Ludwig von Mises: The Peculiar and Unique Position of Economics

In celebration of this year's Holy week, residents of the Philippines will be having a long weekend.

So before I sign out for the week, here is a recommended read on the importance of economics and its effects to society and politics as articulated by the great Austrian economist Ludwig von Mises excerpted from Human Action (1949), chapter 37, "The Nondescript Character of Economics."

From the Mises Institute: (bold mine)

The Singularity of Economics

What assigns economics its peculiar and unique position in the orbit both of pure knowledge and of the practical utilization of knowledge is the fact that its particular theorems are not open to any verification or falsification on the ground of experience. Of course, a measure suggested by sound economic reasoning results in producing the effects aimed at, and a measure suggested by faulty economic reasoning fails to produce the ends sought. But such experience is always still historical experience, i.e., the experience of complex phenomena. It can never, as has been pointed out, prove or disprove any particular theorem. The application of spurious economic theorems results in undesired consequences. But these effects never have that undisputable power of conviction which the experimental facts in the field of the natural sciences provide. The ultimate yardstick of an economic theorem's correctness or incorrectness is solely reason unaided by experience.

The ominous import of this state of affairs is that it prevents the naïve mind from recognizing the reality of the things economics deals with. "Real" is, in the eyes of man, all that he cannot alter and to whose existence he must adjust his actions if he wants to attain his ends. The cognizance of reality is a sad experience. It teaches the limits on the satisfaction of one's wishes. Only reluctantly does man resign himself to the insight that there are things, viz., the whole complex of all causal relations between events, which wishful thinking cannot alter. Yet sense experience speaks an easily perceptible language. There is no use arguing about experiments. The reality of experimentally established facts cannot be contested.

But in the field of praxeological knowledge neither success nor failure speaks a distinct language audible to everybody. The experience derived exclusively from complex phenomena does not bar escape into interpretations based on wishful thinking. The naïve man's propensity to ascribe omnipotence to his thoughts, however confused and contradictory, is never manifestly and unambiguously falsified by experience. The economist can never refute the economic cranks and quacks in the way in which the doctor refutes the medicine man and the charlatan. History speaks only to those people who know how to interpret it on the ground of correct theories.

Economics and Public Opinion

The significance of this fundamental epistemological difference becomes clear if we realize that the practical utilization of the teachings of economics presupposes their endorsement by public opinion. In the market economy the realization of technological innovations does not require anything more than the cognizance of their reasonableness by one or a few enlightened spirits. No dullness and clumsiness on the part of the masses can stop the pioneers of improvement. There is no need for them to win the approval of inert people beforehand. They are free to embark upon their projects even if everyone else laughs at them. Later, when the new, better, and cheaper products appear on the market, these scoffers will scramble for them. However dull a man may be, he knows how to tell the difference between a cheaper shoe and a more expensive one, and to appreciate the usefulness of new products.

But it is different in the field of social organization and economic policies. Here the best theories are useless if not supported by public opinion. They cannot work if not accepted by a majority of the people. Whatever the system of government may be, there cannot be any question of ruling a nation lastingly on the ground of doctrines at variance with public opinion. In the end the philosophy of the majority prevails. In the long run there cannot be any such thing as an unpopular system of government. The difference between democracy and despotism does not affect the final outcome. It refers only to the method by which the adjustment of the system of government to the ideology held by public opinion is brought about. Unpopular autocrats can only be dethroned by revolutionary upheavals, while unpopular democratic rulers are peacefully ousted in the next election.

The supremacy of public opinion determines not only the singular role that economics occupies in the complex of thought and knowledge. It determines the whole process of human history. 

The customary discussions concerning the role the individual plays in history miss the point. Everything that is thought, done and accomplished is a performance of individuals. New ideas and innovations are always an achievement of uncommon men. But these great men cannot succeed in adjusting social conditions to their plans if they do not convince public opinion.

