On Thought Leaders, Corporate Social Responsibility, and Sustainability

By Orlando Roncesvalles (January, 2020)

There’s an unfair amount of cheesy buzzwords out there.

It hit me one day when I came across something called “Thought Leaders.” My first reaction was to ask, “Are you kidding?” – addressed to no one in particular. When I think I’m thinking, I’m being me, moi. I’m doing the Cartesian thing (you know the drill: Cogito, ergo sum). Anyone without a working brain is just a rock, if not a pebble (but a glistening grain of sand can still capture the human imagination). This is a long-winded way of saying that if someone is “thought-leading” you or me, he’s not making sense. Never mind that Wikipedia defines “.. a thought leader [as] an individual or firm that is recognized as an authority in a specialized field .. whose expertise is sought and often rewarded.”

One commentator once cynically described a thought leader as “.. a discussion facilitator at think tank dinners where guests talk about what it’s like to live in poverty while the wait staff glides through the room thinking bitter thoughts” (David Brooks of The New York Times, way back in 2013). In short, a thought leader is an intellectually bankrupt idea wanting to be paid big bucks. How can you be thinking if your puny brain is being led by its nostrils? That wait staff in Brooks’s satire was the smart one, if poorly paid.

Pretty much the same can be said of something called Corporate Social Responsibility (CSR). A somewhat extreme view, usually attributed to Milton Friedman, the economist, is that CSR is, like thought leadership, somewhat of an oxymoron. It’s neither social nor responsible. It isn’t needed at all and wouldn’t even exist without a budget. That budget comes from excess profits. Economists understand that Friedman saw the problem as a lack of competition. The textbook says that with easy exit and entry, the long-run profit is just enough to compensate shareholders, even as corporations use the most efficient technology to minimize costs and sell products at reasonable (affordable) prices.

The other (also somewhat extreme) view is that CSR is a worthwhile cause, like climate change. We need to restrain corporate “greed” through signaling devices (“My product is green or organic, not produced by slave or child labor, and I’m an NGO-certified good guy”), or by outright regulation. In this public relations ecosystem, CSR validates monopolistic pricing and ultra-high CEO compensation, or it runs on the fiction that regulators cannot be bought. Is there a middle ground? I admit to not knowing, though I believe that Friedman is right if corporations dealt only with private goods (those without negative externalities like pollution). In a world where corporations produce public goods or bads, governmental regulation must be brought in, although this leads to a problem of how to prevent something called regulatory capture. Perhaps that’s just too difficult a problem, especially in countries run like pineapple republics where cozy relations between corporations and their regulators are an open secret.

Finally, I come to that bane of all banes. The word is “sustainability.” If something is not sustainable, it must be sinister and will, sooner than later, destroy our souls. Think of single-use plastic clogging the planet’s oceans if not our stomachs. Ponder the futility of islanders heading to an upland that will anyway be washed away by climate change. We are doomed beyond recognition, never mind repair. Unless we see the light of sustainable. Yeah, right.

These words pretty much suffer in translation. Thought leader is tagasugod ng pag-iisip. CSR wimps out as katungkulan ng korporasyon para sa madla. Sustainability comes through as pananatili ng kinabukasan. Although I kind of like the last even if it suggests a Luddite itch for all things old.

To Thought Leaders, I say, “Talk is cheap. Let others speak too. You lose credibility otherwise.” To corporations practicing CSR, “We’re on to your tricks.” To those waving the banner of Sustainability, “You look like a kissing cousin of CSR.” Perhaps the antidote is to impose an excise tax on those selling CSR products, or to confront the sustainability activist with a question. “What exactly would you suggest we do?” If the answer won’t pass the Cartesian existential smell test, then we know it was just hot air, if not a sigh. The climate change folks will sorely disapprove.

Pigou vs Coase, as refereed by Demsetz

This is a good summary of the Pigou vs. Coase debate on externalities. I have one comment: That the author should have brought Hayek into the picture. After all, the piece was published in 1996. What follows is a kind of executive summary.

Demsetz sees the debate on externality as one between two ideals: An ideal state (with perfect information) and an ideal market (also with perfect information and zero transaction cost). Taken to the limit, both models do not generally produce identical solutions. It is well known that the initial distribution of wealth and income affects market outcomes. Change that distribution and the economy rests somewhere else. With Pigovian state intervention, one also needs to factor in the initial distribution of wealth and income as a determinant of political process. Still, it is reasonable to imagine that both models arrive at the same end-point if they started with the same initial conditions.

Demsetz then concludes, based only on theoretical considerations, that the choice between the two models is one determined by preferences for freedom and the final (and/or initial) distribution of incomes and wealth.

Once we depart from the ideal to actual governments and markets, the choice between the two solutions would then have to take into account how much information there is (available) in the competing models, and how well they would reduce transaction cost. Here, Hayek would pronounce in favor of Coase, if only because Hayek believes that the market is more capable of ‘discovering’ such phenomena as efficient technologies and consumer preferences. Transaction cost can be seen as another form of externality, so we start to run the risk of arriving at a proverbial slippery slope.

