The economy that is Singapore

At S$86,889 ($67,000) just for a permit, the total price of a Volkswagen Passat in Singapore is about the same as the median U.S. metropolitan home. A 25 percent jump in residents in seven years, coupled with the world’s highest proportion of millionaire households, has fueled a 10-fold surge in license prices over three years. The government said last week it will postpone plans to cut the number of permits available and slow traffic growth, responding to the outcry over soaring prices.

…A new 2012 Passat sedan made by Volkswagen AG (VOW), the world’s second-largest carmaker, costs about $152,000 in Singapore, including the license, according to classified ads website The median price of a U.S. metropolitan area home is $158,100, National Association of Realtors data show.

So-called open-category permit, which can be used to buy any type of vehicle, reached S$92,010 in April, the highest since the end of 1994 when a record of S$110,500 was reached. At the latest auction May 23, the licenses went for S$86,889, compared with S$8,501 three years ago. The permits give the right to own a car for 10 years. The next auction is tomorrow.

Besides having to bid for certificates at auctions that are held every two weeks, Singaporeans also pay registration fees and taxes that can amount to 150 percent of the market value of a vehicle, according to the Land Transport Authority website.

There is more here, and for the pointer I thank Ken Feinstein.


No import restrictions here, move along.

'tis the only way to keep the tiny nation from being paved with cars, I suppose.

So much for the libertarian paradise.

Who in their right mind would describe Singapore as a libertarian paradise?

What nation would you choose? Maybe Estonia?

I don't know, I'm not sure there is a libertarian utopia out there. I don't know enough about Estonia to pass comment. I'm just pointing out that the examples given are not exactly libertarian in nature.

Along with HK it's the closest we have. And it's working...they're 25% richer than the US (per capita) and growing at the rate of a healthy developing country.

You can't compare a city state to a country like the US. A comparison between New York and Singapore would make more sense.

Heritage claims Singapore has a high degree of "economic freedom." However one chooses to measure economic freedom, Singapore has an extensive system of public housing designed to mix income levels in neighborhoods and also has a health care system (praised by some libertarians, no less!) that effectively prohibits anyone from purchasing private health insurance without first buying into the state-run MediShield insurance program.

So if what Heritage means by "economic freedom" is safe, affordable public housing, efficient public transit, state-run health insurance along with a series of state-run hospitals providing affordable care, and -- once you have accomplished all of these goals and balanced the budget -- also cutting corporate and individual income taxes a bit, I reckon a lot of moderates would sign on to such an idea. But "free market" or "libertarian" it is decidedly not. Singapore is a mixed economy just like every other developed economy with the government playing a significant, activist role in some areas and taking a hands-off approach in others.

The Heritage Foundation is who

Why is Canada higher on the Heritage List that the US, I wonder? What does Canada do that makes it more Libertarian (or economically "free") than the US?

Since the mid-90s, there's been a push towards increased liberalization (modest) and fiscal prudence (more successful). Oil revenues have given us scope to reduce some taxes (arguably the wrong ones, such as the goods and services tax).

Alberta, Canada's oil-rich province, imposes no additional sales tax and a flat income tax of 10% on top of the federal government's progressive scale. Top earners pay a 39% cumulative marginal rate.

Are we freer than the US? Doubtful.

At least we still have Somalia.

I fail to see how that is a libertarian paradise either? My understanding of libertarianism is that there would be still a functioning state to provide key services such as law and order. Somalia does not possess such a state.

Sir, logic and facts have no place in civilized debate. I demand an apology.

Have they been supplanted by cynicism?

That tears it. Where's my cane?!

Does this mean I can talk about a Marxist revolution and no one will bring up Soviet Russia, because that's obviously not what I have in mind when I say Marxist revolution?

MD: Here's one important difference: in Soviet Russia, this is what they claimed to be (Marxist revolutionaries), even though some may disagree about how well they fulfill the ideals; in Somalia, OTOH, no one is claiming to be libertarian, if they also have failed to "fulfill the ideals", it's a moot point, since they never held them to begin with.

That's not true, I was in Somalia the other and Warlord Smaih Akballah shared some very forward-thinking ideas about the limiting the scope of government to protecting its citizens from aggression, theft, breach of contract, and fraud in order to preserve individual liberties. Our conversation was cut short when he was decapitated by RPG shrapnel but there's no Post Office and I'm pretty sure that makes the country the very embodiment of libertarian principles.

