Agri Econ 6: My Treehouse

Government-sponsored housing (directly provided or financed or subsidized) is among the “human rights” and entitlements that many welfarists argue as a “basic government function”, along with “healthcare is a right”, “education is a right”, “agri credit is a right” and their various cousins and derivatives.

If people would expect that many things are “government responsibility” and very little is left for personal and parental responsibility, then people should expect many things to become “government control and property”, including our monthly income, our savings, our individual rights and liberty.

In the Philippines, various government agencies doing various forms of intervention and forced contribution are engaged in housing. Like the National Housing Authority (NHA), Housing and Urban Development Coordinating Council (HUDCC), National Home Mortgage Finance Corp. (NHMFC), Pag-IBIG Fund, among others.

I am a month-end (or “trying-hard”) farmer and a lower middle class urbanite. Since I go to the farm (Pangasinan, northern Philippines) every 3 to 4 weeks to visit a farm that I manage (I don’t own it), my dogs (I used to have 7, now down to only 4) and our farm caretakers, I need to have my own house there. And since I want to live in Makati where I hold an office but I also cannot afford to buy a condo or townhouse, I have to continue renting a place.

So I got no house in Metro Manila despite various government housing “programs” (to be discussed in future postings) but at least I got a house in the farm. It is easy and non-costly to put up a house there, an all-wood house, because we have lots of trees that we planted since the early 90s. And this is what I got there – a treehouse!

It’s a 2-storey, all-wood, no walls (except the toilet, of course), slatted-bamboo floor, house perched on a big and live mahogany tree. We built it around March 2005, so it’s more than 5 years old now. The tree carries the bulk of the weight of the house, but there are 8 smaller posts that help support the house and give it more stability.

The roof used to be cogon, neatly tied and arranged. It’s cool, not hot on cloudless days and not noisy when it rains. But remember, this house is perched on a live tree. The tree’s trunk on ground floor is getting thicker but not rising. The second floor though is rising by about ½ to ¾ inch per year. And the trunk where the roof is clamped is rising by about 3 inches per year! The roof has to be repaired every 2 to 3 years as rainwater slowly seeps into the trunk and into the house.

This is the house until early 2009, before we changed the roof to iron. Termites were able to climb up the house and they like munching the rain-soaked cogon roof a lot, contributing to the damage to the roof. The part covered by wooden slabs is the toilet. Notice the stone terraces on the right side, fronting the treehouse.

And this is the house this year. The cogon roof at the ground floor and second floor has been changed with galvanized iron. The termites on the roof are gone. It’s not so hot during cloudless days, mainly because of the surrounding trees and their leaves. But it can be noisy when it rains though.

I mentioned above that the 2nd floor is rising by about ½ to ¾ inch per year. The tree’s trunk is rising and getting bigger there, it is trying to move apart the two huge 3 x 6 inches support beam of the 2nd floor. Since the beams are well-secured, the tree has tried a new tack: if it cannot push them away, it will swallow them!

A close up view of the thick new “lips” of the tree. At the rate the “lips” are moving and expanding, this part of the wood will be entire swallowed in 3 to 4 years. I do not know if this will break the wood or it will strengthen it by then.

This is a view of the house 5 years ago, sometime in April or May 2005. Notice the trees surrounding it were still thin and small.

And this is the house last month. The trees surrounding it have become bigger and taller. At least two big and leaning trees have been cut already as they posed danger to the house during typhoon season.

A view of the house on the 2nd floor. Yes, those are live new leaves and branches that grow on the trunk. We have to remove some of them; otherwise, they will grow even bigger and occupy the entire house.

A tall, “Tarzan-like house” would need a Tarzan-like carpenter. That carpenter is Charlie Espinoza, the one on the left. Charlie is cool: a rice and vegetable farmer, tricycle driver/mechanic, carpenter, various other jobs, He’s the one who repaired and/or changed the roof. Assisting him, on the right, is Danny Paragas, who also assists his father, Nong Endring Paragas (not shown here) in taking care of the farm.

