Monday, April 4, 2011

POLITICAL ACTIVISTS, LEARN ECONOMICS, PLEASE




I am convinced that lousy education is caused not by scant educational opportunities or resources. Rather, it is people’s lack of willingness to be educated, that makes for the prevalence of ignorance even in the ‘upper crust’ of society, wherein compassion is misdirected in advocacies of adverse long-term consequences.

Exacerbating the problem is the state’s interference in defining ‘formal’ education ― all these useless and expensive curricula that could be transformed into something more relevant to careers and daily living, at less than the cost of a month’s groceries.

Recently, in this blog, I have been trying to keep things as simple and concise as possible, so as to minimize the need to open a new tab to read the remainder of an article. Unfortunately, many people’s attention spans and reading skills are so poor that even a 300-word article is too taxing to comprehend.




This article is meant as a guide for the politically active, and quite ironically, it’s going to be moderately long. But if you the reader take the time just this once, you will be forever thankful for it.


IGNORANCE OF ECONOMICS IS NO EXCUSE

Ignorance usually manifests in an intolerance for actual debate or dissenting opinion. If one finds strength in numbers, this is assuring enough; never mind that might does not make for right, and makes for folly when not guided accordingly.

Nothing is wrong with not being an economist. And nothing is wrong with being ignorant about economics. But if you are going to be making noises about things with economic implications ― of which most social issues are included ― make sure you don’t look stupid: read some economics yourself.

‘Common sense’ is not enough to grasp the implications of certain policies. It is only when you are accustomed to consider the non-immediate ramifications of any interference in human affairs, that your ‘common sense’ will be a sound one.


ECONOMICS IS NOT THAT SCARY, NOR THAT BORING

My real interest in economics began in 2006, when reading about The Great Depression. Why did it happen? What are the myths behind it? Could such an understanding be applicable elsewhere? These questions, and many more, were answered in time. I have learned more things about the business cycle than I had imagined could be learned, to a degree of enthusiasm that I could not have foretold.

Who would have thought that money made an interesting subject in itself, even not in the context of making money? Indeed, I am more than anything spiritually richer as a result of my studies in economics.




I am guessing that the primary hurdle to studying economics is one’s preconceived notion as to what economics is. Classes in college were mere prerequisites, and one’s particular professor may have failed to impart their enthusiasm for the subject, if they had any to begin with. Mainstream curriculum, after all, is incredibly droll.


PhD PROFESSORS ARE NOT NECESSARILY RIGHT

There is also a tendency to leave economic matters “to the experts.” This ‘argument from authority’ is a cop-out, an ad hominem fallacy. Isn’t it possible that one’s professors could be wrong? And how is one to tell which of the many schools of economic thought is right?




An example of poor economic thinking on the part of a ‘celebrity’ in the academe can be seen in Solita ‘Winnie’ Monsod’s article on antitrust, published last April 2, 2011, in the Inquirer. The issue of antitrust has become hot once more, what with the Pangilinan-Gokongwei deal that allowed PLDT to take control of Digitel-Sun.

Monsod immediately starts off her article with a fallacy; she says: “Unless Manny V. Pangilinan is a saint...” with the implication that the pricing of goods and services is dependent on the kindness of businessmen, rather than reflective of consumer preferences. In actuality, an ‘optimum’ profitable price could not be too high that it would reduce demand, and could not be too low that supply disappears. Monsod also fails to consider the already existent barriers to entry in the telco industry that make for real monopolies and actual price distortions. In truth, if prices are to be kept low, it is not a matter of restricting ‘the big guys’ but eliminating government hurdles for ‘the little guys.’

Unfortunately, the mentality of people is to go with intervention, for no other reason than “Sabi ni Winnie Monsod e.”


ECONOMICS IS ABOUT LOGIC, NOTHING MORE

Economics is not an arcane craft that could be known to only a select few; it is merely an exercise in logic involving issues of social relevance. If you have adequate mental faculties to distinguish between cause and effect, then you’re good to go.




But those graphs, charts, equations and jargon that these professors brandish are all so intimidating, you say. Let me assure you that none of these representations are worth squat if they could not be put into simple words, or could not be applied to real life. Such illustrations are merely just that: illustrations, for the sake of conveying logical ideas. If they serve as a hindrance to grasping a logical concept, then they can be abandoned at no loss.


A CHANGE OF METHODOLOGY

The typical economic ignoramus does not dwell on methodology, so they believe that their makeshift theories are sufficient on the basis of real-world or historical ‘evidence.’ They fail to consider that the data may be right, but the interpretation of such data may be deceptively wrong, thus making for bad theory.




Here is an example of wrong methodology. With regards to the reproductive health (RH) bill, it is taken for granted that the increase in population is responsible for poverty. And if you look at the chart on the worldwide distribution of wealth between developing and developed countries, you might be inclined to believe so.

And then there is the ‘proof’ of ‘overpopulation’ derived from witnessing in one’s surroundings the poor majority, the crowded jeepneys in narrow streets, etc. The possibility of this same number of people enjoying a larger assortment of amenities, including more accommodating infrastructure, is not even contemplated!

It is simply assumed that it is the large population that is the cause of poverty. Naturally, on such a hypothesis, the solution would be to reduce populations so as to arrive at a preconceived ‘sustainable’ level. It is when we consider the logic behind such an assumed relationship of variables, that the hypothesis falls apart.

