Government and Taxes: May 2013

Friday, May 31, 2013

EFN Asia 21: On Think Tank Independence, Jeju Forum

Jeju -- Today is our third day here in the Jeju Forum for Peace and Prosperity held in this big and sprawling Haevichi Hotel&Resort, southern island of South Korea. I am one of the 13 people from the EFN Asia and FNF Korea team who came here from Seoul last Wednesday, led by Lars Andre Richter, the Country Representative of FNF Korea (5th from left), and Pett Jurapaiboon of EFN Asia (4th from right). Our group photo on our first night here. Only Sam Rainsy from Cambodia not present here.

On Day 1 (May 29) afternoon, I attended session [2-A], "Making Ideas Work: Challenges and Opportunities for Think Tanks in Asia".

The moderator was LEE, Chung Hee, Professor, Hankuk University of Foreign Studies, and the Presenter was YI, Seong-Woo, Researcher, Jeju Peace Institute.

The four discussants were:

KANG, Kyung-Tae, Professor, Silla University, S. Korea
Kawaguchi, Shuji, Researcher, Mitsubishi Research Institute (MRI), Japan
WANG, Yao, General Director, Boao Forum, China
Michael YEOH, Manager, Asia Strategy & Leadership Institute.Research Center (ASLI), Malaysia

Dr. Yi mentioned at the start that the University of Pennsylvania's Think Tanks and Civil Society Program (TTCSP) has listed two Japanese and three Chinese institutions in the world’s 50 best think tanks, and none from Korea. So the Koreans are wondering how to strengthen the competitiveness of their think tanks.

Among the factors identified to attain this is autonomy of think tanks from big businesses and government funding, consistent research topics and direction and strengthen specialization, balance relevance, influence and independence, and involve civil society.

Among the slides he showed, is on Missions of Universities (knowledge production and consumption, teaching) and Institutes (knowledge production and consumption, advising). Their shared mission is Research.

Mr. Kang said that the Samsung Economic Research Institute (SERI) is perhaps the best think tank in Korea, with wide range of research areas from engineering to economics, especially after the 1997 financial crisis, it expanded its research work beyond science and engineering. But SERI is for Samsung mainly, not for the entire country.

The Korea Development Institute (KDI) was powerful in the 80s but not so now.

Mr. Kawaguchi said that their think tank also has varied research areas but the bulk is on engineering, 58 percent of total resources devoted to various engineering R&D, then 20 percent for basic science, 11 percent economics, and 5 percent each on law and politics, and sociology. I was wondering why Mitsubishi would be interested in sociology, perhaps to help them understand consumer behavior in other countries and cultures.

He added that think tanks in Japan, started in 1970s. The bureaucracy drove Japan's growth after WW2 as the bureaucrats made more initiatives than the politicians. Among the other influential Japanese think tanks he mentioned are the Japan Institute of International Affairs, Institute for International Policy Studies, International House of Japan, Research Institute for Peace and Security, and Japan Center for International Exchange.

He also noted that in the US model of think tanks, they are mostly privately funded, independent from government. In developing countries though, they are mostly supported or funded by governments.

Mr. Yeoh of ASLI in Malysia said that those think tanks that have clear strategic vision are more successful. They have active engagement with many sectors, public, private and civil society. They have good communications strategy in mainstream and social media. And have good monitoring and feedback mechanism to trace their effectiveness.

In addition, successful independent think tanks focus more on applied research, leave basic research to universities. They are able to maintain their independence by getting funding from different and diverse sources. In particular, they should not get any funding from government.

Among the specialized areas that think tanks should deal and do more research are on regional and trade integration, environmental studies, CC, inclusive growth, disease control, etc.

There was a short open forum after the discussants have spoken. I was the last to make a comment/question from the audience as time was running out. I said that governments now are the main creators of economic uncertainties and instability, like what is happening in Europe, the US fiscal cliff, Japan, etc. Their huge and rising public debt is the main generator of such instability. Government think tanks including the multilaterals like the WB, IMF, ADB, are the rah-rah boys of more spending, with recent magic words like "inclusive growth" and fighting inequality, on top of fighting climate change.

Thus, think tanks should be more independent from government, and check further expansion of government spending and roles.
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Climate Tricks 19: Global Cooling and Resilient Society

Below is a research proposal that I submitted to the East Asia Development Network (EADN) for a regional research competition (RRC) on the theme, "Toward a More Resilient Society". Among the factors that they want to be discussed by research proponents is "disaster risk management in disaster-prone countries" and hence, is related to (man-made) climate change.

Even if I know that this kind of research competition is tailored for the climate alarmists and planet saviours, I still joined the competition. My would-be partner in the research project is my PDE classmate and now Ateneo de Manila University, Economics professor Joey Sescon.

To make the story short, our proposal was not accepted. There should be many factors why, including a big number of research contestants who submitted better-written or better-packaged proposals. Anyway, I am posting a portion of the research proposal that I submitted, below.
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How to Improve Resilience in Facing Global Cooling and Financial Turmoil

I. Research Questions and Background

How much global cooling can we expect in the coming decades?

Implications in flooding in the tropics, damages to crops, private properties, public infrastructures, civilian casualties?

Policy options both at the micro and household level, and macro and government level?

Background

Over the past 2,000 years, climate change has shifted from global warming for about six centuries during the medieval warm period (MWP) to global cooling and a little ice age (LIA) for about four centuries, and back to warming over the past century.