For those who plan to build their own treehouse too, the first thing to do is to have many trees near your area. Plant trees now on your private land, or take care of those that have grown naturally. Take note that the operative term is “tree growing”, not just “tree planting”. The former means planting trees for the long-term, the latter describes tens of thousands, of such activities every year. An average “tree planting” activity by various groups consist of 99 percent tree planting and 1 percent monitoring. After the picture-taking and being published in some newspapers or posted in some online sites, the newly planted seedlings are left on their own. After a week or a month, many of those seedlings are dead – choked by vines and tall grasses, or got burned in forest fires, or eroded by heavy rains and flash flood, or got trampled by farm animals, etc.

Note also that it is very bureaucratic to cut and transport trees even if you’re the one who planted them on your private land. To deal with the forest bureau of the Department of Environment and Natural Resources (DENR), at the central or regional offices, is time consuming and costly. A way to avoid such bureaucracy is to remove the need to transport by truck the wood that you need. Have the trees you need to cut someday be near the house that you will build.
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See also:
Agri Econ 1: Food Prices and Government, April 13, 2008

Agri Econ 2: Rice Laissez Faire vs. Subsidies, May 06, 2008

Agri Econ 3: Dr. Samran Sombatpanit and WASWC, July 03, 2008

Agri Econ 4: Government Agricultural Interventions, October 21, 2008 (long paper) 

Agri Econ 5: Land Reform Without Timetable is Wrong, July 01, 2010

Abolish the SK

The Sangguniang Kabataan (SK) or "Youth Council" at the barangay or village level, is creating baby political dinosaurs out of otherwise simple and non-politicized youth. The design, like the "party-list" system, is wrong from theory to practice; from concept to implementation.

At ages 15 to 18, the youth these days have lots of things to do aside from politics. Foremost of which is to study in high school or in college. If they are in school, there are lots of avenues for school, civic and community involvement as there are various clubs, academic or otherwise, and school councils. There are also school papers or campus journalism opportunity.

If the youth at that age bracket are not in school, then most likely they will be working, mostly in the informal sector or in the house, like helping taking care of younger siblings, both of which can make them busy.

Thus, there is really no need to elect and sustain tens of thousands of young politicos, to be funded from taxpayers' money. The youth should be diverted away from politics and unproductive political wranglings whenever possible. There are plenty of anecdotal evidences of how the youth learn to practice bribery and corruption at a young age just to win elections at the barangay or village level.

The SK, therefore, should be abolished. And it should have been abolished yesterday, not to be abolished tomorrow.

Nonetheless, it is good that there are sentiments and proposals in the new administration, to abolish SK. Among such officials is the Secretary of the Department of Interior and Local Government (DILG) himself, Sec. Robredo. He was reported in this news report today, for instance, DILG chief seeks SK abolition.

Portion of the report says,

Robredo said the youth council has not proven itself to be functional and effective in delivering services to the community.

But scrapping of the SK will not mean that the youth will be deprived of a voice in the community. If anything, it will actually strengthen the position of the youth since a youth representative would now be a regular member of the barangay council when before they only sat as an ex-officio member, he said.

The abolition of the SK will save the government approximately P3.5 billion in expenses.

I hope that this move will attract more public support. For the future of our young people, and partly, for the sake of our pockets as taxpayers.

Medicines, innovation and pricing

It is good to find a physician with a good grasp of economics and finance, and thus can write well on health policy issues. One such physician that I have read is Dr. Tej Deol of Asia Health Space

In his recent long article, Little red riding hood (society) and the big bad wolf (branded pharma), Dr. Tej discusses about certain expectations that pharma companies should sacrifice something for society. It is a philosophical-economics-innovation paper, well-written.

The author wrote for instance, about the role of pricing when a pharma company discovers a drug that is so valuable and innovative.

In well-functioning competitive markets Industries don’t have to defend their pricing choices to anyone in society (except its shareholders!). If a particular company prices it’s product (i.e a new patent protected antibiotic for urinary tract infections) too high, consumers (patients) will substitute to cheaper alternatives. For the vast majority of common illnesses there are plenty of cheap and effective treatment doctors and their patients can choose from. Patent protection to encourage the investment in new technologies/drugs is helpful in justifying the investment but it does not create a monopoly nor eliminate competition. Thus, pharma companies must expend “more on marketing than on R&D “. In order to achieve an acceptable market penetration to justify investment you must market your products. If the condition is rare, and your product is truly innovative and value enhancing, then high prices are very justified and less can be spent on marketing until someone else can challenge your product with a cheaper but equally effective alternative.

