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.

Some (maybe strange) economics questions

 

1. Can economics say anything about unforeseeable (uninsurable) disasters? I’m thinking about the idea that a butterfly moving its wings can cause a global tsunami.

2. Will robots cause permanent unemployment? Rephrase this question. In ancient history, the nobility didn’t do the work because they had vassals and slaves. Were the nobles unemployed? Was that a bad thing? Is employment/underemployment/unemployment an issue of quality of life?

3. What exactly is poverty? If stray dogs are poor, and pet dogs are rich, is it good policy to control the population of stray dogs? Or is it better policy to have feeding stations for stray dogs? Or is it an even better policy to mandate that those who have pet dogs also feed the poor and hungry humans nearby? After all, we seem to always say that humans have rights that animals don’t.

EC 23 Mid-term Exam

Hints:

Be sure you understand the three methods of solving a system of N linear equations: by ‘brute force’ or substitution; by finding the inverse of the matrix of coefficients; and by using determinants as per Cramer’s Rule.  Because the exam has limited time, you should go through the examples in the textbooks, and practice how to find the solution.

The exam question sheets should not be turned in with your blue books.  The questions are useful for class discussion, so please bring them with you for the class meetings after the exam.

Relax.  It’s only math.  It’s only economics.  It’s not the beginning or the end of the world.

 

Philippines vs China

WHY WE WON

It seems that we can boil down the legal conclusion of the arbitral ruling as based on only two key questions.

One, what is an island? A rock is not an island. So there. Even if China builds up a rock, it still cannot become an island. It may be a feeler island, but still that’s not an island in the legal contemplation of international law. UNCLOS says that artificial islands are not properly islands. (Otherwise, any oil rig can claim to be an island!)

And there’s the economics of islands. Under UNCLOS (Art. 121(3)), only natural formations that can sustain economic life on its own, can have maritime zones, such as an Exclusive Economic Zone (EEZ).

Two, what is an archipelagic state? It is one composed of many islands. PH is archipelagic. China is not. It appears that China conceded its status as a coastal (non-archipelagic) state when it signed the UNCLOS because the UNCLOS classifies countries in only two ways — archipelagic or coastal. The Tribunal ruling, in para. 573, categorically restates that China is a coastal state.

The answers to these two questions determine the EEZ, which is 200 miles from the coastline of a non-archipelagic state; and 200 miles from the archipelagic baseline of an archipelagic state. The baseline is a point-to-point boundary that encompasses or includes the islands of an archipelagic state.

An outlying island in the South China Sea, even if it could be claimed as territory of China, cannot result in an expanded EEZ based on archipelagic baselines because China is not an archipelagic state. (Consider the following related question: Can the US consider the waters between Hawaii and Los Angeles as “internal waters” using the archipelagic baseline approach? The answer is in the negative because, like China, the US is not an archipelago.)

The EEZ of an outlying island is 200 miles around that island because such an island is treated like any other land territory (Art. 121(2)). The EEZ cannot extend beyond the 200 miles (beyond this, there would be continental shelf (something else) or open international waters (high seas)). And an EEZ could be delimited if competing EEZ’s from other nearby states exist.

The ruling states that the disputed territories are not at all islands, and therefore cannot provide China an EEZ. Practically all the major disputed territories are inside the EEZ of the Philippines because it is an archipelagic state. Therefore, even ‘rocks’ can be useful to the Philippines, if they are located within the EEZ based on the archipelagic baselines of the Philippines. These useful rocks include Scarborough Shoal, Second Thomas Shoal, Johnson Reef, McKennan Reef, Hughes Reef, and Mischief Reef. Some of the disputed rocks are outsize the EEZ of the Philippines.

An important caveat is that territory and sovereignty are matters of international law not subject to the UNCLOS. Nonetheless, disputes relating to the EEZ are pointedly the subject of the UNCLOS.

WHY IT MATTERS

EEZ means maritime zones (not necessarily territory in the usual ‘conquest’ or ‘historic’ sense) that we can, under international law and UNCLOS, consider as usable only by us. We can, by negotiation, lease or allow others to use the EEZ, but the extent to which the Philippine Executive can do this is governed by the 1987 Constitution.