Source: Dr. Roy Spencer, presentation at the 2^nd International Conference on Climate Change (ICCC), New York Marriott Hotel, NYC, March 8-10, 2009.

(Note: The team leader of this paper has attended that conference, as well as the 4^th ICCC held in Chicago, Illinois, May 16-18, 2010)

Since the start of this century, global temperature has stagnated over the past 15 years, and showed a decline in recent years. Chart below compares temperature projections (by the UN IPCC, different models) vs. actual global air temperature, composite for Northern hemisphere + Tropics + Southern hemisphere, satellite data from 1979 to March 2013, as interpreted and plotted by the University of Alabama in Huntsville (UAH) and Remote Sensing System (RSS). The disconnect between projections (more warming) vs. actual data (stagnation or cooling) is getting wider.

Source: Dr. Roy Spencer, Global Warming Slowdown: The View from Space, April 16^th 2013.

And if we narrow down the reference period over the last 11 years, 2002 to 2013, using land surface temperature + sea surface temperature (SST) anomalies, from HadCRUT3 global mean data, the result is a clear cooling trend.

Source: www.woodfortrees.org/trend

So as the planet enters the global cooling phase, we should expect that the frequent occurrence of heavy rains/snow and flooding in recent years will become even more frequent and severe that can approximate the LIA several centuries ago. Major damages to some public and private properties, high crop damages, high casualty figures from those heavy flooding and brutal winters, can be expected.

This chart shows that the major financial and human losses since the last decade were due to severe flooding and strong hurricanes and storms, other than strong earthquakes and tsunami. Not one major catastrophe was due to severe drought.

Source: The Economist, March 27th 2013, http://www.economist.com/blogs/graphicdetail/2013/03/daily-chart-20

Policy Relevance of the Research

Recognition of the reality of nature-made global cooling as opposed to anthropogenic global warming (AGW) or anthropogenic climate change will enable households and governments to institute more practical and cost-effective policies. Preliminary recommendations to improve resilience against global cooling and frequent flooding, test their practicality would include, among others:

· Households should avoid living in low-lying areas, or leave those areas and move to higher elevation. Or if they live in one-storey bungalow houses, consider building a second or even third floor, to their house.

· Governments, national and local, should invest significantly in dredging creeks, rivers and lakes, big and small, to improve their water catchment capacity. Low lying areas with few residential structures may be cleared of human settlements, be dug and converted to water catchments or mini-lakes.

· Governments to invest in more boats and amphibian vehicles for quick search and rescue work during heavy flooding. Public and private drainage system be de-clogged to minimize street flooding.

· Subsidies or higher energy prices for renewables like wind and solar should be reviewed, encourage cheaper and more stable energy sources that do not require subsidies.

II. Review of Literature

Most literatures talk about AGW and/or anthropogenic climate change (ACC). Little or few literatures on natural climate change (NCC) and global cooling are cited or highlighted in mainstream academic studies. Fortunately, the literature on global cooling has mushroomed recently. Among the important online sources of data are:

Watts Up With That, http://wattsupwiththat.com/

No Tricks Zone, http://notrickszone.com/

Dr. Roy Spencer (famous American climatologist), http://www.drroyspencer.com/

The Hockey Schtick, http://hockeyschtick.blogspot.com/

The book, Climate Change Reconsidered: Report of the Non-governmental International Panel on Climate Change (NIPCC), 2009, Chicago, published by the Heartland Institute, offers a comprehensive discussion of the physical science basis of climate change and cycles.

Another book, Climatism, deals with clarifying certain misconceptions on climate and human economic activities, and how energy policies should not be distorted.

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On another note, an interesting paper by Christopher Moncton of Brenchley in WUWT,

HadCRUt4: revision or revisionism? (May 28, 2013) made this observation:

… On the other side of the account, terrestrial coverage has declined sharply over recent decades. For this and other reasons, the HadCRUT4 record takes explicit account of three distinct species of uncertainty: measurement and sampling, bias, and coverage. Combining the effects of these three, the 2 σ uncertainty bounds today are approximately one-sixth of a Celsius degree either side of the central estimate:

…. The discrepancy between the projections in the IPCC’s Fifth Assessment Report (red central projection bounded by orange region) and the outturn in HadCRUT4 (bright blue trend-line) is startling. The difference between the observed cooling at 0.86 Cº/century and the predicted warming of 2.33 Cº/century is equivalent to a hefty 3.2 Cº/century.

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See also:
Fat-Free Econ 20: Flooding and Global Cooling, August 13, 2012
Climate Tricks 16: On GMST, the Sun, GISS, HadCRU, and Coal, September 04, 2012
Climate Tricks 17: STIKE Forum on CC, October 28, 2012
Climate Tricks 18: Severe Tropical and Winter Storms as Proof of AGW, December 29, 2012 Energy Econ 9: Blowin in the Wind Folly, April 17, 2012

Thursday, May 30, 2013

Welfarism 25: Centenarians and Populist Legislators

Being populist and highly welfarist to get high public and voters' support is a scourge of many legislators and politicians. They propose more public spending, or more anti-business policies just to say they have authored or co-authored a pro-poor bill or law.