Several important concepts were touched by the above paragraph:
a) Pricing of products and to whom it should please,
b) Competition and substitution of products,
c) Patent and protection of a new invention,
d) Role of marketing for drugs on common diseases,
e) Pricing high for revolutionary drugs for rare conditions.

People wish for something very useful and revolutionary, something that is not availalbe yet and they wish were to be created by some magicians or angels. When that "something" was finally invented by humans and made available to the public but was unfortunately priced high, people would tend to demonize those inventors.

This is understandable somehow, part of "human nature" to wish to have something impossible be made possible for them. Like being made available to them for free or at a very low price. But inventions and discoveries, by nature, are scarce and limited. The scarcity (if not non-availability) of something -- like oxygen under the sea, or diamond or a super-fast car -- can be reflected by its price. The higher the price, the more scarce that product or service is. The lower the price, the more abundant a commodity is. Air is free and we pay nothing to breathe the air because its supply around us is unlimited.

Dr. Tej concluded his paper with the following observation:

Anyway, in my humble opinion both Little red riding hood and the big bad wolf are getting screwed. “Society” loses out on an critical source of healthcare innovation and forces large deep-pocketed branded pharma firms into consolidating with generics manufacturers with everyone competing on price and nobody competing on quality. Worse yet, once the consolidation matures, the prices will rise anyway. So in the end, no specialty pharma companies; no pure generics manufacturers; only consolidated hybrids and a commoditized industry with limited incentive to compete on quality or price.

It is important that people and their private enterprises would stick to certain division of labor. There are those who love high risks-high returns, long gestation and lots of hard R&D work; and there are those who love low risks-low (but assured) returns and little or no discovery and innovation work. Then people and their private enterprises can compete with each other in both product quality and product price.

The spirit of competition should be retained at all times at all places. When people feel there is too much competition on existing products, technologies and/or processes, then this will encourage, if not compel, them to do innovation work.

People are getting more demanding in healthcare. If they get sick, they want to get well within 1 or 2 days, not 1 or 2 weeks or longer. Hence, they demand more powerful, more revolutionary drugs and treatment. Health collectivism and coercion though would force pharma companies and retailers to focus on low price. If the price is deemed “expensive” even if the drugs are indeed highly effective and powerful, governments come in to impose price control and similar schemes. And this is where danger and uncertainties would flourish.

4th Pacific Rim Policy Exchange, Sydney, Sept 28-30

Free market-oriented individuals and policy makers, liberty-oriented NGO and think tank leaders, bloggers and writers, there is a great opportunity to meet up with each other from halfway the globe.

The 4th Pacific Rim Policy Exchange (http://www.pacrimpolicyexchange.com/) will be held in Sydney, Australia, this coming September 28-30, 2010. It will be sponsored by 4 think tanks, 3 from the US -- Americans for Tax Reforms (ATR, www.atr.org), Property Rights Alliance (PRA, www.propertyrightslliance.org), and Heartland Institute (www.heartland.org) -- and one from Australia, Institute for Policy Analysis (IPA, www.ipa.org.au).

It is called "Pacific Rim Policy Exchange" because it is a major conference and sharing of ideas, observations and experiences among free market leaders and intellectuals from East Pacific (North and South America), the South (Australia-New Zealand) and West Pacific (North and South East Asia), plus other Asian countries. A number of known free market-oriented intellectuals have confirmed to become speakers.

The 3rd Policy Exchange was held in mid-October 2009 in Singapore. Attendance was less than a hundred people, but the quality of exchanges and discussion papers was high. Picture here shows from left to right, Kate Donner of Donner Foundation, the events organizer; me; Kelsey Zahourek of PRA, and Alec van Gelder of the International Policy Network-London (IPN, www.policynetwork.net). IPN was one of the 5 sponsoring think tanks of the event in Singapore.

The World Taxpayers Association (WTA, www.worldtaxpayers.org) was another co-sponsor of the event last year. Picture here from the left, Bjorn Tarras-Wahlberg, WTA Sec-Gen., Grover Norquist of the ATR and me. ATR has been the consistent and important sponsor of the Policy Exchange since it was started in 2007 in Honolulu, then in 2008 in Hong Kong.