How could a diminution of population levels result in prosperity, when the creation of economic resources is reliant on the large population, whatever the per income capita may be? And how is it that some countries have even larger population densities than those in destitute Africa, yet are materially more prosperous? Are these developed countries then merely sucking out wealth from the developing countries? Why then does the Philippines remain an economic laggard despite having more abundant natural resources than Singapore and Japan combined?




And if the first world is merely taking from the third world, how could we explain the fact that developed countries’ high per-income capita leads investors to employ those from developing countries instead, thus tending towards an equilibrium in income per capita? I guess by now you are beginning to see the logical errors of the initial assumption that an increase in population is the cause of poverty (or that quote-unquote exploitation of the third world is the cause of income disparities).

What has been ignored is the fact that there are other factors involved in the prosperity or poverty of a community, which are far more relevant than population. These factors more often than not have to do with the policies of governments and the freedoms granted to individuals.




Again, interpretation is everything.


CONFLICTING SCHOOLS OF THOUGHT

Admittedly, there are conflicting schools of thought, some of which would, say, support a government reproductive health program to eliminate poverty. If you rely on these materials in your quest for a more able mind, then that’s too bad; I can recommend better stuff for you. Much of mainstream curricula is politically dictated, or based on the latest ‘fashions’ rather than sound thinking.




But at the very least you will be equipped to some degree to argue your points instead of arguing ad hominem, and hopefully you will be of an educational rather than ‘territorial’ frame of mind to be open to contrary opinions that you may ultimately find to make better sense of the world.


ASK YOURSELF THIS

Last week, a friend of mine told me what led him to a political philosophy of freedom. Years back, he had heard some opinions that dissented from the common prattle of politicians and activists. Although initially leaning towards socialism (as most do, including me once upon a time), my friend asked himself something like, “Maybe there’s something to what they’re saying. Maybe they’re not bad people. Maybe they’re opposing these government programs for a good reason.”




This attitude, of openness to one’s ‘enemy,’ of a willingness to learn more, is exactly what makes for an educated gentleman or lady. In fact, this may be precisely what is meant in the Gospel, when Jesus speaks of “turning the other cheek.” If you perceive an attack on your being, look at things from another point of view. You just may find great meaning and insight in that which you once thought as your foe.


CONCLUSION




89 years ago, the great economist Ludwig von Mises said, “Each one carries a part of society on his shoulders.” Given that most, if not all, social affairs have something to do with economics, it benefits each person to be knowledgeable about its basic principles at least.

But economic understanding is especially useful if you are going to be a loudmouth. Without it, magmumukha kang tanga. Examples are replete in everyday news.

If you are an open-minded activist who would like to learn more, I suggest first of all for you to make it a habit to read this blog.


OTHER RECOMMENDED READINGS:

Mises.org has a huge array of educational resources, for which I feel guilty for not donating more money. If you are genuinely interested in wising up, take the time to read these classics, to begin with. Even a chapter or two should do wonders.

That which is seen, and that which is not seen, by Frederic Bastiat ― Written in the middle of the 1800s, Bastiat’s most famous work is still incredibly relevant. This booklet serves as a lesson to those who think highly of state programs in Scandinavia, or believe that Lee Kuan Yew’s iron fist is what turned Singapore into a first-world country. You will see behind the marvelous triumphs of “good governance,” to realize how wealth grows, and how it is destroyed.

Boundaries of order: Private property as a social system, by Butler Shaffer ― The problems society faces are and always will be about the question of property rights. Shaffer is a modern genius, whose contribution remains unappreciated even within the minority of freedom lovers. This book contains splendid arguments for upholding private property (as opposed to state interference) even when it comes to matters such as environmental protection and abortion. I am proud to have it on my bookshelf.

Lessons for the young economist, by Robert Murphy ― I have read little of this actually, but it seems like a good start for a newbie in economics, with plain, clear language used to convey the most valuable principles about human action and markets.



Related articles:
Burying the RH bill, by my friend Kenneth




5 comments:

Filipinofreedomfighter said...

This article is WIN on so many levels.

Anonymous said...

Most mainstream curricula is based on the scientific method, and OBSERVATION. I think the idea that capitalism is some pure system that we can understand through a priori arguments is absurd. Capitalism is not a perfect natural system - we invented money, and we are the most unnatural thing around.

The writer of this blog said...

Anonymous, I assume you're familiar with methodological dualism, so I'll limit this comment to the matter of economics being a pure science.

Economics IS a pure science, but I think this is subject to misinterpretation. Pure doesn't mean clear-cut or simplistic. It means that there are discoverable principles that are consistent.

Even with what you call the scientific method/observation, you are seeking to determine principles by which a theory is fashioned.

But observation isn't enough, as you have to interpret data logically. Even positivists are aware that correlation is not causation.

The fact that theories use the ceteris paribus qualification, or that real-world examples have their unique features not covered by theory, does not mean theory is wrong. Theories, by nature, have to generalize to some degree.

I invite you to read an excerpt from the 'methodology' section of my business cycle book.

RChavez said...

If this post is a sample of the kind of mind resulting from 6 years of studying Austrian economics, I am all the more excited to learn more about this school of economics. I just started studying this school last July 17 this year. Thank you for all the relevant articles and links you provided for a beginner like me.

The writer of this blog said...

Thanks very much for your comments, RChavez. I see you have a blog of your own, how'd you come across my blog BTW? Feel free to e-mail.

As you can see in the sidebar, there are other libertarian-oriented blogs in the Philippines.