovation. The purpose of a competition bill should not be to penalize existing businesses and increase their cost of doing business. Will government policy focus on lowering barriers to entry, please?

Friedman preferred always to offer people alternatives without compulsion, and favored a competitive provision of such services rather than a public monopolistic provision . . . believing that poverty alleviation should be separately dealt with rather than bundled with compulsory public retirement insurance schemes. To tackle poverty Friedman proposed using . . . directly with income rather than indirectly with subsidized services. Friedman believed it was not fruitful to convince politicians of his ideas; rather it was the people who should be convinced, who would then tell the politicians what they must do to keep their jobs.

If politics is primarily a game of competing for the right to make income transfers between social classes, then an enormous amount of time and resources is spent on redistributive activities. Things get even worse when the transfer goes to the politicians themselves or their narrow constituencies. . . . Under socialism a larger share of the economy is in the hands of the government than under capitalism. This only makes rent-seeking activity and redistributive electoral competition even more rewarding and vicious as more resources are in the control of government. . . . Without a capitalist engine to generate growth, zero-sum politics could cause an economy to go backwards.

It is a mistake to believe that the minimum wage helps low-income households. . . . the workers . . . to a lesser extent even among the high-income households . . . For Hong Kong to genuinely address poverty, it is far more important . . . to study much more comprehensively the real incidence and causes of poverty and not let politics get in the way. The provision of a basic income is a far better policy than a minimum wage. This should be considered in Hong Kong.

The market provides a mechanism to sort people into different jobs. The minimum wage destroys this important function for low paying jobs. Increasing the minimum wage coverage to more workers would further enlarge the damage to the economy. It simply creates a race to the bottom for a larger number of enthusiastic workers.

The government should make clear that it has no intention of adopting a universal social pension scheme and rebuke those who continue to advocate such irresponsible actions that harm society’s intergenerational compact. Unfortunately the government in a bid to appease populist pressure from the legislature is suggesting that the introduction of the OALA will not prevent the government from considering a universal social pension scheme in the future. This is wrong.

Venice appeared to have been on the brink of becoming the world’s first open, competitive, and inclusive society, but it fell to a coup. Political and economic institutions became more closed, monopolistic, and exclusive, and Venice began to experience economic decline. . . . . When visiting the Doge’s Palace in Venice it is worth considering the two faces of this great medieval trading center . . . . The Doge’s palace grand Sala Maggiore . . . . is its inclusive face . . . . the clandestine rooms of the secret service. . . . is its exclusive face.

The central idea of “Hong Kong land for Hong Kong people” is to provide a subsidy on land values for eligible households through the public housing sector. The focus therefore is on land rather than housing structures. The strategy would enable eligible permanent residents to capture the full value of the land they have been offered at a subsidy . . . . It is a path-breaking idea. It forms the core guiding principle for a long-term housing strategy. In 10 years not only would more housing be supplied but we can definitely look forward to exceeding an 80% target for bona fide homeownership.

The central idea of “Hong Kong land for Hong Kong people” is to provide a subsidy on land values for eligible households through the public housing sector. The focus therefore is on land rather than housing structures. The strategy would enable eligible permanent residents to capture the full value of the land they have been offered at a subsidy . . . . It is a path-breaking idea. It forms the core guiding principle for a long-term housing strategy. In 10 years not only would more housing be supplied but we can definitely look forward to exceeding an 80% target for bona fide homeownership.

Setting a goal of 80% homeownership in the population will make it possible to address problems related to housing policy, with spillover benefits for the political and economic environment. By homeownership I mean those who have full title to their unit and can sell it on the open market without having to settle an unpaid land premium.

It is entirely likely that such animosity could also emerge in Mainland urban centers if issues of home ownership and the functioning of markets for public sector housing are not adequately addressed by the authorities in the proposed “economic housing” policy initiative of the 12th Five Year Plan.

It is important to acknowledge that the low number of Application List sites that were successfully triggered in previous years may have been the result of design flaws in the system. These flaws can be remedied. But it would be incorrect to conclude that the market driven system has failed or that there has been collusion among developers. This would be far too sweeping a conclusion. Reverting back to scheduled auctions would be premature and carry other risks if market sentiment turned negative either because economic prospects had dimmed or policy uncertainty had increased.

The continuity of any long-term housing strategy that has to straddle administrations is less secure today. Policy uncertainty does not depend on the credibility of any administration or its determination to act; it reflects the underlying uncertainty of a political system that is still in transition. This adds an additional dimension to the market – policy uncertainty. Such uncertainty magnifies the existing market uncertainties.