One such law is the mandatory discount of 20 percent + 12 percent VAT-free credit for a 32 percent effective mandatory discount, for senior citizens (60 years or older) in their purchase of medicines, hospitalization and healthcare bill, plane fare, restaurants bill, and so on. The law does not distinguish rich and poor senior citizens. So that even the richest senior citizens in the country can get nearly one-third price off from various private enterprises and businesses, even if they can afford those prices without any discount, and even if certain drugstores, restaurants, bus lines or airlines, other business entities are struggling financially just to survive.

And I read yesterday stories like this (headline stories by the Inquirer and BusinessWorld, upper and lower photos, respectively.

The Inquirer story said,

About 7,000 Filipinos aged 100 years old and above will have to hang on a little bit longer before they get additional benefits after President Aquino vetoed the proposed Centenarian Act that would have earned them each a P100,000 bonus, plus discounts on purchases.

Aquino vetoed the measure for being “excessive (and) unreasonable” and for being “patently oppressive.”

What caught the attention of the President was a provision in the bill proposing a whopping 75-percent discount on goods and services for the centenarians.

The 75-percent discount would not be tax deductible for business owners and the President said this “exceeds the usual mark-up rate of most businesses and will obliterate profit margins and result in capital loss.”...

Albay Rep. Edcel Lagman, the bill’s main author, was quick to assign the blame on the Senate version principally authored by Sen. Francis Pangilinan that jacked up the discount to 75 percent from the 50 percent in the House version…

Aquino spelled out his reasons for thumbing down the bill in his veto message to Congress dated May 15.

“The 75-percent discount exceeds the usual mark-up of most businesses and will obliterate profit margins and result in capital loss. The provision granting the exorbitant discount may thus be subjected to a constitutional challenge from both retailers and service providers,” Aquino said.

“Furthermore, the 75-percent discount is patently oppressive as it will force retailers and service providers to exclusively bear the income loss as the proposed measure does not provide for a tax deduction to recover the said discount.”

The BusinessWorld story said,

A BILL granting additional benefits to centenarians has been vetoed by President Benigno S. C. Aquino III as the proposed discounts will be a burden to establishments, a Palace aide said yesterday. Under the centenarian bill, Filipinos who reach 100 years old will receive a cash gift of ₱100,000 and value-added tax (VAT) exemption of 75% on the sale of certain goods and services.

Deputy Presidential Spokesperson Abigail F. Valte said the Bureau of Internal Revenue (BIR) has been clear on the government’s position that the VAT exemption "may be too heavy without a tax deduction on the part of the establishment." …

Mandatory, forced and coercive price discounts by law of any amount, whether 10 or 30 or 75 percent or higher, is wrong and confiscatory. Here are some reasons why.

One, those welfarist and populist policies make government even more powerful and bigger. Government does not own private enterprises but it can dictate how owners and managers of those establishments should price their products and services. And assuming that these establishments can survive after being oppressed with forced discounts, government comes in to impose various taxes and fees.

Two, those proposals and laws only impose the full burden to the private enterprises and entrepreneurs, government is spared from burden sharing as they do not allow tax credit for those forced discounts.

Three, those proposals do not make any distinction between rich and poor people. One reason why some people become centenarians is because they or their children, grandchildren, relatives and friends are very rich, they can afford various life-extending healthcare services. This cannot be said of certain establishments that may be struggling just to survive, much less make a modest and sustainable profit to remain in business.

Four, one "law" that keeps coming up even if it is not legislated by Congress or any other government body, is the "law of unintended consequences." If there are too many privileges and price discounts given to certain sectors, some businesses will simply stop selling or producing those goods and services often demanded by those sectors. So "cheap but not available" is the new problem.

Welfarism and populism via government intervention and legislation is wrong. They invite more stupidity in government and society as a whole.
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Wednesday, May 29, 2013

EFN Asia 20: Liberals Meet Liberals in Seoul

Here now in Jeju, S. Korea. Below is my article written when we were still in Seoul this morning, posted today in the EFN Asia website.
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Seoul -- Liberalism is a political ideology that advocates liberating the individual from excessive and unnecessary coercion. Such coercion includes over-regulation and taxation of individuals and private enterprises, or prohibiting people where and to whom they can freely trade their goods and services. People who subscribe to this ideology are called liberals in Europe and Asia. In the US, the term was hijacked to mean the opposite, the lovers of more state coercion. So they are called libertarians in the US.

So liberalism is a great ideology. And liberals and libertarians are generally great people for giving prominence to individual freedom, individual responsibility, free market, free trade, tolerance of diversity, and rule of law.

Last night was a great evening billed “Liberals meet Liberals” organized by the Friedrich Naumann Foundation for Freedom (FNF) Korea. It was held at Koreana Hotel in the heart of the capital city of South Korea. A small but intimate gathering of participants from China, India, Germany, Korea, Malaysia, Philippines, Thailand, and Vietnam.

Dr. Lars Andre Richter, the Resident Representative of FNF Korea gave an inspiring introduction of the work being done by his office to promote freedom. Then Minister and Head of Mission, German Embassy in Korea, Johannes Regenbrecht, gave a short talk that the German government is supporting initiatives to promote freedom and democracy worldwide. Jaykun Yoo, CEO of Christian Global Network TV also gave a short talk on the value of promoting liberal ideas to the public.

