Humanity isn’t economically rational

Human mannerisms are economically irrational. Malaysians honestly need to understand a point; there's nothing rational in economics.

Richard M. Thaler pointed it out very well is his book "Misbehaving: The Making of Behavioural Economics" if anyone wishes to read it.

But more to the point, let us look at what a higher US dollar means for us using the ringgit from a corporate and personal scale.

If you've traded commodities, you know it uses the dollar. Petrol, palm oil, even rubber and tin are all traded in dollar. So yes, it may make money for the commodity traders and even companies involved in those areas.

But know this. What they buy in terms of maintenance and care are also in dollar. Spare parts, equipment, fertiliser, perhaps even foreign consultants and overseas offices, are all in dollar, too, if based outside Malaysia.

So with falling commodity prices affecting income, have these companies cut their spending in all these areas, or have they upped their sales prices to make up for it?

In oil and gas, it is about layoffs. You can't do the same in plantations. Machinery still needs maintenance in manufacturing, mining and multiple downstream activities.

If you've had to handle cargo, you know it uses the dollar from storage in a warehouse to shipping it overseas and into the country. Some may even use the euro, or maybe the pound. But our currency is also weak against these, too.

But what most impacts us has always been food for local consumption. Malaysiakini had an infographic showing how high costs went up during the GST implementation.

What is of the top most concern, however, will always be food. It isn't like we're buying a lot of imports unnecessarily.

Most of the goods we are importing and used daily is in the dairy, rice and meat aisles of a supermarket. Well, that, and onions, mushrooms, and maybe even a majority of the fruit section.

Maybe even turkeys since that's imported from the Philippines, certified halal by their Muslim board.

And these are all traded in dollar. So when the ringgit gets weaker against the dollar, these prices either go up or the companies bringing it keeps the price level by sustaining it with whatever mechanisms they have.

There are a few possibilities.

Maybe these companies set the ringgit-dollar conversion rates in their contracts. Maybe they up the shelf prices. Maybe they renegotiate the imports according to the value of the amount to correspond to the value of the contract signed.

But for the services side and the SMEs, or anyone contracted to the United States will see a hike in costs, especially social media and online practitioners.

Companies subscribing to the Google Mail corporate package, Facebook pages looking to sponsor their wares, service subscriptions from on demand TV to even hosting services based in the US will go up higher.

Personally, I'm unsure about franchises, especially fast food operators and how they will be affected, but there it is.

So, when someone tells me it's good for exports, I ask if it balances out the cost of imports which would go up. If they tell me our commodities will be better, I frown because the back end cost to produce, procure and maintain it also went up.

When someone says people will buy more Malaysian goods, I also frown because when it comes to fashion even local brands are produced overseas, whereas we find the Malaysian produced Abercrombie t-shirt in Reject Shop and not for local consumption.

The whole concept of buying local is out of sync. What do you define as a local product?

Would you then insist on buying Protons and Perodua Myvis and selling off your BMWs even if it's a company car?

Or does this whole buying local agenda a front for you to create a class system, where you use the excuse of being able to afford it?

You can argue macroeconomics till kingdom come saying it will be good or even use it to try and rationalise the Malaysian population.

But humanity isn't rational. The fact that finance is grounded on the basis of trust and confidence is a clear indication. And for those arguing brilliant ratings from agencies, well, they gave those same grades to banks in trouble during the US Financial Crisis.

The fact that the Employees Provident Fund cannot raise its withdrawal age to 65 shows the same thing.

Economics, even on the micro and unmeasured scale to the point of branding has an effect unless you have a monopoly.

And this nation has an issue with all this.

Aptly put, we are not a nation of Vulcans. And anyone trying to rationalise this might as well go yodel at a brick wall. – August 18, 2015.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.