Also among the participants and speakers last year, from left, were Ms. Jamie Story of Grassroot Institute Hawaii, Jaya Naidu from Australia, Chris Derry of Bluegrass Institute, Kentucky, and Jargal Dambadarjaa of the Mongolians for Fair Taxes and Wise Spending (FTWS).

MG Thinkers was among the minor sponsors of the event, helping the major sponsors advertise the event to its network.

In this age of ever-rising government intervention, regulation and taxation, the battle to preserve individual freedom is a continuing challenge. Individual freedom cannot and should not be subsumed always under national and (forced) collective freedom. There are certain individual rights that run contrary to "collective rights". For instance, the right to self-expression by an individual is paramount to the State's "right to censor" diverging opinions. The right to keep more of an individual's monthly income runs counter to the State's penchant to confiscate as much income as possible from the toil of the hard-working people.

Game theory in analyzing drug price control

(Note: this is my article for the online magazine today, http://www.thelobbyist.biz/perspectives/columns/back_to_personal_responsibility/883.html)

If there is free competition among companies and players, there will be dynamic and fluid changes in pricing and marketing of products by the players. Such changes can happen within months or weeks, or even days, as each player is watching its competitors’ current and future moves.

If free competition is hampered or killed by government intervention like drug price control, such fluidity is also hampered. Both foreign and local players will be watching not much each other, but the government. They will be asking questions like: How long will the drug price control stay? Will the list of drug molecules under price control be expanded or reduced? Will there be other interventions aside from price control?

The more that such questions are not answered, the unstable the business environment in the sector will be. More instability means weaker competition and weaker attractiveness of the economy to other potential players, both foreign and local. And this will negatively affect the competitiveness of the sector and the economy over the long-term.

(The 2 illustrations here are from en.wikipedia.com)

Game theory is an applied mathematics theory adapted in the social sciences and economics. It is useful in analyzing players and consumers’ behavior, which can help guide public policy.

In the pharmaceutical industry, there are many players. Let the multinational pharma companies be labeled as M1, M2, M3, and so on. And let the local pharma companies be labeled as L1, L2, L3, and so on.

When the government imposed the mandatory 50 percent price cut on the best-selling products by some big multinational pharma companies last year, this greatly affected not only the multinationals but the local players as well.

Companies M1, M2, M3 and so on halved their prices, say from P20 to P10, from P16 to P8, from P12 to P6, respectively. Assume that the prices of companies L1, L2, L3 and so on are 40 percent lower on average, than the original prices of the multinationals. So L1, L2, and L3 will have two options: further price cut of their already low-price generic drugs, or withdraw some products, at least temporarily while price control is in effect, if there is no more room for further price cut without suffering significant losses. The result may look like this:


(Note: I dont know how to paste the diagram I made there into blogger format. A typical copy-paste move does not show the diagram. Check the above link to see the diagram, thanks.)


The figure (10, 6) means the after-price-control price of M1 is P10 while L1’s price is P6. The figure (10, 0) means M1 keeps the P10 price while L1 has withdrawn its product. In which case, the local generics manufacturers were whacked by the government’s price control policy.

From the various data coming from medium-sized drugstores in the country, it seems that the market was distributed to (10, 6), (8, 5) and (6, 3) situations. For the ABC class of consumers, there was a big switch from generics to the branded drugs that were under price control.

Did the poor benefit from such downward price spiral? A number of data say that the answer is NO. Take the molecule amlodipine, an anti-hypertension drug. The most popular brand then was Norvasc, made by Pfizer, sold at P44 for the 5mg tablet. Prior to price control, the cheapest generic was sold at only P8. After price control was imposed, the P44 became P22, but for the poor, it is still expensive since the cheapest generic producer has retained its P8 price, or possibly brought it down further.

For the really poor, the most affordable price is not 50 percent of xx pesos, but zero. The poor want the essential drugs to be given to them for free.

For those with sentiments that the price control policy should cause pain and losses to the “profit-hungry capitalist multinationals”, the above exercise in game theory says there is a “law of unintended consequences” and that those who were possibly hurt more, are the local pharma players L1, L2, L3 and so on.

