Essay by SM Lee Hsien Loong “Microeconomics in Public Policy: A Practitioner’s View” (Mar 2026)

I was going to post this, but you beat me to it.

Lee Hsien Loong is Singapore’s former prime minister. I thought this was a fascinating essay on how he views the government’s role when it comes to shaping the nation’s economy, while addressing the strengths and limitations of market forces. Some of the issues it addresses are pretty specific to Singapore but I still think it’s worth reading.

The conclusion is just so pleasant to read:

*The Singapore Government intervenes heavily to achieve major public policy objectives.*

*But it also recognizes economic realities and has relied on market forces more than other countries, sometimes in unconventional ways, to achieve social and economic objectives.*

*This does not mean that only economic considerations matter. Nor should they always take precedence. Governments must balance them against other considerations such as political acceptance, social norms or intangible objectives. For example, National Day Parade tickets are in great demand, but we do not auction them to the highest bidder.*

*Kidneys for transplantation are scarce too, but we have not legalized trading in human organs. In these two cases, nation-building and ethical qualms trump economic logic.*

*However, in my experience, the more common problem is governments paying insufficient attention to economic principles and market forces when designing and implementing policies. Only occasionally is the problem the opposite — governments taking too purist an approach in applying economic logic, to the detriment of wider objectives.*

*This essay does not present any breakthrough in economic theory. Rather, it describes, from a practitioner’s view, how Singapore has applied microeconomic principles to real world situations. In particular, we have found three rules-of-thumb useful: (i) when designing and implementing policies, use economic principles and market forces; (ii) when allocating a scarce resource, just price it; and (iii) when providing assistance to beneficiaries, cash or cash-like is better.*

*Because Singapore has done this systematically and extensively, we run a smaller government than most. The outcome, whether in terms of growth, equity, social stability or quality of public services, confirms that this is a viable way to achieve not only the economic, but also the social and political goals of the nation.*