A10 Wednesday, October 12, 2016 • Editor: Angel R. Calso
Opinion BusinessMirror
editorial
An economics Nobel for examining reality
T
his year’s economics Nobel Prize has gone to Oliver Hart and Bengt Holmström, for their work on the theory of contracts. For good primers on the winners and their work, check out the blog of economist Kevin Bryan, several posts by the alwaysreliable Marginal Revolution, and the summary written by Bloomberg View’s Tyler Cowen.
The research here is deep microeconomic stuff. It’s about incentives, and imperfect information, and long-term relationships. It’s about delicate strategic interactions between people who don’t know each other’s capabilities or intentions. But it’s related to lots of real-world economic issues—performance pay, mergers and acquisitions, bank lending and corporate structure. What it’s not about is the kind of economics you read about in the news. It’s not about growth or unemployment, fiscal stimulus or interest rates, trade agreements or productivity. It might be indirectly related to those things— Holmström’s work on financial crises and debt certainly has relevance for what happened in 2008. But it isn’t what you expect to see economists arguing about when you open up Bloomberg or pick up the New York Times. It’s not macroeconomics—the study of how the broad economy works. That’s interesting, because in the past, the Nobel went almost exclusively to macro research. In the decade after the prize was created by the Bank of Sweden in 1969, nine out of 10 prizes went to things that we would call “macro.” In the 1980s, it was about half. Nowadays, prizes for macro research are less dominant. The last true macro prize was in 2011, for the empirical work of Christopher Sims and Thomas Sargent. Other macro prizes came in 2010, 2006 and 2004. The prizes in 2013 for financial economics and 2008 for the economics of trade and geography have some macro flavor—after all, trade and finance both affect business cycles and growth—but both are now considered distinct fields, with their own distinct methods and data sources. Meanwhile, the number of prizes in fields, like game theory, is on the rise. This year’s winners do work that’s somewhat similar to that of 2014 winner, Jean Tirole, who studied corporations. Micro theorists also won prizes in 2012, 2007 and 2005. Though this is a small sample to work with, it does seem as if micro theory’s star is on the rise within the profession. What should we make of this development? Economics debates in the news media and on the blogs tend to make a big distinction between macro and micro, painting the former as unscientific and the latter as serious science. There’s a grain of truth to that, but it’s not that simple. What really happened was that macro developed first. Economists saw big, important phenomena, like growth, recessions and poverty, happening around them, and they wrote down simple theories to explain what they saw. The theories started out literary, and became more mathematical and formal as time went on. But they had a few big things in common. They assumed the people and the companies in the economy were each very tiny and insignificant, like particles in a chemical solution. And they typically assumed that everyone follows very simple rules—companies maximize profits, consumers maximize the utility they get from consuming things. Pour all of these tiny simple companies and people into a test tube called “the market”, shake them up, and poof—an economy pops out. Even today’s macro theories are similar in spirit. Most of what you see in academic seminars or at central banks are so-called general-equilibrium models. But in the meantime, economic theorists have been branching out in different directions. They began to think much more seriously and deeply about how people and companies behave and interact. And those efforts are paying off with real-world applications—Google’s auctions, kidney transplants, or government sales of wireless spectrum rights are a few of the better-known examples, but there are more all the time. And theories, like those of Hart and Holmström, are changing the way companies think about everyday economic issues, like performance pay and mergers and acquisitions. Meanwhile, most of the explosion in empirical work is in micro fields, if only because those have much more copious and reliable data. Bloomberg Editorial
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There is much to learn from the elderly. As shown in the life of Lolo Cesar, nurturing close family and social ties results in happier and more meaningful lives; the elderly should not be underestimated for they are still highly capable of adapting to the changing times and contributing to society; and Filipino workers have much to benefit as covered members of the SSS.
Even at the national level, the elderly are held in high regard, with government officials crafting and implementing policies to promote the welfare of senior citizens through special benefits and privileges. Part of this initiative is the annual celebration of the National Elderly Week held every first week of October, as mandated by Proclamation 470 signed in September 1994. One of the government institutions actively engaged in serving the elderly is the Social Security System (SSS), which disburses monthly benefits to more than 2 million pensioners at present. Among these SSS pensioners is 73-year-old Cesario “Lolo Cesar” Dayag, whose life provides a treasure trove of valuable lessons for the young and old alike. Love for family. Even with a family of his own and despite his advanced age, Lolo Cesar is
Kung magpapa-stress ka, mabuburyo ka lang,” he quips. Even more impressive is Lolo Cesar’s continuing contribution to society through his active participation in organizations, such as the Senior Citizens of Barangay Malaya; Committee of Ethics in Barangay Gulod, Novaliches; and Senior Prostate Advocacy Club in East Avenue Medical Center. Saving for retirement and other contingencies. A covered SSS member since 1966, Lolo Cesar has contributed a total of over P8,000 during his working years. Strenuous activities took its toll on Lolo Cesar’s health and he succumbed to pneumonia in 1996, for which he was able to claim SSS disability benefits for two consecutive years, which amounted to P32,300. He currently receives P3,049.20 in retirement pension per month, which he spends for basic needs, such as food and clothing. Since his retire-
Susie G. Bugante
All About Social Security mong the sources of Filipino pride is our sacred tradition to treat the elderly with utmost respect and reverence in recognition of their valuable wisdom acquired through decades of life experiences. For those of us who grew up with our grandparents, their role in shaping our values and beliefs during our growing up years is undeniable. dedicated in looking after his 93-year-old mother, who was widowed after his father, who previously worked in the Armed Forces of the Philippines, passed away. In his own precious way, Lolo Cesar’s commitment to his mother echoes this year’s theme for the National Elderly Week, which is “Pagmamahal at Respeto ng Nakababata, Nagpapaligaya sa Nakakatanda.” Active aging. Age is just a number, and Lolo Cesar keeps himself busy by watching movies and ballroom dancing, which is his favorite pastime. His energy and timeless dance routines enliven social events, such as the SSS Pensioners Day, where he often participates in ballroom dancing sessions and production numbers. “Walang ibang nagpe-perform kundi kami. Mahiyain sila, eh kami sige lang ng sige. Gusto ko kasi masaya talaga.
