PM Wong urges economists: Prioritise core principles

Directing Singapore's Economist Service

Prime Minister Lawrence Wong, also Singapore's Minister for Finance, addressed the 25th anniversary dinner of the Economist Service on 30 September 2026, outlining a clear mandate for the nation's economic policymakers.

He stressed that even when faced with immediate pressures for straightforward solutions or equipped with sophisticated analytical instruments, government economists must uphold a rigorous adherence to core economic principles.

These foundational concepts, he noted, have consistently proven their value in guiding clear decision-making, particularly concerning trade-offs, the creation of incentives, and the anticipated consequences of policy choices.

The Economist Service, established in 2001 with five economists, has expanded significantly to include over 100 professionals distributed across 20 government agencies and two international organisations, reflecting its central role in public policy formulation.

The Signalling Role of Prices

Mr Wong detailed the first key principle: the critical role of prices. He explained that prices act as essential indicators of scarcity, consumer demand, and the optimal allocation of resources, thereby shaping behaviour across the economy.

Suppressing or distorting these price signals risks misallocating limited resources, potentially leading to more significant challenges in the future. As an illustration, Singapore's pricing for essential utilities such as water and electricity reflects their underlying costs. This approach aims to encourage conservation while preserving the integrity of price signals.

Concurrently, the government implements targeted financial assistance programmes to ensure these essentials remain accessible to all segments of the population.

Recognising Costs and Shaping Incentives

The Prime Minister then moved to the second principle, asserting that costs are inherent in every policy decision, extending beyond monetary outlays to include opportunity costs.

He cited Singapore's land use planning as an example, where decisions require balancing national needs with public values, acknowledging that dedicating land to one purpose necessitates foregoing another. Understanding these often-invisible trade-offs is crucial for effective policymaking.

The third principle, incentives, dictates that individuals and businesses adjust their behaviour in response to various stimuli, influencing purchasing, investment, and employment decisions.

Mr Wong highlighted the SkillsFuture Jobseeker Support Scheme as an instance where temporary financial aid is carefully linked to job searching and training, aiming to balance generous support with the need to maintain incentives for returning to work.

Judgement Beyond Advanced Tools

Mr Wong cautioned against over-reliance on advanced analytical tools, such as high-frequency microdata, empirical techniques, and artificial intelligence, asserting that superior tools do not automatically equate to superior judgement.

He emphasised that while economists should fully utilise these resources, policymaking occurs in a complex environment characterised by imperfect information and inherent uncertainties, where theoretical models may not always translate directly into practical outcomes.

Effective economists require more than technical proficiency; they need sound judgement, intellectual honesty to present uncomfortable conclusions, and the ability to articulate complex economic issues clearly to ensure that rigorous analysis informs robust policy.

Implications for Singapore's Policy Trajectory

The Prime Minister's address on 30 September 2026 indicates Singapore's continued commitment to a disciplined, evidence-based approach to economic governance. This framework suggests that future policy interventions, even in response to global uncertainties or technological disruptions, will be carefully calibrated.

Decision-makers can anticipate that new policies will undergo scrutiny for their direct and indirect costs, their effects on market signals, and the behavioural incentives they create.

This emphasis on fundamental principles aims to ensure long-term stability and efficient resource allocation, guiding Singapore's economic trajectory through complex global conditions by prioritising thoughtful, measured interventions over expedient solutions.