The flowering of human society depends on two factors: the intellectual power of outstanding men to conceive sound social and economic theories, and the ability of these or other men to make these ideologies palatable to the majority.

Quotes from Peter Drucker’s The Sickness of Government

The late management guru Peter Drucker bewailed the public’s dependence on government from a practical standpoint in a chapter called the Sickness of Government in his 1969 book The Age of Discontinuity

Tip of the hat to Cato’s Chris Edwards. Mr. Edward’s blog post is the source of the following quotes which I cross checked with Mr. Drucker’s essay (bold mine)

Government surely has never been more prominent than today. The most despotic government of 1900 would not have dared probe into the private affairs of its citizens as income tax collectors now do routinely in the freest society. Even the tsar’s secret police did not go in for the security investigations we now take for granted.” p.3

…

For seventy years or so – from the 1890’s to the 1960’s – mankind, especially in the developed countries, was hypnotized by government. We were in love with it and saw no limits to its abilities, or to its good intentions. p.4

…

This belief has been, in effect, only one facet of a much more general illusion from which the educated and the intellectuals in particular have suffered: that by turning tasks over to government, conflict and decision would be made to go away. Once the “wicked private interests” had been eliminated, a decision as to the right course of action would be rational and automatic. There would be neither selfishness nor political passion. Belief in government was thus largely a romantic escape from politics and from responsibility.” p.5

…

The greatest factor in the disenchantment with government is that government has not performed. The record over these last thirty or forty years has been dismal. Government has proven itself capable of doing only two things with great effectiveness. It can wage war. And it can inflate the currency.” p.7 (I would add spending and borrowing too—benson)

…

The best we get from government in the welfare state is competent mediocrity. More often we do not even get that; we get incompetence such as we would not tolerate in an insurance company. In every country, there are big areas of government administration where there is no performance whatever – only costs. p.7

…

Modern government has become ungovernable. There is no government today that can still claim control of its bureaucracy and of its various agencies. Government agencies are all becoming autonomous, ends in themselves, and directed by their own desire for power, their own narrow vision rather than by national policy. p.8

…

We are very good at creating administrative agencies. But no sooner are they called into being than they become ends in themselves, acquire their own constituency as well as a “vested right” to grants from the treasury, continuing support by the taxpayer, and immunity to political direction. No sooner, in other words, are they born than they defy public will and public policy. p.9

…

Nothing in history, for instance, can compare in futility with those prize activities of the American government, its welfare policies and its farm policies. Both policies are largely responsible for the disease that they are supposed to cure. p.13

Philippine Politics: Barangay Elections and the Pork Barrel System

The recently concluded Barangay elections reported accounts of massive and widespread vote buying (as much as 1,000 pesos per head) and a surge in the death toll from election violence (higher than national elections in 2010).

The 64 billion peso question: why all these?  What drives candidates to desperately seek political office at the cost of their lives and huge amounts of expenses?

The answer of course is no stranger to most: it has been both about perks and power.

Let us examine the perks or benefits from the officials of Barangay level.

The basic perquisites are as follows: 

Graph from the Rappler.

Aside from these, other benefits include Christmas bonus and cash gift, insurance coverage, as well as, benefits for accident, total or permanent incapacity, disability, death and burial.

There’s more. Barangay officials also get many subsidies in the form of “free hospitalization in government facilities, and free tuition in state schools for themselves and two of their legitimate dependent children (“legitimate” is specified in the law) during their incumbency. Based on their number of years in the service, barangay officials can get civil service eligibility”.

What are they not entitled to (for now)? 13th month pay, hazard pay, representation and transportation allowances, productivity incentive bonus, clothing and personnel and economic relief allowances.

[As a side note, the above also introduces the power aspect

National level officials have been pushing for more Barangay benefits from more funding to fare discounts. Why? 

It’s all about political power

This noteworthy excerpt captures its essence

“In theory, the law says [barangay elections] should be nonpartisan,” Casiple said, referring to a provision in the Omnibus Election Code barring candidates to represent or receive aid from any political party.