Nonetheless, Demsetz is essentially right. Transaction cost is not at the kernel of Coase; and neither did Pigou ignore transaction cost. What was being debated was who should have the property rights to the externality, a question that economists usually avoid but one that Coase faced head on.

12 Articles Every Aspiring Economist Should Read | Steven Horwitz

Here are 12 important articles to help you understand sound economics, ideally before you head off to grad school in economics.

Note: Coase, Hayek, McCloskey, Alchian, Buchanan, Friedman, Lucas

Source: 12 Articles Every Aspiring Economist Should Read | Steven Horwitz

Why blogs should be censored

This is a particularly good example of the inanity of freedom of expression, never mind that of the author.

One, he doesn’t like Christians, and calls the Philippines ‘Christianabad.’ Such cheek.  The religious of either left or right should mount a holy war to expose the Get Real folks as insult artists.

Two, he believes that FB, corporations, and religions are all the same crude banana.  Maybe.  Maybe not. But so what? Has he ever run a behemoth, or tried to deal with satanic cults?

Three, his solution to the predicament of FB users who upload bikini pics is to update privacy settings.  Fat chance.  No one really understands the privacy features of FB, or any site for that matter. Fine print is an automatic non-read.  Still the only way to avoid exposure is simple: Wear a fig leaf or Just Say No.  But we don’t do the latter because there is a nonzero value to FB users even if they now can’t quite capture the financial benefits.

Four, he thinks lawyers will be called upon to disentangle difficult social issues.  And I thought the bard said we should kill the lawyers.  I don’t know the solution but turning to lawyers and reading stuff from Get Real will get a nonthinking nobody nowhere.

Enough of blather.  Bring in the censors.  The site should be called We’re Unreal.

Disclaimer:  My one regret, though an iffy one, is this post just might promote site traffic to Get Real Philippines.  But it would have been worth it if just one reader gets saved from eternal intellectual damnation.  Also, I side with the good sisters of STC on the original issue.

Questions FIT to ask on the cost of electricity

Glen Campbell's song (photo credit freefoto.com)

Electricity is perhaps just another commodity.  An early legal case in Philippine jurisprudence established that it is a “thing” that could be taken, and therefore be the object of a crime (of theft).  But it is now more than just a thing.  It is too expensive, and as an object of business, it attracts “power” players (pun intended) more than usual. Lately, the drive to protect Mother Earth has caught on, and in its wake is a law, the Renewable Energy Act of 2008 that grants incentives for the use of renewal energy in the production of electricity.  Among the key elements of the new law is something called FIT.

How did FIT come into being?

Continue reading “Questions FIT to ask on the cost of electricity”

Three symbolic economic changes to kickoff the Aquino Presidency

There are times when symbols matter more than substance, and times when symbols and substance coexist.  The latter times give a window of opportunity for the new Administration to set the tone for shifts in economic policy that make sense.

For consideration are three suggestions.  One is to roll back the EVAT rate from 12% to 10%.  Another is to negotiate a new “basic” text message rate of 10 centavos (compared with the by-now archaic P1 rate).  Still another is to empower parents and teachers of students in public schools to decide which textbooks the students will use.

Continue reading “Three symbolic economic changes to kickoff the Aquino Presidency”

Star wars log – The “great success” is seen differently by serious foreign observers

It is a mystery that the local media seem to have fallen all over themselves to praise the “success” of poll automation.

At least some foreign observers have a different take.  In part, they state:

The PCOS machines turned out to be overpriced lemons, agreed Carol Pagaduan-Araullo, chairperson of Bayan (New Patriotic Alliance) and convener of Pagbabago. “You don’t expect to see your newly-acquired expensive appliance to break down the moment you bring them home and start to use them,” said Araullo.

The PIOM documented the nationwide occurrence of breakdown of PCOS machines which can all be attributed to the Comelec’s and Smartmatic’s cost-cutting measures. In a a PIOM group’s interview with the Comelec director Emmanuel Ignacio in Tarlac, he admitted that 600 voters per machine are “more ideal” compared to 900 plus per machine. Ignacio told the PIOM only 1 modem per 3 precincts were allotted (and that explains why precincts were packed in the same schools). The PIOM group also learned that to further cut cost, the Smartmatic did not install cooling fans or cooling mechanisms in its PCOS machines, hence its proneness to break down from overheating.

Lemons? Overpriced?  Should we be happy we don’t own the machines? Should we start looking at the anti-graft laws on contracts that are “disadvantageous” to government?

It is often said that success breeds success.  Pretty soon we may hear some folks  proposing we should “buy” the machines, on the theory that we had a “successful” automation, and we should do it again.

And the would-be cheats would have a field day.  The next time they will know better how to convince potentially losing candidates that the former can, indeed, do some “magic.”  After all it will be the same machine, the same CF cards, and, likely, a renegade machine can be made available for “demonstration” purposes.