Pett Jarupaiboon, Regional Program Officer of Economic Freedom Network (EFN) Asia, gave an introduction of EFN Asia and what it is doing. He showed a video about the network, produced by Asia Freedom TV and the network, wow.

The main talk was given by Dr. Chung-ho Kim, Professor of Economics at Yonsei University in Seoul. He used to be the President of the Center for Free Enterprise (CFE) and is now putting up a new free market think tank, the Freedom Factory Ltd. See an earlier article about him here.

Dr. Kim’s lecture was entitled “The Challenge for Liberals in Korea” and he gave a short rap before his talk, to the delight of the audience. No wonder he is called the “Freedom Rapper” with several short videos in youtube.

The big challenge for liberals and libertarians in Korea is that many people have accepted the strong state intervention philosophy, even among intellectuals and academics. The usual lectures do not appeal much even to the young people. So what they did, they produced several youtube clips about freedom and liberty, in rap music with dance component. This has attracted the attention of many people in Korea, especially among the youth.

He showed that before, there were only about three of them in Seoul promoting libertarianism. This has changed now as thousands of people, the young and university students in particular, are now are attending his lectures about liberalism and the libertarian philosophy. So there is hope.

A few weeks ago, he announced in facebook and other social media that he is inviting investors from the public to put up a new independent and free market think tank, the Freedom Factory Ltd. As of last night, he has received emails from 150 people, many he does not know personally, expressing support to invest. Their combined pledge has topped $70,000 already and more should come.

Dr. Kim is introducing new schemes in putting up and funding a free market think tank. And he is spreading the philosophy to more and more people. The open forum that followed was very lively, that the event moderator, Tricia Yeoh of Rakyat Institut in Malaysia, has to stopped more questions as dinner was becoming late.

Lars Andre gave a toast to freedom before dinner was served. And over dinner, discussions continued in each table. Food was nice.

When liberals meet liberals, they naturally share ideas and stories how to further promote freedom and liberty. There is always hope, there are always new ways and schemes, to advance the philosophy of liberalism.

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See also:
EFN Asia 16: Participation in Jeju Forum for Peace 2013, March 19, 2013

EFN Asia 17: Zubair Malik as President of FPCCI, April 05, 2013

EFN Asia 18: Jeju Forum's Economic Panels, April 19, 2013

EFN Asia 19: Chatib Basri as New Finance Minister of Indonesia, May 21, 2013

Chung ho Kim, Freedom Factory Ltd., May 28, 2013

Tuesday, May 28, 2013

Chung ho Kim, Freedom Factory Ltd.

Seoul, S. Korea -- While waiting for an available room in my hotel at Somerset Palace Seoul, I visited a good friend that I have met for the first time in 2005, Dr. Chung ho Kim. Chung ho used to be the President of the Center for Free Enterprise (CFE), a free market think tank in Seoul. He resigned last year from CFE and concentrated teaching Law and Economics at Yonsei University, a big and hilly private university in this city.

After an Atlas and Economic Freedom Network (EFN) Asia conference in Phuket, Thailand in 2005, I met him again in 2006 when I attended the Asia Pacific Taxpayers Union (APTU) meeting in Seoul. Then he attended the EFN Asia conference in Manila in 2008 where I also attended, then I met him again in Washington DC in 2009 during the Atlas' Freedom Dinner in celebration of the 20th anniversary of the fall of the Berlin Wall. He was one of two foreign speakers (the other was a freedom fighter lady from Croatia or another country from East Europe) that night where he declared in front of a big crowd, nearly 400 people I think, "In Korea, we do not have a wall that divides the North and the South. Instead, we have a fence. As President of the Center for Free Enterprise, I urge you Mr. Kim Il Sung, Tear down the fence ~~wall~~". To the applause of the people.

Then I met him again in Sydney, Australia in 2010, during the 4th Pacific Rim Policy Exchange, sponsored by the Americans for Tax Reforms, Property Rights Alliance, and two other free market think tanks.

Chung ho is putting up a new free market think tank soon, to be called the Freedom Factory Ltd.. Cool name.

Below are some books in Chung ho's mni library in his office.

In another book shelf, some books by his friend and fellow faculty member. Some books by Friedrich Hayek, Milton Friedman, translated in Korean.

And some classic works, by Adam Smith, John M. Keynes, Karl Marx, Karl Popper.

Will meet again Chung ho shortly for a dinner meeting tonight billed "Liberals meet Liberals" (and libertarians). Many Asian free market leaders like Liu Junning and Feng Xingyuan from China, Barun Mitra from India, Wan saiful Wan Jan and Tricia Yeoh from Malaysia, Sam Raimsey from Cambodia, are here too, to meet with FNF Korea and other friends of FNF in Seoul.

Free Trade 29: The Asian Century

One measurement of economic growth or expansion of material wealth other than growth rate in gross domestic product (GDP) is the absolute increase in GDP size between two reference points or years.

The IMF’s latest World Economic Outlook (WEO) was released in April 2013, and it has a more accurate measurement or estimation of country GDP for 2012 compared to WEO’s October 2012 issue.

Here are the largest economies in the world based on their nominal GDP (ie, unadjusted for inflation), 15 years gap from 1997 to 2012. Five Asian countries are able to land in the top 20: Japan, China, Korea, India and Taiwan in 1997, and China, Japan, India, Korea and Indonesia in 2012.