“But in reality, they’re important to mayors. That’s where the fight is. If you hold the barangay, it’s a ready-made machinery for ward leadership. It has become a fight by ordinary politicos,” Casiple said.

Casiple said this partisanship has translated the “perks” otherwise not stated by law, granted by higher government units. Off the top of his head, Casiple cited, as example: “Here in Quezon City, all barangay captains are given a car. “

Ergo, controlling the Barangay means ensuring votes from the grassroots level. So leaders from the local to the national level compete to gain their favor. This leads us to the key of Philippine patronage politics: whoever controls the local governments, controls the machinery for the national level]

Now even if we total cash and non-cash benefits these would amount to about at best Php 500k per year. For a three year term that would accrue to P 1.5 million. At P 1.5 million, 1K peso per vote expenditures, whether direct (vote buying) or indirect costs (ads or marketing campaign, organization, network and etc..), would translate to only 1,500 voters. There are about 3,518 voters per Barangay in the National Capital Region (registered voters: 6m, no. of Barangays 1,705 NSCB)

How will candidates recoup their election expenditures “investments”?

We can only make a guess. 

One, from their 20% share of the national internal revenue allotment (IRA). In 2013, the IRA budget for the 42,026 Barangays nationwide has been at P59,165,520,37.This will jump by 15% to 68.3 billion pesos in 2014.

Two, from their share of the other revenues from the allocations for local government units (ALGU) as part of the national government’s budget law, the General Appropriations Act. 

In 2014, the AGLU budget has been set  at 360.5 billion pesos.

Notes the Philippine Senate:

Other items in the ALGU are the shares of local governments from tobacco excise tax collections and taxes from mining and other extractive industries, and the budget of the Metropolitan Manila Development Authority, among others.

Third there are other sources of funding from the Barangay level, include (as per the Department of Budget and Management

-Service fees or charges for the use of barangay property or facilities;
-Barangay clearance fees; 
- Fees or charges for the commercial breeding of fighting cocks and on cockpits and cockfights;
- Fees or charges on places of recreation with admission fees;
- Fees or charges for billboards, sign boards, neon signs and other outdoor advertisements; 
- Toll fees or charges for the use of any public road, pier or wharf, waterway, bridge, ferry, or telecommunications system funded and constructed by the barangay; 
- Revenues from the operation of public utilities and barangay enterprises (markets, slaughterhouses, etc.); 
- Fines (not exceeding P1,000) for the violation of barangay ordinances; and, 
- Proceeds from the sale or lease of barangay property or from loans and grants secured by the barangay government

In short, fees and taxes from the Barangay level

The above is the flow chart of how the Barangay establishes and supervises its budget via the DBM

So there you have it. Pork in its varied forms applied to the Barangay: from the national level: AGLU via IRA and AGLU via other shares of taxes, and from the Barangay level fees and taxes.

In essence, from top to bottom, Philippine politics operates under the Pork Barrel system

Every election, said the great libertarian H. L. Mencken, is a sort of advanced auction on stolen goods. The Barangay elections seem to validate this.

As I wrote in 2010

So essentially, the Pork Barrel culture reinforces the patron-client relations from which the Patron (politicos) delivers doleouts and subsidies, which is squeezed from the Pork Barrel projects, to the clients who deliver the votes and keeps the former in power. Hence, the Pork Barrel system is essentially a legitimized source of corruption and abuse of power seen from almost every level of the nation’s political structure, an oxymoron from its original “moralistic” intent (unintended consequences). As the saying goes “the road to hell is paved with good intentions”.

As we previously noted, ``Plainly said, when we demand for more social spending or welfare based programs to resolve our problems then we increase the funds allocated to politicians for their dispensation. Essentially, Pork Barrels signify our excessive dependence on government where the correlation of government spending and the price of getting elected are direct.”