If arm-twisting companies M1, M2, M3 and so on to bring down their prices did not succeed in improving access of the poor to essential branded medicines, then the next option for the government is abandon the policy, and shift to bulk purchase of those essential medicines, the cheaper generics especially, and give away to poor for free. Some pharmacists would caution though that giving away drugs for free should be under professional supervision. Irrational drug use, if not unhealthier lifestyle among the poor, can be encouraged by free medicines. And irrational drug use will create new health problems in the future.

Ice, ice everywhere

Global cooling is getting harsh this year.

Consider the following headlines, all of which refer to July and/or early August 2010events:

1. "Peru declares state of emergency due to plunging temperatures", with more than 400 people already died last month alone,
http://www.guardian.co.uk/world/2010/aug/01/peru-freezing-weather-emergency

2. "Cold wave kills 6 million fish in Bolivia", with a picture of so many dead fish. Authorities there called it "an environmental catastrophe." Not because of global warming but with global cooling.
http://www.topnews.in/law/cold-wave-kills-six-million-fish-bolivia-222874

3. "Snow in Brazil, below zero Celsius in in the River Plate and tropical fish frozen", that also talked about the cold snap in Argentina and Uruguay,
http://www.climatechangefraud.com/climate-reports/7454-snow-in-brazil-below-zero-celsius-in-the-river-plate-and-tropical-fish-frozen

4. "First 6 months of 2010 in Germany the coldest in 14 years",
http://pgosselin.wordpress.com/2010/07/09/das-eisbox-first-6-months-of-2010-in-germany-coldest-in-14-years/

The original article is published in German language, Readers Edition, at
http://www.readers-edition.de/2010/07/02/kaelteste-erste-jahreshaelfte-seit-15-jahren/

5. "July average maxima in San Francisco coolest since 1971", see the table of the coledst maxima from the 1920s,
http://wattsupwiththat.com/2010/08/02/july-in-san-francisco-coolest-since-197/

The reason for such severe cold snap in South America, and the official appearance of La Nina in the Pacific Ocean, can be seen in this graph. The blue color represents cold ocean water moving fast from east Pacific (S. America) to west Pacific (E. Asia). Data as of July 29, 2010.

So if we wonder why we hardly see the Sun the past few days, expect even darker skies in the coming weeks and months. Would people still consider this as "man-made global warming"?

More news stories of the creeping global cooling can be cited, but let us stop at those 5 above, and focus our attention now on sea ice extent in the Arctic (northern hemisphere) and Antarctica (southern hemisphere).

The pictures and graphs below should convince people that there is no such thing as "ever-melting polar ice", and its lousy conclusions like "ice-free Arctic summer in 5 to 10 years."

There is one site that gives all the most updated data, as of the other day, of the Arctic and Antarctica, http://wattsupwiththat.com/sea-ice-page/

I suggest that readers visit that site regularly to disabuse ourselves of idiotic claims of "ever-melting polar ice", http://wattsupwiththat.com/sea-ice-page/

1. Satellite picture of Arctic ice extent, as of August 6, 2010, data from NSIDC.

2. Satellite picture of Antarctica ice extent, also as of August 6, 2010, data from NASA Earth Observatory.

3. Graph, Arctic ice extent, data from the International Arctic Research Center - Japan Aeronautics and Aerospace Administration (IARC-JAXA), as of August 6, 2010. Data for 2010 shows lower than the levels early this decade, but higher than those in 2007 and 2008.

4. Graph, Antarctica ice extent, data from NSIDC, as of August 6, 2010. The 2010 figures are about 1 million sq. kms. wider.

Expats View 1: Some Drastic Government Moves

One of my favorite newspaper columnists is Peter Wallace, an Australian businessman who has been living and working here for more than three decades now. Peter writes a weekly column in Manila Standard.

Today, Peter's article is entitled, "A real to-do list",
http://www.manilastandardtoday.com/insideOpinion.htm?f=/2010/august/6/peterwallace.isx&d=/2010/august/6

Peter suggested the following to President Aquino:

1. Legalize jueteng you’ll never stop it. Bingo is legal, casinos are legal, why is just one form not? Legalize it, you can control it. Legalize it and the crime syndicates go bankrupt.

