Progress and income inequality in PH

A recent Pew Research Center piece  has data on income inequality for various countries and the world.

The distribution of income in PH is as follows for 2011: 14% poor; 72% low-income; 14% middle to upper middle; and 0.2% high-income.

The global percentages are: 15% poor; 56% low-income; 22% middle to upper middle; and 7% high-income.

What might be concluded? We aren’t exactly poor, but we are predominantly low-income. That means the middle and high income groups are a minority of only 14%.

The economic challenge to those who claim they have a better mousetrap is whether they can reduce the low-income group to the global average of about 50%, raise the middle group to 30+%, while lowering the poor to 10% or below. Doable, but not easy, over the next decade.

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HW for EC 11 – Macroeconomics and Unemployment

For readings, please refer to my lecture notes on macroeconomics, and to Mankiw’s chapter on the natural rate of unemployment. For extra-credit questions, you may have to do further research or readings.

Please answer the following questions, and submit your answers by email by March 2, 2016.

  1. What is the most important difference between microeconomics and macroeconomics?
  2. Explain Say’s Law. Why is it important for an understanding of macroeconomics?
  3. How does Mankiw define the natural rate of unemployment?
  4. According to Mankiw, what are the four reasons why the natural rate of unemployment is not zero? Are these reasons important in the context of the Philippine economy?
  5. It is said that macroeconomics is essentially the economics of unemployment and inflation. Why, in your opinion (based on your readings or research), do policy-makers not aim for zero unemployment and zero inflation?
  6. Extra credit: What is the Okun Index of Misery? Can it be improved by including a poverty index?
  7. Even more extra credit: Construct an Okun Misery Index for the Philippine economy. How far back in time could you go? (Hint: data may be available in the websites of BSP and IMF.) Is it affected by the prevailing economic policies of various Presidents? (Anyone – even a group of up to three – answering this question well will be exempted from taking a final exam.)
  8. Extra credit: Explain in your own words the Neoclassical Synthesis (this is from previous studies in EC 12, History of Economic Thought).

Living the lousy life of a telecom consumer

Remedies against monopoly

You can almost see  the present system of announced prices, with unannounced promos maintained by the telecoms, as a form of price discrimination, a concept familiar to students of economics.

The two aren’t quite monopolies. But for the sake of discussion only, imagine that they are a two-piece cartel, a bikini in nosebleed-speak.

What can consumers do to foil a price-discriminating monopolist/cartel?

Any interesting answers out there?

EC 11. Special HW on the stock market

Imagine that your grandparent willed you P1 million. You have decided to invest this inheritance in the Philippine stock market, specifically in only one company.

Your homework assignment is to choose that one company, and report at how much you acquired the stock (any price at which it traded in the PSE will do) in an email, and to give a short explanation for your choice.

A second part of this assignment is to report at the end of the semester how your investment did, and to give a brief explanation of how or why the outcome came about. Try to answer the following questions, based on your readings and your experience in this imaginary experiment: Are stock market investors who win just lucky? To what extent do diligence and smarts matter?

The first part is due by Friday, February 5, 2016. The second part is due on March 20.

Bitcoin as money

BITCOIN Screen Shot 2016-01-29 at 10.04.16 AM

The following is a note found on Facebook.

Random ideas on what makes money money
by Kermit Kefafel,  Friday, January 29, 2016

Is money a public or private good? It is a private good imbued with public interest. The public goods that attach to money are the safety of the banking system and price stability, as conventionally promised by a central bank.

What are cryptocurrencies? They act as substitutes for the use of cash in untraceable transactions, the idea of Bitcoin. You can even buy bitcoins at your local 7-Eleven.

The market for Bitcoin has lately been shaken with the arrest of one of its principals; there is talk that it could collapse. Will other cryptocurrencies have the same problems?

I suspect that for a cryptocurrency to become viable, it must hurdle the trust problem — its users and holders must be assured that its supply and valuation are, in some sense, sacrosanct. That its price could bubble up and down like a financial asset is a negative. Even fiat-currency central banks pay some kind of lip service to exchange stability under the current system of floating exchange rates.

Because of the public-goods aspect of money, a stateless currency requires an enforcement mechanism that is private but viable. Does such an enforcement mechanism exist?

Or, are cryptocurrencies just another Ponzi scheme?

*******

For reference, see Lawrence White’s article in the Cato Journal.

The central bank (Bangko Sentral ng Pilipinas) has issued an advisory regarding the lack of regulation on virtual currencies.

A recent assessment predicts continued growth of Bitcoin in the Philippines.

 

 

Where is the Philippine peso going? Up and away? Up and down?

There has been some recent wrangling over the plight of OFW families because the peso has risen. One foreign bank active in local financial markets has predicted a P40 to US$ exchange rate for 2013-14. In an academic paper, Prof. Gerardo Sicat of the University of the Philippines has raised the issue of whether the economic managers, mainly the central bank (the BSP) and the fiscal authorities, should do something about the matter. Sicat’s main beef is that the government has adopted a very conservative fiscal policy that has contributed to the peso appreciation.

The conventional wisdom is that the peso has strengthened because foreigners are optimistic about the domestic economy, and they have been a major factor behind the recent stock market gains. The peso rise has hurt the families receiving dollar remittances as well as our local exporters and the call center-BPO sector, but then at the same time it benefits those who own peso assets. This piece of arithmetic is also a given, although some people seem to focus more on the supposed ill effects of peso appreciation. The latest IMF report considered the peso ‘not overvalued’ in 2011 and early 2012 when the US$ rate was P43.3. Observers like Prof. Sicat are right to ask whether a P40 rate might be overvalued.

Continue reading “Where is the Philippine peso going? Up and away? Up and down?”

Rappler is cute, but no cigar, on electricity

As an electricity consumer, I’m grateful for a wrapped-up report on how to understand electricity prices. Rappler.com has come up with such a report. It is an anime that raises more questions than answers.

“Watch this animated illustration to understand how the sins of the past, the capital intensive nature of the power industry, market forces, and moves for cleaner energy sources make their way into the electricy bill.” – Rappler says in its website.

Continue reading “Rappler is cute, but no cigar, on electricity”