Table 1. The 20 Largest Economies in the World, Nominal GDP in 1997 and 2012, in $ Billion

Source: IMF, World Economic Outlook, April 2013, Database

What is notable is the huge jump in material wealth of some countries in a span of just 15 years: 8.6 x for China, 5x for Russia, 4.3x for India and Saudi Arabia, and 4x for Indonesia. Australia and Turkey were able to expand their GDP more than 3x over the same 15 years period.

In contrast, the big economies of North America and Europe outside Russia were able to expand their wealth only between 1.7x to 2.8x. In South America, only Brazil and Mexico are able to join the top 20.

Let us now look at the other big countries. The oil-exporting countries like Iran, Venezuela, United Arab Emirates were able to multiply their national wealth by 4x to 5x in just 15 years. The huge world oil price hikes in recent years were mainly responsible for this big jump in their GDP size. The same explanation can be said for Russia, Indonesia and Saudi Arabia in Table 1 above.

Table 2. Other Big and Asian Economies, Nominal GDP in 1997 and 2012, in $ Billion

Previously heavily-repressed economy Vietnam was able to grow 5x its GDP size after various economic liberalization policies. One factor though is the under-reporting or under-statement of economic activities in the 90s, so when they were more reported and accounted, the growth is very big.

Despite high growth in recent years, the dollar value of Philippine nominal GDP of $250 billion in 2012 was smaller than those of Hong Kong and Singapore.

Countries have different valuation of the same goods and services produced. For instance, a taxi ride per kilometer in the US or UK or Japan would be around 5x to 10x more costly than in the Philippines or Indonesia. To correct this hyper valuation in other countries compared to other countries for similar goods and services produced, GDP are valued on purchasing power parity (PPP). The result is interesting.

First, India is now the 3^rd biggest economy in the world next to the US and China, displacing Japan now in 4^th place. Whereas in nominal GDP, India is only 10^th largest worldwide.

Second, China’s $12.4 trillion is just $3.2 trillion shy to overtake the US in #1 spot. If current GDP growth of China will continue and if US growth will be anemic, China may be able to overtake the US economy in about seven years or less.

Table 3. Top 20 Largest Economies with GDP Based on PPP Valuation, 1997 and 2012, in $ Billion

Third, six of the top 20 largest economies in the world as of last year are Asians, eight if Middle East Asian countries like Iran and Saudi Arabia are included.

Fourth, the big population countries are in the frontline of the top seven huge economies.

For the other big economies, here is the ranking.

Table 4. Other Big and Asian Economies, PPP Valuation of GDP in 1997 and 2012, in $ Billion

The Philippines is ranked 31^st in 2012 with $424 billion, versus 41^st rank with $250 billion in nominal GDP size. Its GDP-PPP is also larger than those of Hong Kong and Singapore, in both 1997 and 2012 ranking.

Near-free trade, or at least less-protectionism environment, has allowed many Asian economies to grow fast, thanks to their large population (more workers, more entrepreneurs, more consumers) and piecemeal transition towards democracy and less dictatorship. Many Asian countries are actually far out compared to the level of democracy and respect of the rule of law that many European and North American societies have achieved.

The “Asian Century” continues to emerge with each passing year. This is a good opportunity for the Philippines to grow fast too. If only we can reduce bureaucratism, statism, and the politics of envy. Then potential growth can be attained which is often higher than actual growth.

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See also:
Free Trade 25: Excess Supply or Demand and Trade, June 05, 2012
Free Trade 26: "Buy Local" and Protectionism, June 24, 2012
Free Trade 27: Proposed EU-PH FTA and TRIPS Plus, September 24, 2012
EMHN 7: Free Trade Improves Public Health, February 26, 2013
Free Trade 28: Exports and Prosperity, March 11, 2013

Monday, May 27, 2013

Transport Econ 9: MMDA Bureaucratism

The Metropolitan Manila Development Authority (MMDA) is among the huge bureaucracies in the country. It is supposed to solve problems related to heavy traffic congestion, street flooding, dirty streets, undisciplined motorists, and other functions to develop Metro Manila and its component cities and municipalities.

Today, a friend, JB Baylon, posted in his facebook wall about the MMDA. He wrote,

The MMDA has, over the years, tried so many schemes to bring sanity to our traffic: bus lanes, color coding, motorsiklo lanes, yellow lanes and yellow boxes, designated bus stops, even timers at bus stops (!!!) etc. But the MMDA has never been consistent and persistent in implementing these schemes, so, except for the color coding, everything else eventually is forgotten/fails. Not the Gates of Hell, perhaps, but definitely a metropolis of indiscipline, of "regulations-as-recommendations", of anything goes! Traffic - it's more fun in Metro Manila, the Philippines!

I replied that MMDA and many LGUs specialize on so many prohibitions. Driving your own car is not allowed on this day and hours, prohibited to drive on yellow lane, prohibited to make a left turn or U turn there, prohibited to drive your diesel engine car or van unless you pass their smoke test. More prohibitions, more regulations, more penalties, they make lots of money from those plenty of prohibitions.

Another friend, Stephen Cutler, replied,

I suggest, Nonoy, its because they don't have the right goals in mind: 1) traffic safety 2) traffic ease. Most of these guys don't drive, so they don't have to feel the pain of drivers. Most policy makers have drivers who take the strain, and the enforcers use public transportation. Neither are behind the steering wheel. Poor quality and non-standard signage is one example of this fact. The US, Australia, Europe and other nations have adopted a Uniform Signage code so that signs are at a uniform style/type, height, location and so on. Privately owned roads, such as the majority of the roads in Makati, but which are open to the public must conform.