Politicization of every aspect of social life from top to bottom leads to corruption, political and wealth inequalities and economic-financial repression which means a lower standard of living. The worst effect is the violence which politics incites, and of the degradation of society’s moral fiber

While the call for the abolition of the Pork Barrel is ideal and necessary it is not sufficient. 

For as long as the public thinks the Pork is a problem of personal virtuosity or what I call as personality based politics (and not of systemic defect), politicians will be able to camouflage pork into many different masks as shown by latest the speech by the Philippine president. 

In other words, to abolish the Pork requires a radical change of opinion by the public. As Scottish philosopher historian and economist David Hume wrote in Part I, Essay IV OF THE FIRST PRINCIPLES OF GOVERNMENT in Essays, Moral, Political, and Literary (bold mine)

NOTHING appears more surprizing to those, who consider human affairs with a philosophical eye, than the easiness with which the many are governed by the few; and the implicit submission, with which men resign their own sentiments and passions to those of their rulers. When we enquire by what means this wonder is effected, we shall find, that, as FORCE is always on the side of the governed, the governors have nothing to support them but opinion. It is therefore, on opinion only that government is founded; and this maxim extends to the most despotic and most military governments, as well as to the most free and most popular.

And the best way to attain such change is for the public to demand a third party audit of all forms of Pork from the top to the local level (past and current), with emphasis on the top. 

Only by opening the Pork's Pandora's Box will there be a bigger chance for an epiphany by the public that Pork is inherent in the nature or structure of the Philippine patronage based political system. Such that dismantling of the Pork Barrel has to occur from top to bottom. 

Yes this also means demolishing Pork at the Barangay levels.

Quote of the Day: “Crazy” Anarcho-Capitalism

The lesson: "Crazy" is relative to expectations.  A thousand years ago, everyone was used to despotism.   No one expected a defeated incumbent to voluntarily hand over power.  As a result, refusing to hand over power didn't seem crazy.  Since it didn't seem crazy, incumbents who refused to hand over power after losing an election probably would have managed to retain power.  In modern Sweden, in contrast, everyone is used to democracy.  Everyone expects a defeated incumbent to voluntarily hand over power.  Refusing to hand over power seems crazy.  As a result, refusing to hand over power would end not democracy, but the incumbent's career.

Why bring this up?  Because like the democrat of a thousand years ago, I advocate a radical political change: anarcho-capitalism.  After we've privatized everything else, I think we should privatize the police and courts, and abolish the government...

Since we've never had anarcho-capitalism, this peaceful equilibrium sounds like wishful thinking.  But it's no more wishful thinking than stable democracy.  Both systems sound crazy when first proposed.  Neither can be stable as long as people expect them to be unstable.  But both can be stable once people expect them to be stable.

You could object: The expectations necessary to sustain anarcho-capitalism are highly unlikely to ever arrive.  But the same was true for democracy a thousand years ago.  Yet somehow, expectations radically changed and stable democracy arrived.  How did expectations change so dramatically?  It's complicated.  But can expectations change dramatically?  Absolutely.

This is from author and professor Bryan Caplan at the Library of Economics and Liberty blog (Econolog)

Mark Twain on Public Opinion: As a Rule We Do Not Think, We Only Imitate

Samuel Langhorne Clemens, a novelist popularly known with his pen name Mark Twain (1835-1910), sees public opinion to be mostly social signaling or about attaining social conformity or "corn-pone opinions", rather than independent thinking.

A longish excerpt from Mr. Twain (at the LewRockwell.com) [bold mine]

Our table manners, and company manners, and street manners change from time to time, but the changes are not reasoned out; we merely notice and conform. We are creatures of outside influences; as a rule we do not think, we only imitate. We cannot invent standards that will stick; what we mistake for standards are only fashions, and perishable. We may continue to admire them, but we drop the use of them. We notice this in literature. Shakespeare is a standard, and fifty years ago we used to write tragedies which we couldn't tell from – from somebody else's; but we don't do it any more, now. Our prose standard, three quarters of a century ago, was ornate and diffuse; some authority or other changed it in the direction of compactness and simplicity, and conformity followed, without argument. The historical novel starts up suddenly, and sweeps the land. Everybody writes one, and the nation is glad. We had historical novels before; but nobody read them, and the rest of us conformed – without reasoning it out. We are conforming in the other way, now, because it is another case of everybody.