I don't think anybody said that that Singapore is a libertarian paradise, it has always been a very authoritarian place. Taxes are low for rich people which is something some ignoramuses and puppet masters like to equal to liberty.

But that Singaporeans are authoritarians doe snot mean that they are stupid, cars create enormous externalities, and should be priced correctly.

other interesting tidbits.

"Mathur said he was entitled to an interest-free, five-year loan of S$130,000 from his company"

Do any US companies offer such loans.

“Due to the COE, you can make money by buying a car and selling it one year later. In most other countries, we’d say a car is a depreciating asset.”

“You’re pitting the rich against the poor, and guess who wins?” Chee said in an interview. “People with needs, and the guy who runs a small family business, are pitted against this wealthy family that’s buying a third car for the teenage son because he had just done well in his exams.”

The lack of cars seems to be killing their economy.

Lacks of cars or lack of spending on more roads?

Why aren't the rich building more roads or making the existing ones wider? Isn't that what scarcity is supported to resolve in a free market economy? Building a separate private road system would save the rich lots of money while allowing them unlimited numbers of cars.

But maybe its better to pay the $92,000 for just one car in order to make your wealth obvious.

Probably because they're not allowed to

Singapore is densely populated and has a stated goal of getting 75% of its population using public transit to get to and from work (currently about 50%). Building a bunch of private roads would be impractical and would have various negative impacts (pollution etc.).

1. I don't understand why economists love to hate on cars. The fact that people are willing to pay such high prices for the right to drive one is quite telling. And don't go on about public transit - people vote with their feet and avoid it if at all possible. Why make peoples' live miserable by denying them the ability to drive?

2. This system merely further privileges the very wealthy.

3. With some engineering prowess it is possible to build underground tunnels, double barrel highways (lanes on top of one another) as well as multistory parking.

4. I don't really think that having multiple golf courses in Singapore is a good use of space.

5. They seem to have a lot of 'restricted areas'. Not sure what the rational is, but perhaps a more permissive environment could allow more road construction.

It's ironic how people who will shell out so much more for a car will yet vehemently object to a 50 cent increase in highway tolls.

Maybe people (not Singaporeans though) won't be willing if they had to bear all the price of car driving. Golf courses are a bit better in this aspect?

1. Because if we internalized the total price of driving a car in its price and then allowed it to compete against public transportation, more people would opt for the latter, especially in dense urban areas. On that note, it's an atrocity how the SF Bay Area has such a car-dependent culture despite the huge potential for efficient and cheap public transportation.

In short, Singapore is voting with its feet. Most of the population uses public transit and want to continue to do so.

Because if we internalized the total price of driving a car in its price...

Who says we don't? To counter the immediate objection (Gas taxes don't pay for roads, blah blah blah), I would suggest that gas taxes aren't the only method by which
vehicle owners cover their costs. Nearly all of the states levy a tax (rhymes with "bales tax") that gets collected even when a private seller and private buyer make a contract.
Furthermore, states charge another fee to actually use the thing. Frequently, this fee is progressive, increasing as the value of the vehicle increases. Cities
can even get in on the deal: When I lived in Chicago, it was ~ $100/year for a "city sticker". Park on a public street without one and you'd get a ticket. Which leads to my final point:
Parking violations and moving violations are cash cows. Red light and speed cameras, although sold as a public safety proposition, are more often than not a revenue generation scheme.

Actually, the car dependency in SF is quite justifiable. There is not that much land to develop on, hence there are pockets of density where feasible, but the actual metro area has to be very spread out. Between the mountains and the gigantic bay, you cannot just plop 7 million in compact area.

SF is about to maintain an efficient and cheap network of buses, so is Berkeley and Oakland. However, what kind of mass transit system do you expect to adequately connect San Jose with San Francisco city?

"This system merely further privileges the very wealthy."

Less traffic congestion benefits the wealthy but also people who occasionally take taxis (which are quite cheap in SG compared to other developed countries) and people who ride buses.

The notion that people "avoid public transit if at all possible" is also false. The more dense an urban area is, the more sense public transit makes as many people in the New York, D.C. and SF metropolitan areas sometimes use public transit even when they own cars. Singapore's population density is 7,700 per square kilometer.

Gosh, I wish my city could adopt that policy. Clear, safe streets and roads and free-flowing traffic along with quality transit would be a dream.