ment in 2002, his pension benefits have added up to nearly P500,000 at present. His experience is just one of the many examples of the generous return that SSS members receive from their monthly contributions, which serve as their savings for retirement and other financial contingencies. “Maganda ’yung pagkaka-member ko ng SSS. Nakakatulong ito sa pangaraw araw na pagkain ko, pambili ng mga gamit [at] damit, kasi biruin mo, lifetime yan, ’di ba? Kung hindi ako nag-member, wala akong maaasahan, eh hindi ko naman alam kung makakapagbigay ’yung mga anak ko. Eh, nagsipag-asawa na sila, may pamipamilya na rin. Mahirap din umasa eh,” he explains. There is much to learn from the elderly. As shown in the life of Lolo Cesar, nurturing close family and social ties results in happier and more meaningful lives; the elderly should not be underestimated for they are still highly capable of adapting to the changing times and contributing to society; and Filipino workers have much to benefit as covered members of the SSS. For more details on SSS programs, members can drop by the nearest SSS branch, visit the SSS web site (www.sss.gov.ph), or contact the SSS call center at 920-6446 to 55, which accepts calls from 7 a.m. on Monday all the way to 7 a.m. on Saturday. Susie G. Bugante is the vice president for public affairs and special events of the SSS. Send comments about this column to susiebugante.bmirror@gmail.com.
What are still lacking in govt’s antipoverty programs?
Lorenzo M. Lomibao Jr., Gerard S. Ramos Lyn B. Resurreccion, Efleda P. Campos
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Valuable lessons from the elderly
Michael Makabenta Alunan
on the contrary
I
n the National Anti-Poverty Sectoral Summit held late last week, there are indications there is nothing strategically different with past antipoverty government programs, except the fact the Left is now well represented, led by National Anti-Poverty Commission Chairman and Secretary Liza Largoza-Masa of Gabriela fame.
President Duterte is right in involving the Left directly in governance, which is a double-edged sword. He has given the Left the chance, for the first time, to implement what they have long been fighting against—the inequities in society. On the other hand, he has effectively disarmed them with burden to prove their worth and show a better way to bail out people from poverty. And if some-
thing fouls up, the Left can no longer blame the government but themselves. Red not expert? You cannot question probably the sincerity of many revolutionaries as they make sacrifices of their lives to create change for the better, ironically, through violent means. They are inspired by the likes of revolutionary icon Che Guevarra, who once said that it may sound ridiculous,
but “revolutionaries are inspired by the greatest feelings of love.” However, as it is said, “the road to perdition or hell is paved with good intentions,” which is true with history replete with stories of how revolutions failed as their leaders lack the expertise of running an economy. The Left may know at destroying, but poor at building. It is good at political organizing and agitation and propaganda (“Agit-prop”), but are poor in business and development. The Left always blames poverty more on the oligarchic control of the economy by “some 41 families,” and what they claim are problem, like “bureaucrat-capitalism,” “feudalism” and “neocolonialism,” which they say can only be resolved genuinely through a bloody clash or class struggle, and replaced with socialist central planning, which history has totally failed in many countries. What the Left lacks is the expertise in livelihood development, finance, marketing and overall project management, which are vital
in running business ventures that increase the pie. Free market has done no better? If the Left is bound to fail, the freer market system, in place for about three to four decades now, has not seemed to have done any better. In the dog-eat-dog free-market system, growth does not trickle down much to the poor partly due to an “Elite Capture.” Based on an Asian Development Bank (ADB) study done on 51 developing countries, for every 1-percent increase in GDP or income, poverty is reduced by 1.5 percent and even as high as 2 percent among Asian countries, except the Philippines. We’ve had cases of high growth rates in past years and, yet, poverty rate even worsened. More so, in agriculture, where about two-thirds of those living below the poverty line is based, which simply agriculture and the fishery sector has been performing dismally for many decades now. Records show because of our poor See “Alunan,” A11