I told Steve that these guys have clear and explicit goals in mind -- they are the central planners who will influence everyone else's behavior as motorists or commuters. More prohibition means (a) more revenues for MMDA and LGUs due to lots of acts that are prohibited, and/or (b) more extortion as many innocent motorists who are less informed of certain traffic rules will be forced to negotiate with them to spare further hassle and trouble.

Traffic congestion is very often an engineering problem with engineering solutions. If bureaucratic solutions are adopted, more problems are created than solved.

Someone suggested that “laws that make traffic violations be made a criminal offense, and said laws enforced, make the driver spend 30 days in jail when he makes an illegal U-turn, or 45 days when he fails to stop at a red light. Hopefully spending time in jail would make drivers think twice about breaking traffic rules. And don't improve the conditions of the penitentiaries. Let the driver suffer.”

Most likely this person does not drive here in Metro Manila, or does not drive often. In this country, all traffic prohibitions apply only to ordinary motorists. Red plate vehicles, police vehicles, low-numbered plates (6, 7,... 16 or 4 - 5 digits, etc.), armored vans, or ordinary civilan cars but with political VIPs inside, are all exempted from those prohibitions. The government is the worst violator of the rule of law, and it wants to impose more prohibitions, more restrictions.

Another suggested that MMDA should be abolished. I support his proposal but one problem there is that once a bureaucracy is abolished or shrunk, LGUs themselves will put up a new inter-LGUs body with a bureaucracy similar to MMDA. So one bad reality we have to live with is that bureaucracies just sprout like amoeba, they are everywhere, expanding or perpetuating themselves. The least we can expect from them is to limit their powers to create and expand the list of prohibited acts as if we ordinary motorists and commuters are their slaves.

More observations and ranting.

1. MMDA and LGUs want people to take public transpo, to car pool and reduce traffic in MM. Fine. But they make commuting hard and very inconvenient. For instance, you ride a bus from Ayala or Edsa, going to LRT taft to go to Monumento or nearby. MMDA forces commuters to get off about 300 meters away from the LRT station, they have to walk under the sun, or under the rain and flood, or avoid possible pick pockets along that distance. Fine if one is not carrying anything heavy or feeling well. But if one is sick, or carrying heavy things, such a huge discomfort to commute.

2. In Buendia, Makati city govt created a long line of "No jaywalking" along the island, sometimes as far as 200 meters. So to go to the other side, one walks 200 meters east or west, cross the street, then walk another 200 meters to one's destination. Again, if one is carrying heavy things, or valuables, or not feeling well, the discomfort of commuting -- and govt says people should commute more and not drive their cars.

Tax Cut 16: Conserving Fishery Resources by Taxing Demersal Fish Catch?

In late April this year, I have a short discourse with two fellow UPSE alumni in our discussion ygroups regarding fishery conservation. A friend who works at the Bureau of Fisheries and Aquatic Resources (BFAR) wrote,

There are however some cases where government needs to come in such as in cases of environmental protection. Where there are no controls put in place, people tend to harvest natural resources without thinking about the future, environment, and the like.

This is the case in fisheries where we need to put in place time and spatial closures to ensure that the fish stock as provided an opportunity to spawn and regenerate succeeding young ones, where we put in capacity limits to ensure that we do not over harvest and gear restrictions so that we do not catch non-target species. In order to do that, we put in a police force, so to speak, to ensure compliance. Hence, we need a monitoring, control and surveillance systems to ensure compliance.

That costs money but what price do you put on the loss of species, especially those that we usually harvest for food. In this case, markets are altered due to government regulations. Without it, we might end up in a situation where the sardines were lost in the case of one North American country in their Pacific coast.

I replied that the main reason why many fish varieties in the ocean remain in abundant supply is because of market solution to higher market demand for more fish, via aquaculture and fish farming. Lots and lots of tilapia farms, bangus farms, shellfish farms, crabs, lobster, shrimps, prawn farms, even lapu-lapu farms, has supplied humanity, the Filipinos in particular, with more fish. So the pressure to catch more fish in the open sea is not that high.

I read a news where BFAR wants to declare a "close season" for several months for galunggong catch, to allow the popular galunggong to expand further. That of course, is one solution but its full implementation will be low. Will BFAR send hundreds of inspectors to check the fish catch of each fishing boat coming from the sea? That's highly unlikely. So what will happen is that many may comply but a few will still catch galunggong non-stop.

One solution is to allow more fish farming of various species; galunggong, maya-maya, lapu-lapu, etc. This will greatly expand fish supply of certain species without the fishermen going far out in the sea. I read that the Israelis have modern tech in fish farming, they can grow various species even in desert-like conditions.

Then my perennial friendly co-debater in the UPSE alumni ygroups, Mike Alunan, suggested the following.

We are only starting to develop aquaculture and mariculture fishing systems, which include sea ranching, sea farming, floating cage fish production, etc.
But you may possibly tax demersal fish like lapu-lapu, as it penalizes the wealthier consumers, who can afford anyway...

tax specific fish catch as they are unloaded on fishports or at fish markets. There are basically two types of fish: 1) “Demersal fish,” like “Lapu-Lapu” which are more expensive and caught near shores mostly by small fishermen; 2) “Pelagic Fish” or those “schools of fish” like galung-gong that are caught by deep-sea fish operators.