NB: The map of PH EEZ is from Wikipedia.

PH EEZ Screen Shot 2016-07-14 at 2.07.29 PM

 

Undistributed Middle Redux

How does the fallacy of the undistributed middle (FUM) arise in economics?

FUM can be exemplified as: The queen has a poodle; I have a poodle; I am queen.

This can be rewritten as: If I am queen, I have a poodle; since indeed I have a poodle, then I am queen.

FUM then boils down to hypothesizing that P implies Q, and then claiming that P is true because Q is true.

This restates what we ought to know from logic – that FUM is a formal (syllogistic) error. This error, when expressed in terms of P and Q, is that of not ruling out all the other possibilities that can produce Q.

In economics, we can think of P as the unseen but ‘true’ model, which has an implication Q. If we gather statistics to show that Q is true, can we proclaim hallelujah that P is true? No, because this would be exactly just another FUM! And yet we find that this thought process using FUM underlies many an article in economics journals (to EC 23 students: gentle reminder that this is a HW assignment).

Karl Popper would now stir from his grave, and say that humans never learn. (Does that mean that Karl was at least part alien?)

FUM is no fun.

EC 23 – Explaining the undistributed middle

The fallacy of the undistributed middle has the form:

“All A are B. All C are B. Therefore, all A are C.” For example: The queen has a poodle. I have a poodle. Therefore, I am the queen.

This example is obviously a fallacy because the conclusion does not make sense – we know from other knowledge that just because I have a poodle does not make me queen (except by accident).

But other instances of the fallacy are more subtle, and appear convincing. For example: Lazy people have no jobs. Uneducated people have no jobs. Lazy people are uneducated. In this example, the fallacy is less obvious because we also know from other knowledge that many lazy people are uneducated, and many uneducated people are lazy. It seems that our minds over-generalize to make the fallacy acceptable.

Why is the fallacy called the “undistributed middle”?

The standard form of a syllogism is as follows, by way of example (call this the Plato/mortal syllogism):

  • All men are mortal.
  • Plato is a man.
  • Plato is mortal.

The first sentence is the major premise; the second, the minor premise. The third sentence is the conclusion. (Premises and conclusion are sentences.) This particular syllogism is valid (take its validity as granted, for now; or you can prove its validity for yourself by using Venn Diagrams to map out the premises and the conclusion).

The three “terms” in the syllogism are the major, minor and middle terms.

The major term is the predicate term in the conclusion. The minor term is the subject term of the conclusion.

The middle term is the term that is neither the major nor minor term; the middle term appears twice in the premises. The middle term is also the term that “disappears” from the conclusion, because, in Tagalog, kasi nga, it is the term that mentally connects the subject and predicate in the conclusion.

In the Plato/mortal syllogism, the major term is “mortal.” The minor term is “Plato.” The middle term is “man.” The textbooks explain that in this syllogism, the middle term is “distributed” because by distribution we mean that all members of the set described by the middle term are “accounted for.” In this case, the middle term is man, and all men are referred to or accounted for in the premise or sentence that “all men are mortal.” In other words, a term is distributed if in the major premise, the adjective “all” applies to the term.

Consider now the following syllogism that is invalid because it has the fallacy of the undistributed middle:

  • All men are mortal.
  • Plato is mortal.
  • Plato is a man.

Even if we believe the conclusion that Plato is a man, it is a conclusion that does not follow from the two premises. Plato could be a dog and also mortal (and this fact would not violate the minor premise).

What happened? The minor term is still “Plato.” The major term is now “man” and the middle term is now “mortal.” Are all mortals accounted for? No, because, even if all men are mortal, the premise does not deny the possibility that other beings, such as dogs or cats, are mortal. In other words the middle term “mortal” is undistributed. “Men” is distributed, but it is now no longer the middle term.

(It would be different if we re-wrote the first sentence as “All mortals are men.” If so, the syllogism would be valid in form, even if the first sentence is technically not true. If all mortals are men, and Plato is mortal, it must be true or valid to say that Plato is a man. You can satisfy for yourself this validity by drawing the Venn Diagrams. And in this case, the middle term – mortals – is now distributed.)

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Homework assigned in class: Give an example of a fallacy of the undistributed middle in an economics argument or discussion.