Understanding comparative and absolute advantage

WE can joke all we want about economists, their theories and forecasts, and the inexactitude they sometimes deal with, but economics definitely offers some profound truths.

Comparative advantage is an example. It is a principle that says a country, a company or a person is better off specialising in an economic activity that generates the most value for that country, company or person.

This is different from absolute advantage, which is the ability to produce more goods and services than a competitor, with both using the same amount of resources.

Usain Bolt was once the world’s fastest man. And even now, only the delusional among us fancy our chances in a foot race against him.

And he apparently is an above-average footballer, given that he has a contract with an Australian professional team.

Because of his remarkable athleticism, he has an absolute advantage in the sport compared with many of us.

And yet, Bolt waited until his last race in August last year before earnestly chasing his football dreams. And that is because of his comparative advantage as a sprinter. It is hard to believe that he would have earned as much money and glory in football as he did in running.

In other words, stick to what you do best and work on being as efficient and productive as possible.

Malaysians have the same message for our government leaders. That came out in May after Prime Minister Tun Dr Mahathir Mohamad announced that he would be in charge of the Education Ministry.

Many people spoke out against the move because the Pakatan Harapan election manifesto promises that the prime minister will not hold other ministerial posts.

At the same time, there were those who wanted the education portfolio to come under Dr Mahathir. But their views mattered less, it seemed.

In the Cabinet list released the next day, Dr Maszlee Malik was named the Education Minister.

And now Dr Maszlee is the one facing criticism over another controversial appointment – the one that makes him the seventh president of the International Islamic University Malaysia (IIUM).

There is strong opposition largely because the idea of the Education Minister being the “highest ranking officer” in IIUM’s management (as described in the university’s website) does not match the manifesto promise to “restore the authority and independence of public universities and institutes of higher learning”.

Dr Maszlee defended his acceptance of the appointment by pointing out that IIUM does not come under the Universities and University Colleges Act and that its governance structure is not the same as those of Malaysian public universities such as Universiti Malaya and Universiti Kebangsaan Malaysia.

He also reminded people that Datuk Seri Anwar Ibrahim was education minister when he became president of IIUM in 1988.

Datuk Seri Najib Tun Razak was also education minister when he took over as president after Anwar’s removal in 1998.

It is, however, obvious that there is nothing in the university’s constitution that makes it a must for the president to be the education minister. None of the other past presidents was a Cabinet member when serving as president.

Others who came to Dr Maszlee’s defence, including the Sultan of Pahang (the university’s constitutional head and the person who appointed Dr Maszlee) and the university itself, say he is the best person for the job because he taught there for many years.

There is no doubt that the Education Minister is in a position to do a lot for the university. One might even entertain the idea that nobody is currently more qualified than Dr Maszlee to be the IIUM president. But is it best for Malaysia that he takes on that role?

As president, he chairs the board of governors, which is the university’s governing, policy-making and monitoring body.

This, on top of his duties as head of a ministry that was once two separate ministries and MP for Simpang Renggam, is a huge responsibility. And let us not forget that he is relatively a newcomer to politics and administration.

And what about accountability? We do not need to hear again a board chairman offering the excuse that he is too busy and cannot be expected to know what goes on in the operations of an organisation.

It is good that the government is prepared to review the situation, particularly when there is no let-up in the dissatisfaction over the matter.

Hopefully, somebody will hit the economics textbooks and read up on the difference between comparative advantage and absolute advantage.