Friday, August 14, 2015

“People make mistakes in their thinking”

Scanning our dailies, as this posting has done, would we recognize how much that applies to us too? “Unless we change drastically the approach to land reform in the coming years, these dismal figures will continue to prevail.  We cannot continue flogging a dead horse. In management, there is a principle which states that stupidity is defined as addressing the same problem with the same solutions that have been proven failures in the past.” [Land Reform in the Philippines (Part I), Bernardo M. Villegas, Manila Bulletin, 2nd Aug 2015]

“Obsession is undue preoccupation with an often unreasonable idea, feeling or object – (Merriam Webster). Some academics, mainly economists, contend that our obsession with rice and consequently the long-standing rice self-sufficiency policy stand in the way of a more productive and competitive agriculture. Public resources monopolized by the national rice program could have been better spent on other commodities with better returns and where we enjoy some comparative advantage.” [Intelligently managing our obsession with rice (Part 1),Dr. Emil Javier, Manila Bulletin, 25th Jul 2015]

“In the first place, why are we so obsessed with rice? The explanations are evident: Most of us eat rice three times a day. We feel still hungry after a meal if we did not have rice. Among the poor, we often hear the expression ‘Hindi na baleng mawalan ng maraming bagay, huwag lamang bigas!’ The biggest number of Filipino farm families grow rice.”

“People make mistakes in their thinking.” That is a fundamental given as postulated by behavioral economics, not to be confused with standard economic theory. According to standard economic theory, which gives humans (perhaps too much) credit for making rational choices, those efforts should be enough to change your behavior. If you know the consequences but still get fat, you must want to be overweight. Of course not, say Leslie John and Michael Norton, professors at Harvard Business School specializing in the burgeoning field of behavioral economics.” [Business of Behavioral Economics, Michael Branding, Harvard Business School, Forbes, 1st Aug 2014]

“‘Standard economic theory suggests that as long as people understand the full consequences of their actions, they tend to act in their self interest,’ says John. ‘If they want to be healthy, and you tell them how many calories are in a burger, then they’ll eat better.’ But behavioral economics suggests that people make mistakes in their thinking. For example, we have self-control problems that can lead us to knowingly ‘misbehave.’

“Such biases are the bread and butter of behavioral economics, and have been accepted into the mainstream of economics and pop culture, particularly since the recent publication of popular books such as Richard Thaler and Cass Sunstein’s Nudge, Dan Ariely’s Predictably Irrational, and Daniel Kahneman’s Thinking, Fast and Slow.
“Even so, relatively few companies have attempted to use behavioral economics to try to change people’s behavior around overeating, smoking, or other bad habits many are desperate to break.”

If behavioral economics raises such questions, should we assume that we Pinoys have embraced the imperatives of competitiveness, for example, or development for that matter? “[C]onsumer welfare alone does not lead to economic efficiency. For the economy to grow and develop, consideration must also be given to market players, especially domestic players. The issue lies on whether our local businesses can actually compete in such an open market where big players can freely participate. The question remains whether small local businesses can compete with other participants in terms of quality, quantity, cost or price, especially under the scrutiny of a well-informed consumer. Nonetheless, the creation of a national competition policy encourages all economic parties, businesses and consumers alike, towards a more progressive national economy.” [Last but not the least, TOP OF MIND, Juliet Marie M. Guevara, The Philippine Star, 11th Aug 2015]

“The passing of the Philippine Competition Act fulfills the Philippines’ obligation under the AEC which aims to create a highly competitive economic region by uniting its member states into a single market and production base. The end goal is to create a region fully integrated into the global economy. The establishment of a national competition policy not only equips the Philippines for regional and global economic integration under the AEC, but most importantly, it reinforces the Philippines as a country by addressing the issues of its national economy while promoting a competitive one at that.”

But does Juan de la Cruz in fact subscribe to that? Or he would rather be in bed with oligarchy because of “learned helplessness”? Which makes the job of Philippine leadership and the economic managers truly challenging! And behavioral economics is still too contemporary – and we have yet to figure it out? [“Behavioral economics and the related field, behavioral finance, study the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions and the consequences for market prices, returns, and the resource allocation.”]

“NEDA stresses continuing market reforms to boost competitiveness,” Edu Lopez, Manila Bulletin, 8th Aug 2015. “The National Economic and Development Authority (NEDA) has stressed the need to continue pursuing market reforms in order to sharpen the competitiveness of domestic industries and reap the benefits of the Asean economic integration.”

“While opportunities abound and growth prospects in the industrial sector and logistics are very encouraging, there remains a number of major challenges that we need to aggressively address in order to maximize the sector’s full potential,” said Economic Planning Secretary Arsenio Balisacan.

“Some of the critical constraints that need immediate action are the country’s weak public infrastructure and regulatory environment. While infrastructure spending as a percent of GDP has been increasing in recent years, there is a constant need for the infrastructure system to keep up with rising demands in our fast-growing economy as new property investments flood the market, said Balisacan. Poor public transportation and congestion in our roads, ports, airports, and seaports threaten to hamper the pace of economic activity and cap the growth of many major cities if left unaddressed.

“The government is already devoting greater focus on infrastructure investment and putting into place comprehensive transport road maps and critical logistics infrastructure road maps to keep up with the significant growth of the country’s primary business hubs.

“Another critical area of policy reform concerns economic regulation, including restrictive ownership rules. Investors generally look for credible, stable law and regulation surrounding investment. He noted that in some cases, however, the legislation is weak or not even in place to protect investors. As a result, investors face high transaction costs, petty corruption and red tape, and substandard regulatory practices, said Balisacan.

“He also stressed the need to pursue a number of other important legislative measures that will further reduce the cost of doing business in the country. The passage of the Competition Law last July 21 will help diffuse market power and concentration in a spectrum of key industries, including manufacturing and logistics, said Balisacan.”

Do they sound logical from the standpoint of standard economic theory? But how did we allow ourselves to be the regional laggard? What is our thinking process like? Even in something that at first may appear unrelated but in reality is about development – not only of Mindanao but of the Philippines?

“What would Jesus say about the BBL (?), Rina Jimenez-DavidAt LargePhilippine Daily Inquirer, 9th Aug 2015] “‘One would naturally wonder why anyone with little or no knowledge of the BBL would disapprove of it,’ said Cardinal Quevedo. He offered an explanation, citing a conversation he had with a Catholic religious leader. AS he reported in his talk, the cardinal said he asked the religious leader: ‘Do you support the BBL?’ The reply: ‘No I don’t support the BBL.’ Again he asked: ‘Have you read the BBL?’ ‘No.’ ‘So why don’t you agree with what you have not read?’ The reply: ‘Ah, basta, I don’t agree.’”

People are funny. The reality is “people make mistakes in their thinking.” Except Juan de la Cruz?

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