2. Abolish the National Food Authority use conditional cash transfers. With a debt of P177 billion, it’s a proven failure. Give the poor the cash to buy from a competitive market.

3. Mandate that all pork barrel funds should go to education and health.

4. Revive family planning and sex education in school ask the United States to provide free condoms again.

5. Add carriages to MRT-3 and reduce the number of buses on EDSA by half, controlled into the right-hand lane only LRT-7 will help greatly here.

6. Make English the primary language of learning but retain Filipino as a secondary language.

7. Negotiate power plants we know the cost. We need power NOW. Declare a state of emergency if necessary, because it is an emergency.

8. Order transparency in government a law can follow. All President Noynoy Aquino has to do is order all departments to open their books to anyone who asks.

9. Reduce cigarette taxes to one tier or, reluctantly, two the currently mangled law is depriving the government of billions. we need high taxes on cigarettes, they kill.

10. Increase VAT to 15 percent and greatly reduce personal income tax for salaries below P20,000 per month. I’d far rather pay tax when I spend than when I earn.

11. Scrap the idea of receipts and taxes for sari-sari stores they can come later, if at all. Let those with marginal incomes also maximize the use of what little they get.

12. Create a Department of Information and Communications Technology it’s going to be the biggest sector.

13. Split the Department of Environment and Natural Resources you can’t promote and regulate in the same office. The conflict this develops is emphasized by what’s happening in Tampakan now.

14. Scrap the Comprehensive Agrarian Reform program, 21 years was long enough it hasn’t worked and you need plantations, economies of scale in agriculture.

15. Resolve the Ninoy Aquino International Airport mess within 90 days, not 91 either through a final court decision or a unilateral decision by the Philippine government to just pay a fair price.
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Of the 15 items above, I support all except the following:

12. Create the DICT. It's another bureaucracy in the government, the BPO and ICT sectors grew even without a department in the past. Most new regulation on ICT becomes outdated within a year or less as that sector is very dynamic.

I haven't thought much on no. 4, revive family planning and sex education in public schools.

Climate loans racket

The Asian Development Bank (ADB) is the premier lending institution for many governments in Asia. And just like any bank, the more (and bigger) loans it makes, the more revenues and resources it accummulates.

Recently, it announced to commit $2 billion per year climate loans to Asian countries. I'm watching that multi-billion dollars climate loans to "fight man-made climate change and save the planet".

It's an idiotic proposition actually. When there is prolonged drought and El Nino, it's because of "man-made warming and climate change." When there is super-heavy rains and prolonged rains (like typhoons Ondoy and Pepeng last year) and La Nina, it's because of "man-made warming and climate change." So to fight climate change, governments should keep borrowing billions of $ from them. And we taxpayers should pay more in carbon taxes that the government will siphon off to subsidize expensive solar and wind farms, that we do not deserve more lights in our house and villages if such electricity does not come from their rent-seeking power plants.

(picture from CCC website)

Meanwhile, there was an intriguing news report last June, "RP needs $100 billion for climate change adaptation." It was about the proposal of top RP climate rent-seeker, aka climate commissioner, Heherson Alvarez, who wanted $10 B/year, yes, $10 billion/year, of climate loans to the Philippines for 10 years, or $100 B! And he mentioned the ADB as among the major sources of such multi-billion dollars climate loans racket. See the new report here,
http://www.philstar.com/Article.aspx?articleId=587198&publicationSubCategoryId=200

I saw from the ADB website, cumulative loans to RP as of end-2009, $1.91 billion was for agriculture and natural resources, and $3.08 billion was for energy projects, or almost $5 billion total http://www.adb.org/Philippines/main.asp.

La Nina is officially in the pacific ocean, the cold ocean water is moving fast from east to west (south america to east asia), see the graph and story here, http://wattupwiththat.com/2010/08/05/noaa-still-expects-active-atlantic-hurricane-season-la-nina-develops/#more-23027

An Ondoy-type of rains may be with us again this year or the next few years, terrible global cooling will be with us, but the UN IPCC, FCCC, Al Gore, ADB, WB and other climate alarmists will insist that we need to borrow billions of $ to prepare for "unequivocal warming and rising oceans" and "save the planet."

And we will wonder why our public debt will keep rising and rising?