The outside influences are always pouring in upon us, and we are always obeying their orders and accepting their verdicts. The Smiths like the new play; the Joneses go to see it, and they copy the Smith verdict. Morals, religions, politics, get their following from surrounding influences and atmospheres, almost entirely; not from study, not from thinking. A man must and will have his own approval first of all, in each and every moment and circumstance of his life – even if he must repent of a self-approved act the moment after its commission, in order to get his self-approval again: but, speaking in general terms, a man's self-approval in the large concerns of life has its source in the approval of the peoples about him, and not in a searching personal examination of the matter. Mohammedans are Mohammedans because they are born and reared among that sect, not because they have thought it out and can furnish sound reasons for being Mohammedans; we know why Catholics are Catholics; why Presbyterians are Presbyterians; why Baptists are Baptists; why Mormons are Mormons; why thieves are thieves; why monarchists are monarchists; why Republicans are Republicans and Democrats, Democrats. We know it is a matter of association and sympathy, not reasoning and examination; that hardly a man in the world has an opinion upon morals, politics, or religion which he got otherwise than through his associations and sympathies. Broadly speaking, there are none but corn-pone opinions. And broadly speaking, corn-pone stands for self-approval. Self-approval is acquired mainly from the approval of other people. The result is conformity. Sometimes conformity has a sordid business interest – the bread-and-butter interest – but not in most cases, I think. I think that in the majority of cases it is unconscious and not calculated; that it is born of the human being's natural yearning to stand well with his fellows and have their inspiring approval and praise – a yearning which is commonly so strong and so insistent that it cannot be effectually resisted, and must have its way.

Read the rest here 

Bottom line: Without independent-critical thinking, we become subject to the mind manipulation-control ruse or easily succumb to indoctrination (brainwashing) schemes employed by various vested interest groups via populism. Think collectivism, statism, nationalism, demand based economic policies, climate change, and more...

Quote of the Day: Economic Value of Politicians

By what insane calculation is a congressional candidate more representative of society than an entrepreneur, a corporate director, or a taxicab driver?

I am sharing Cafe Hayek's Professor Don Boudreaux quote of Steve Landsburg’s 1997 book, Fair Play (original emphasis) page 35

This quote reminds me of a popular and controversial media personality who recently said in a radio show that for a particular case, he only helps retired public officials because they have done “public service” to society and won’t do the same for civilians.

The announcer seem to have forgotten that that the food he eats comes from the private sector, the clothes he wears comes from the private sector, the car he drives comes from the private sector, the mobile phone he uses comes from the private sector, the microphone and sound system he uses to air his self-righteous junk comes from the private sector, the bed he sleeps on comes from the private sector…practically everything he does (directly and indirectly—even government roads may have been subcontracted to the private sector or at least sources their raw materials from the private sector) comes from the private sector which he so belittles.

And what of public officials? Public officials live off from the resources generated by the private sector to supposedly do some “public service” which in reality the private sector can provide. In short, public officials exists because of the private sector from whom the former forcibly extracts resources from the latter.

In the world of politics, what is self-evident can hardly be seen. Moreover, people are seduced to noble sounding economic naiveté themes, as well as, to morally bankrupt idea of collectivism (nationalism) or to the servitude to the state.

Video: Explaining The Tyranny of the Majority

Should majorities decide everything?