Plus, you can make the people who just need their personal cars pay for public services and drop taxes on everyone else.

I'm disappointed that the local electorate is making them increase permit numbers, though. They should consider reducing them even further instead. Just goes to show that democracy is a fragile thing, easily corruptible by demagoguery; the people should smarten up and vote better.

There is a peculiar consequence of this I thought you might be interested in. The tiny island of Singapore is one of the world's biggest markets for high end mechanical watches. They are a substitute good for luxury cars to many wealthy men. As they are not subject to the same taxes and licensing, they are relatively extremely cheap.

To me these observations reinforce my mental stereotype of the type of persons that flock to Singapore.

So much for the libertarian paradise.

I don't know, is having to pay for your externalities (increasing everybody else's time lost in traffic jams) all that non-libertarian?

This explains why a couple of my college classmates thought nothing of their parents buying them luxury german cars just for the short time they were in the U.S.

I know very little about Singapore, but I would imagine that the appropriate pigovian tax rate for car externalities in a relativly wealthy, very dense, small island city-state could be very high.

One of the first places to truly benefit from driver-less cars.

Is the permit to drive or own?

This should be the most depressing story a proponent of public transportation could ever hear. There's this idea that if the cost of driving were fully realized everyone would choose trains and such, but it does kind of seem like a goodly number of people will drive at almost any absurd level of expense. We should have taxation or fees or whatever to capture the externalities, but I have this sneaking suspicion that people expecting a radically different world from those policies would be bitterly disappointed.

On the contrary! This is great! For all those who cause discontent over the cattle haul of public transit, this is the way to keep them out of public policy. First class and private jets allows everyone else to fly coach "cheap". If the wealthy knew what airline deregulation would bring, they would have fought to keep passenger rail and buses the primary intercity travel so they would have the airliners to themselves.

Given that a car in Singapore is a completely unnecessary luxury item, and that they don't have much space, this is probably a good thing.

I wonder if car2go could operate here. Seems like it would be an ideal situation and would be far more efficient than building a bunch of parking garages that are underutilized most of the time.

They have something better, the public transport system.

Conservatives are wrong: Government regulation doesn't prevent large accumulations of wealth and the existence of a very rich society.

"At S$86,889 ($67,000) just for a permit, the total price of a Volkswagen Passat in Singapore is about the same as the median U.S. metropolitan home."

The article you linked to doesn't say that. Which is good, since it isn't true. I think you mistook the median income stat for a median price.

Oops, I misread it myself. Nevermind.

Having lived in Singapore, cars are all about signaling that you have some wealth. Fees basically cover you renting the use of the land under the car.
IMHO Singapore is run like a benevolent dictatorship and people in power listen to uber rationalists who are willing to try things and to also pivot fast as things change. Singapore is not remotely libertarian.

Amsterdam and Singapore are both considered Libertarian in some form, but it is the latter which is the one libertarians constantly reference as the role model.

I think we sarcastically called Singapore a libertarian paradise because libertarians on average are terrifyingly fanatical in their lust for tax-free societies while they casually ignore business subsidies and corporate influence in politics, and gives at best some lip service to when it comes promoting non-economic liberties.

Fully agree on this point. For some reason libertarianism seems to solely mean "low-taxes" to some people whereas Singapore is clearly a place that has developed due to policies which can hardly be considered liberal (in the classic sense). As for the car tax: cars aren't even all that trendy among young Germans anymore, that should tell you something. I don't see why I should waste my money on a fast-depreciating asset when public transport is just as good or better in many cities.

What does it even mean for cars to be "trendy"? And what does it tell us? Anything that's not trendy with German youth is not worth having?

"What does it even mean for cars to be “trendy”?"

I suspect that you haven't lived in Germany. Having your own car and driving it around was one of the main attributes of a young man.

It isn't that much anymore, though I suspect that it has a lot to do with the current rise of a pseudo-religious green movement across German-speaking countries.

I think you have libertarians and conservatives confused. Libertarians are pretty fanatical about all the things you say they ignore.


It means that people in one of the key producer and consumer market of cars are starting to put a lower value on cars, with everything that comes with it such as promoting public transportation, people spending their money on other products and a change in the politics of car regulation.

Please. When Prop 8 was on the ballot, I worked with several Republicans to man phones, pass out flyers to vote against the ballot. Not a single libertarian could be bothered to take time away from their tax (and guns) zeal to further this liberty.