In short, the fish eaten by the poor like galunggong are caught by the richer fish operators, while the more expensive fish like “Lapu-lapu” are caught normally by small fishermen, whose numbers and operations in near shore fish sanctuaries are putting pressures on fishery resources. It is more likely that the small to medium fishermen are the ones involved in illegal fishing methods like dynamite fishing that damage coral reefs and fish sanctuaries.

Taxes may not be slapped on galunggong so as to keep down prices of cheaper fish bought and consumed by the poor. But you may possibly tax demersal fish like lapu-lapu, as it penalizes the wealthier consumers, who can afford anyway. If it increases prices of lapu-lapu further, it is alright as the poor is not affected anyway as they do not really buy this type of fish. But for the wealthier consumers, they may not care much about the price as they are even willing to pay premium prices and dine at high-end fine-dining restaurants.

Fishery Resource Exploitation Excise (FREE) tax, which will be a fee which means it is not really free ironically. Being a tax, Nonoy may likely oppose this again.

This taxation system on fishery resources will in the end be a “market-oriented” fiscal policy to regulate this resource through a pricing system that is induced by a proposed taxation system, that is also intended to generate the necessary fund to bankroll credit for ice cold storage facilities, dryers and other processing equipment for fishing communities.

I replied to Mike arguing that those aquaculture and mariculture are free market solutions to previous market failures of insufficient supply of certain fish species (tilapia, bangus, shrimps, prawns, grouper/lapu lapu, sea cucumber, crabs, sea lobster, etc.). Government regulation here should be limited to enforcing private property rights, say between conflicting claims of land ownership among people or for some environmental concerns. Certain market problems or market failures have market solutions, sooner or later.

But his proposal to slap a tax on demersal fish like lapu lapu that are consumed more by the wealthy peoople is terribly wrong. For the following reasons.

One, extending this politics of envy, government should also tax blue marlin, tanguige, prawns (at P600+ per kilo), lobster, crabs, many other expensive marine products.

Two, more taxes means more bribery and more corruption. Either the fish farmers or fish restaurants will bribe the BFAR or LGUs or police or Coast Guard or BIR people who will assess and/or collect the tax.

Three, if we assume that all these government personnel have suddenly become saints and will not accept bribes, then government -- through all those agencies mentioned -- will hire more personnel, to assess and collect the tax, or oversee the frontline tax collectors to control corruption. Which means to expand the bureaucracy further to the nth level.

Four, lapu lapu, crabs, etc. that are raised via fish farming should be taxed as well. Because if they don't, then lapu lapu caught from the open sea will only be temporarily transferred say for one day, in those lapu lapu cages, and be harvested the next day at zero tax. This further raises the cost of harvesting these fishery products and wastes labor, even if taxes were not collected.

And five, the politics of envy is wrong. Being rich and wealthy is demonized as evil; hence, they should pay more tax, they should be "penalized" more, they are bloodsucking evil anyway. People should be contented being poor or lower middle class. They will not be penalized, they will even get more subsidies, endless and no timetable subsidies.

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Saturday, May 25, 2013

Weekend Fun 41: Nancy Binay, Grace Poe, Other Politicians

Newly elected Sen. Nancy Binay ranked 5th out of 12 Senators recently proclaimed by the Comelec. Being a never-heard political personality nationwide until November 2012, she suddenly shot up in the top 15 candidates when she was drafted by UNA in December 2012. The rest is history. Below is her political pedigree.

Some political cartoons during the campaign period, below.

Well, the joke is now on the voters, you and me included.

On the part of #1, Sen. Grace Poe who got 20.15 million votes, almost two million higher than the 2nd placer Loren Legarda who got 18.48 million, there are also jokes and memes about her, but less offensive. Like this one.

Meanwhile, a funny story about the Batangas Gubernatorial elections of 2013, from a friend, Derrick Gerardo Manas, who posted this in his facebook status and gave me permission to re-post:

The guy who challenged Governor Vilma Santos is Marcos Mandanas Sr. a distant relative of Congressman Hermilando Mandanas,who himself was a former Governor who is supposed to run but decided to back out.

Marcos Mandanas Sr after filing his candidacy last October for Governor to challenge Vilma Santos, suddenly visited Governor Vilma Santos in her office to shake her hands and to top it all - ASK FOR DONATIONS FOR HIS CAMPAIGN AGAINST HER, Bwahahahaha! and the Governor laughingly gave him some bucks! hahaha
I got this story from a reliable source in the Capitol of Batangas.

Vilma Santos - 759,237 votes
Marcos Mandanas 48,143
Praxedes Bustamante-4,859

I also heard a story of a perennial crackpot Presidential candidate before, Danny(?) Racuyal. Among his programs if he won as President was to enclose the entire Philippine archipelago in one big glass, and turn on several giant air-con. He noticed that cold countries are more developed than hot and tropical countries, so by making the Philippines colder, the country would develop economically.