That's the question dealt by Duke University Professor Mike Munger in the following video at the LearnLiberty.org (thanks to Tim Hedberg for the video)

A synopsis from LearnLiberty.org

Under a democratic system of government, how is an individual protected from the tyranny of the majority? According to Professor Munger, democratic constitutions consist of two parts: one defining the limits within which decisions can be made democratically, and the other establishing the process by which decisions will be made. In the United States Constitution, the individual is protected from majority decisions. Professor Munger warns, however, that these protections are slowly being stripped away as American courts of law fail to recognize the limits of what can be decided by majority rule. Professor Munger uses the case of Kelo v. New London to illustrate the dangers of confusing majority rule with a democratic system.

It is important to note that the lessons from the above doesn't apply just to the US but has been universal through modern political institutions. For instance, Europe's unfolding crisis has substantially been influenced by the rule of the majority channeled through the populist welfare state.

In the Philippines, such dynamic has been evident through Pork Barrel "personality" based politics.

Yet all one has to do is to look at how media and politicians shapes public opinion. Even trivial events have been sensationalized to bring about political importance. Events are always projected to appeal to the majority's emotions subtly intended to mold and manipulate the public's sense of social morality e.g. collectivism via "selfless" nationalism "para sa bayan", which have been and will be used as basis for legal mandates premised on the rule of the majority.

The tyranny of the majority as the great Professor Ludwig von Mises warned, (Theory and History p. 66-67)

If public opinion is ultimately responsible for the structure of government, it is also the agency that determines whether there is freedom or bondage. There is virtually only one factor that has the power to make people unfree—tyrannical public opinion. The struggle for freedom is ultimately not resistance to autocrats or oligarchs but resistance to the despotism of public opinion. It is not the struggle of the many against the few but of minorities—sometimes of a minority of but one man—against the majority. The worst and most dangerous form of absolutist rule is that of an intolerant majority

In short, the ethical tenet embraced by democratic politics has been "Thou shalt not steal, except by majority vote". People essentially lose their "rationality" when they become overwhelmed by Groupthink dynamics applied to politics.

Importantly, the tyranny of the majority is just but one phase of the harsh political reality. Democratic politics has largely been about the rule of the political minority who uses and manipulates the majority as an instrument to acquire their self interested goals.

So democracy is essentially an illusion where the majority rules but through the palms of the privileged politically mandated minority.

India’s Economic Growth Slows, Choked by Politics

From Bloomberg

India’s economy expanded at the weakest pace in at least eight years last quarter, hurt by a slowdown in investment that has undermined the rupee and set back Prime Minister Manmohan Singh’s development agenda.

Gross domestic product rose 5.3 percent in the three months ended March from a year earlier, compared with 6.1 percent in the previous quarter, the Central Statistical Office said in a statement in New Delhi today. The median of 31 estimates in a Bloomberg News survey was for a 6.1 percent gain. GDP climbed 6.5 percent in the year to March, the office said.

Singh faces a struggle to bolster expansion as Europe’s debt crisis dims the global outlook and elevated inflation and a record trade deficit limit room for more interest-rate cuts to boost spending at home. Discord within the ruling coalition and claims of graft have impeded his push to open up the economy, deterring investment and sending the rupee to its lowest level.

Well, India’s economic deceleration poses as another factor that contributes to the current environment marked by accentuated uncertainty.

The chart above from tradingeconomics.com does not include the today’s data.

Left of center analyst Satyajit Das at the Minyanville.com has a pretty good account of India’s lingering economic woes, and a list of obstacles towards attaining a developed economy status. (bold emphasis mine)

In recent years, India has consistently run a public sector deficit of 9-10% of GDP (if state debt and off-balance-sheet items are included). The problem of large budget deficits is compounded by poorly targeted subsidies for fertilizer, food, and petroleum, which amount to as much as 9% of GDP. Currently the official deficit is just over 3% of GDP, but trending higher and the highest in the G-20.

