Thursday, June 28, 2007

More evidence for a downward sloping demand curve

When I was teaching I often heard the canard, "Gas is so essential it doesn't have downward sloping demand."

Here is evidence to the contrary. Not in any way rigorous, but fairly convincing to a college sophomore!

Tuesday, June 19, 2007

The breast of intentions

Another controversy with strong implications for economic freedom: the breast milk advertising controversy. (See this news item.) The Philippine government wants to fully implement the National Milk Code (full text

The Code is well-intentioned. Yes, breast milk is really best for babies. As with tobacco products, I agree that mandatory labeling can help balance the subtle cues inherent in product advertising.

But extremists advocate an outright advertising ban. That is going too far.

I have a better approach: tax it. The analogy with tobacco (and alcohol) is very precise. And don't call it "sin" tax or some such pejorative term: call it a "health tax". Set it at an ad valorem rate say equal to or even double the VAT (now at 12%). Watch the money roll in and the breastfeeding rates go up! Earmark the money for maternal and child health services of the LGUs (Local Government Units). LGUs would be happy. Maybe they'd even pressure the Congress to approve of it.

Wednesday, June 06, 2007

The egghead disconnect

The Philippines and Japan are in the process of ratifying a bilateral free trade agreement. In principle I am no fan of bilateral agreements - broad multilateral is more of my thing. But (as usual) I am bothered by the remarks of a Philippine Senator calling for"safety nets", because "Thousands of Filipino workers in factories making garments and electric appliances, and assembling automobiles stand to lose their jobs."

Now where did that figure (vague though it is) come from? The analysis is thought-provoking:

The chair of the Senate committee on economic affairs said his studies showed that 20 percent of Philippine products covered by the JPEPA would be adversely affected because the deal would reduce duties on Japanese exports to the Philippines to zero from between 10 percent and 30 percent.

“The domestic industries that would be affected are in garments, electronics such as toasters, washing machines and cooking ranges, and automobiles and spare parts,” said Roxas.

He noted that the three sectors were the country’s top dollar exports.

Now let's get this straight: these sectors are competitive enough to be able to export. But somehow they are threatened by the fact that we are repealing our tariffs? It boggles.

What's really happening? Well it's this cross-hauling thing: while we export a lot of these industrial products, in the same aggregated categories we are importing. So in some finer categories we are competitive, in some we are not. The latter is threatened by Japan's exports.

So how big is the threat and what to do about it? As a matter of fact the first part of the question has been answered, "not much." A bunch of eggheads have already done that study. See here. In short: Gains on the Philippine side mostly arise from lower prices and higher imports. Increased export is minimal (except services exports) because our main exports are already charged low to zero tariffs on Japan's side. Output adjustment on the Philippine side ranges from 0 to a whopping -0.04%. (Yeah, that's right, it's already in percent.)

By some awesome display of nonchalance, this research is ignored.

Well at least the good Senator didn't call for abrogating the agreement! Just putting safety nets. But then demanding these safety nets could be a ruse to put an end to the whole thing. In any case, such "safety nets" would use public funds, putting them in real danger of being wasted or worse, stolen.

(For an informative discussion about the bilateral trade agreement - which I mistakenly characterized as "free" - read here.)

Friday, June 01, 2007

English or Filipino?

English as a medium of instruction is a hot topic again these days. Philippine Commentary has posted several times, this being the most recent.

As with many other issues, the market-oriented approach seems best. (Which allows me to get away with using my comment as a post in this here economics blog):

It's time to depart from the rhetoric of cultural imperialism and legalism, and shift towards a pragmatic approach to this issue. I was intrigued by Tan's claim that students learn faster with the mother tongue. Not being an education language expert, I did a little googling and found that, voila (Pranses iyan, uy), there is good evidence that mother tongue teaching is associated with better education outcomes, compared to second (or third) language teaching. However there is by no means a consensus - mainly because the "all other factors constant" condition is difficult to meet.

The best paper I've read about the subject is found here. Paper No. 9 argues for a "market-oriented" approach. Rather than a dogmatic, one-size-fits-all approach, why not devolve the language issue to the schools? (And that's not the only choice that needs to be devolved. I happen to think the entire public school system should be privatized and education support extended through school vouchers. But that's another debate). Public resources can indeed be devoted to production of mother tongue learning materials. But there should be no ridiculous language quota one way or another. And note that I am not talking about Tagalog. All the studies have been about the "mother tongue" - which for most Filipinos, is certainly NOT Tagalog (which is my mother tongue).