So is the cost of ownership and use more or less than the same car in NYC or LA or Seattle? A driver wasting an hour a day on "free" but congested U.S. streets and highways, at $50 an hour, is about $15,000 a year lost to congestion, or $60,000 over four years.

People drive to work because it is the fastest way to get to work from were they live, that is the time wasted getting to work is part of the price you pay for your home

Compared to the 2 or 3 hours a day that could be wasted while riding public transit. This is not hyperbole, although it is anecdotal: When I lived in Seattle, it was a 15 minute drive to work, but in the best case it was 45 minutes by bus there, and an hour back. On top of that, I had to drive to the park and ride. Otherwise it would have meant another 15-20 minutes each way. All that is before we talk about the turds on the floor, the lady huffing paint behind me, or the panhandlers aggressively working the bus stop.

A meta-comment

I notice that the number of replies on MR tends to be lower when the topic is "small steps toward a much better world" and higher when the topic is "small steps toward a much better (or worse) world for me".

I don't particularly want to live in Somalia, the USA or Singapore but, having spent some time in the USA and Singapore, given the choice, I'd pick Singapore in a heart beat.

There are a lot of different places to live in the U.S.

Singapore is more akin to a relatively exclusive club for the wealthy and mobile.

Also, this:

"Having lived in Singapore, cars are all about signaling that you have some wealth. Fees basically cover you renting the use of the land under the car. IMHO Singapore is run like a benevolent dictatorship and people in power listen to uber rationalists who are willing to try things and to also pivot fast as things change."

Though not this:

"Singapore is not remotely libertarian."

Strong statement. Economic freedoms clearly speak against that.

Granted, this is not promising.

"Singapore introduced Goods and Services Tax (GST) with an initial rate of 3% on 1 April 1994, increasing government's revenue by S$1.6 billion (US$1b, €800m) and estabilising government finances.[15] The taxable GST was increased to 4% in 2003, to 5% in 2004, and to 7% in 2007."

I pay less sales tax in Oilberta, Canada.

The policy framework for people starting a business or re-locating there is pretty libertarian by world standards, however the policies Singapore undertook to become the place it is today were initially far from libertarian.

I agree, I just thought the "not remotely libertarian" description was a bit much.

Read Lee Kuan Yee's book Hard Truths. Singapore is libertarian when it works and when it does not is not. It is a fascinating combination of very hands off (business) and very hands on (many of the social policies).

In other words, Singapore is run by people who consider it very much their property, much like Mayor Bloomberg runs Manhattan, where investment bankers pay capital gains tax rates and police stop and frisk anybody who looks like he can't actually afford Manhattan. Sure it's unconstitutional, but that's what keeps Manhattan Manhattan.

Singapore has a LOT of good things going for it, but it is far from libertarian. There are some economic freedoms, sure, but there are many economic policies that don't fit the tag. The housing market for example is far from free and is tied up with forced savings schemes. I'm not saying such policies are bad and do not meet their objectives, but that they are not what could be considered libertarian.

Besides, economic freedom is just one aspect of freedom. How about large scale censorship of media and arts? What about penalties for drug possession that seem to go far far beyond the price of any negative externalities? Libertarian much?

Singapore is a virtual single party state that borders on authoritarian, has done tremendous things over decades in improving the living standard of its citizens and continues to do so, but it most certainly is not what I'd call libertarian.

Well, in an inherently "libertarian" society, where the land area is around 700km^2, what would one expect a landowner charge for the right to park your car? Or the owner of a road for the right to drive on it? Have any of you any idea what it would mean for traffic if the number of cars, say, doubled? This island is fully built (apart from the occasional nature park etc), and roads are wide. Distances are short, the longest drive conceivable is not much longer than 60km, many people in the US and even Europe commute over such distances.

I fail to see how a libertarian road owner would not extract similar rents, in fact, probably higher. I think the government could extract a lot more revenue by taxing cars and gasoline if it wanted to. In a libertarian version, privatized roads would be much much more expensive here.

Singapore is a little over ten times the size of Manhattan. 4 million people. An international airport, water reservoirs, parks, universities, highways... Naval base, army bases. There just isn't enough room for all the cars that everyone would like. It's not ideology, it's just the arithmetic of geography. BTW they've built a very extensive public transportation system and most people use that for getting to work.

