Negative Externality in Singapore and The Economics Behind Sim Lim Scams

Negative Externality in Singapore
Uncover how we use Jover Chew and his scams to explain Negative Externality in Singapore!

Do you know that Economics can also be used to explain the rampant scans in Sim Lim Square? In particular, this is a classical example of negative externality in Singapore.

Despite being “famous” for the wrong reasons, these unscrupulous shops like ‪#‎mobileair still seem to be growing strong.

The following article provided a very good insight on why such unscrupulous still thrive despite building such a negative reputation for themselves:

The article is well written, but did not provide an Economics solution. So what are the viable economic tools out there to rectify the market failure problem of negative externality in Singapore?

1) Fine these unscrupulous shops – as a fine acts like a tax and forces the supplier to internalize the negative externality of “inconvenience and bad reputation” it brought to its neighbour shops, it will force these unscrupulous to think twice before committing such disgraceful and myopic act again.

2) Draconian measures like force closure of the shop – it serves like a “ban” and forces these unscrupulous shop owners out of business. However, it is not practical to do so as most of these shop owners own the physical shop itself. It is not possible to force them out of the business, especially when elections are coming up next year.

I am personally in favour of imposing hefty fines on such inconsiderate and unscrupulous shop owners. However, I believe this alone has limited effects and Singapore Tourism Board has a role to play in educating tourists the fine caveats when shopping in Sim Lim Square as a tourist.

Let’s see if #mobileair dares to be funny and pay its fine to the authorities in coins.

For coming year J2 students, we will be using regular examples like this to illustrate economics principles and make learning economics interesting and fun!