When he was asked, "How do Filipinos go out of the country or how do foreigners visit the country if there is a huge glass surrounding it?" He replied, "that's a stupid question." :-)

See also:
Weekend Fun 37: On Fighting Poverty, July 07, 2012
Weekend Fun 38: Skylab Motorcycles, July 14, 2012
Weekend Fun 39: Funny Photos in Manila Floods, August 12, 2012

Weekend Fun 40: Bank Robbery and Management, May 18, 2013

Thursday, May 23, 2013

Pol Ideology 40: On Social Darwinism

Late last month, I have a debate with a friend and fellow UPSE alumni, Mike Alunan, about markets and regulation. Among his arguments, below.

“Survival of the fittest” thinking is inhuman? Human beings are not like animals as they have the capacity to surpass the limits of nature by doing more than simply adapting to nature as most animals do---but they have the capacity to even conquer nature through their creativity that leads to science and technology.

And if we believe that Darwin’s dictum of “survival of the fittest” also applies to human beings, then we have reduced ourselves to the level of the beasts, which only survive for the present and even devour their off-springs only to survive for the day. Darwinism is a kind of free market competition for survival among beasts fighting in the wild jungles.

Social Darwinism basically justifies also the free market competition of man vs. man as a perceived normal order of things that escalates, at times, into their worst situations like wars, similar to the Peloponnesian Wars among the ancient Greeks that led to the downfall of Athens and the Greek civilization….

I told him that his arguments are terribly wrong, in both economics and natural science aspects. The Darwinian definition of "survival of the fittest" does not mean only the ability to eat and eat to survive. It is also the ability to evade predators and "murderers" in the natural world. That is how animals "chose" their skin colors and textures to look like their natural environment so that they cannot easily be detected by their would-be food or would-be murderers. So chameleon, monitor lizards, butterflies, birds, etc. have skin or feather colors that look somehow similar to their natural environment.

In the economics aspect, there is nothing, zero, nada, in free market philosophy that people should harm other people -- eat them, butcher them, stab them, etc. just to survive and prosper. Free market and free individuals simply mean that people are free to do what they like. They can over-work or underwork, over-sleep or under-sleep, over-sit and over-eat or go on a hunger strike, over-drink and over-smoke or avoid these temptations, over-sex, what have you. So long as people harm no one. Be as fat as a pig, no problem. Be as rich as Henry Sy or Zuckerberg, no problem. Be as drunkard as Erap, no problem. People are free to be industrious or lazy, to be responsible or irresponsible, to be efficient or lousy. That is free market and free individuals.

When government comes it, it usually distorts this freedom of individuals. Thus, even those who wish to meet their creator early by over-eating or over-drinking and over-smoking and become sickly later, are prevented by government from doing so. Government over-taxes you and me, those who take care of their body more responsibly and work hard, so that government will have more money so it can subsidize the healthcare and prolong the life of these people, on top of hiring too many government personnel to do endless subsidies. This is not cool, it is simply irrational.

His words that "Social Darwinism basically justifies the free market competition of man vs. man... that escalates, at times, into their worst situations like wars..." is of course, wrong.

ALL big wars, no, zero, nada exception, are instigated and initiated by governments, or armed/rebel elements wanting to overthrow an existing government so that they will be the new government. Free market means freedom to exchange, voluntary exchange. I sell you tomatoes and onions, you do not like my products' quality, or you may like them but you do not like my price, you walk away and look for another seller of tomatoes and onions. I did not nor will I ever put a gun on your head so that you buy my tomatoes whether you like it or not. Zero war, zero coercion, nothing.

In government, I give you the lousiest policeman or a stupid teacher or a terribly corrupt but shrewd Mayor, you have to pay for them, by hook or by hook. There is threat of prison and political harassment, so that you pay various taxes, fees, fines and mandatory contributions, whether you like it or not, to pay for these thick army of politicians and bureaucrats. Expand this coercion to a national and international scale, and you have wars, bombings, destruction. The more armed government wants to impose its will and biases on other people or governments.

Mike also complained that "The problem with Nonoy’s free market extremism is that he labels everyone not agreeing with his brand of free market and minimalist government as statists and socialists. Isn’t labelling and stereo-typing by itself a form of statism, being devoid of dynamism."

This is wrong. There are other proposals or advocacy that are more extremist than mine. Like the anarchists -- they want zero, nada, authority and government. Even the protection of private property rights should not be given to government. I am a "minarchist" and respects that there is role for government. I believe in big government -- only in promulgating the rule of law and protecting people's right to peaceful life. Thus, armed and organized criminals and robbers, armed rapists and murderers, armed and organized land grabbers and carnappers, should be met by a bigger armed government plus a credible justice system.

I label "statists and socialists" those who are explicit in begging for "more state intervention please, more forced collectivism please." People want to forcibly collectivize education, healthcare, housing, pension, etc. -- by collectivizing also your own income, your own savings and investments. The role for personal and parental responsibility is blurred and negated if not corrupted, by more government responsibility. And this results in often lazy thinking. Edukasyon sa mahirap at di mahirap (ala UP), gobyerno. Medicines sa mahirap at di mahirap, gobyerno. Tractors sa mahirap at di mahirap, gobyerno. Condoms and pills sa mahirap, gobyerno. Do not ask why some people are poor, do not dig for laziness and personal irresponsibility, just close your eyes, for any problem of the poor, there is only one solution -- gobyerno. This is lousy and lazy thinking. And people complain when they are called as statists and socialists.

There was no follow up from Mike after that.

To follow was our debate on his proposal to impose a fishery taxation...