And let us not forget that the public transportation system in Singapore is extremely good (extremely good coverage, cheap and fast – and in the case of the MRT subway: clean, odourless, silent, and uncrowded even at rush hour). I'm pretty sure most car owners continue using the subway for convenience on a daily basis.

The transport system is not really that fast. A relatively leisurely paced bicycle ride is competitive with busses and, surprisingly, MRTs are even slower.

It's definitely true that traffic is much heavier in Singapore on Saturdays and Sundays--esp. between downtown and the "outlying" areas--which always makes me think that a lot of people who use public transportation during the week take their cars out during the weekend to take the family on outings.

In most of the world congestion is the method used to control use of the limited road resource. More vehicles join the road until people perceive the unpleasantness of congestion exceeds the utility of the resource. This is a very poor way to share a limited everyone suffers but if only the wealthy could commute that would be inequitable. Singapore provides excellent and cheap public transport and a low cost taxi service to take care of the equity issues and shares the road through voluntary taxation. Brilliant!

The main motivation for owning a car in Singapore is status. The roads are not overcrowded and the purchase of status provides a community benefit through voluntary taxation. What could be cleverer? The higher the cost, the more status is conferred. Everyone wins.

Rather than getting into the argument about libertarian paradises I thought I'd offer some perspectives from a recent immigrant to Singapore (having moved there from Amsterdam). Now that I've lived there for a few years, and being in the process of buying another car, here are some thoughts on this story:

1) Few people pay cash for a car. Loans are plentiful and cheap, with advertized interest rates of 1.8% p.a. (or so) for ten years. Note this is quoted as a flat interest rate, making the APR about twice that.

2) Rule of thumb is that your monthly payment for a ten year loan is about 1% of the car's price. So buying that $150k VW will roughly cost you $1,500 a month in financing. With top marginal income tax rates of 20% kicking in at the S$300,000 level the median actual tax rate is very low; I would guess below 10%. (There's also mandatory CPF contributions, which go to a DC pension scheme, but which you can also use for mortgages.)

3) Financing is coterminous with the expiry of the COE, so the second-hand car market suffers from this. Essentially buying a 5-year old car means you can only finance a term of five years, which makes your monthly payment higher. Often you're better off buying a new car... having said that, the two cars I've bought have been both second hand. There is some efficiency in the market here too.

4) I don't understand some people's purchasing decisions. Friends have bought brand new low-end cars for more money than a 1-year old used BMW would have cost, but then again, that's why people are different...

5) Luxury cars are relatively a better deal with high COE prices.

6) Road tax is assessed on the basis of engine size, and is non-linear. The sweet spot used to be 1.6L cars for general use.

7) Dynamic road pricing (ERP) also serves to ration road use demand during peak hours. I get to the office faster if I pass the ERP gantry between 8:35 and 8:55am when the toll is S$4 than half an hour later, when the toll is down to S$0 and traffic picks up.

8) The benefits to owning a car are substantial even in Singapore as there are places that become far less accessible without one. Sure, you can take a cheap cab to virtually anywhere, but getting back home is often an issue. There are long lines for cabs at the malls in the evenings and weekends for instance, and getting a cab from, say, East Coast Park or Tanah Merah Ferry Terminal may take you a very long time indeed.

9) Having said that, it's perfectly possible to live without a car in Singapore, more so than in other large conurbations. Many of my colleagues don't own a car but could easily afford to.

10) I really like living in Singapore. My sympathies definitely lean libertarian but I wouldn't call it a libertarian paradise (to circle back to the main theme of the comments here). Nonetheless it's a pretty good place to live, but to explore that fully would take too much typing.

I'd like to ask again:

Since the industrial revolution, which nation state is (or was) the most libertarian. Have at it, ladies and gentlemen, I am genuinely curious.

Possibly Hong Kong, perhaps the U.S. or the Netherlands. Some European states tend to be more socially libertarian, some Asian states can be more economically libertarian.

There's a lot of conflation in "libertarianism." Social behavior that's allowed, nay, encouraged high-tax, high-regulation Toronto would probably get you caned in Singapore.

I would say that more generically, a libertarian polity's governors have a personal stake in its ownership and maintenance--like you do your household or business. And, like people's households and businesses, there's a lot of variation in what's permitted. Democracies, by contrast, are governments of the commons.

You would think for that price they could afford to build multi-story roads.

They have built them.

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