In March 2012, India brought out a budget forecasting an official fiscal deficit of 5.9%, well above its previous fiscal deficit target of 4.6%. India’s strong rate of recent growth (an average rate of 14% between 2004-2005 and 2009-2010) made large deficits, in the order of 10% of GDP, relatively sustainable. Slowing growth will increasingly constrain India’s ability to manage large deficits.

As its debt is denominated in rupees and sold domestically, India faces no immediate financing difficulty. Instead, the government’s heavy borrowing requirements crowds out private business.

However, exports are slowing as a result of weakness in India’s trading partners. Higher imports, mainly non-discretionary purchases of commodities and oil, have increased. India imports around 75% of its crude oil from overseas.

India’s weak external position has manifested itself in the volatility of the rupee, which was one of the worst performers among Asian currencies in 2011. Indian businesses, which have unhedged foreign currency borrowings, have incurred significant losses as the value of their debt rises as the rupee falls. Many Indian companies face large debt maturities in the coming year.

India has around US$250-300 billion in currency reserves. Foreign debts that must be repaid in the current year represent about 40-45% of this amount which highlights the increasing weakness in India’s external position.

Further, India is plagued by inadequate infrastructure especially in critical sectors like power, transport, and utilities. While its workforce is young and growing, there is a shortage of skills which has led to large increases in salaries for skilled workers.

The above account shows how India has been TOO reliant on the government.

Since government spending is ALWAYS politically determined, where decisions are usually made according to the needs of the moment or on what is presently popular or on what will accrue to votes for politicians (public choice theory), then the obvious result has been wastage, inefficiency and corruption.

Such dynamic has been the same even in the US, the erstwhile bastion of the market economy where dependence on government spending can be equated to crony capitalism.

Also infrastructure problems represent symptoms of too much politicization, viz., regulations and bureaucracy.

Now for the fun part. Adds Mr. Das… (bold highlights mine)

Corruption and Political Atrophy

Another major problem is large-scale, deep-seated and endemic corruption, highlighted by scandals surrounding the issue of telecommunication licenses and the sale of coal assets.

Used to accessing power and influencing politicians, businesses have advanced their interest in securing rich natural resources, especially land and minerals, and ensured a favorable regulatory framework restricting competition, especially from foreign companies.

India’s economic challenges are compounded by internal and external security concerns. For 2012, Indian defense spending is forecast to be $41 billion, around 1.9% of GDP or the ninth highest in the world. Financing this spending diverts resources away from other parts of the economy.

Political paralysis is another impediment to economic development. Successive governments have failed to undertake meaningful reforms. Complex coalition governments are a barrier to decisive action. The current government failed to implement its own plans to allow limited entry of foreign retailers. The government also failed to get a key anti-corruption bill through parliament.

Changes in land and property laws have not been made. Problems in acquiring land, for instance, are a factor in 70% of delayed infrastructure projects. The land acquisition process falls under a 19th century law and amendments proposed three years ago remain unlegislated.

Tax law reforms, including introduction of a direct sales tax correcting cumbersome differences in individual states, have not been completed. Changes to mining and mineral development regulations to allow proper, environmentally controlled exploitation of India’s mineral wealth have not been made.

Other crucial areas that remain unaddressed include rationalizing unwieldy and economically distorted subsidies; implementing economic pricing of utilities; promoting foreign investment in key sectors; reforming agriculture, especially the wasteful and inefficient logistics system for transporting produce to market. Reform of labor markets and privatization of key sectors has not progressed.

To sum it up, the basic reason why India’s economic advances has stalled has been due to the lack of economic freedom: particularly, too much government spending (crowding out effect), too much regulations (evidenced by stringent labor regulations, corruption), political concessions (subsidies, price controls), protectionism (restriction of foreign investments, and restrictions on agricultural and mining investments) and problems concerning property rights (land and property laws)

Indians have been used to the “License Raj” mentality or a business or commercial environment strangulated by elaborate licenses, regulations, and stultifying red tape, where vested interest groups fervently compete to acquire political power to generate economic clout at the expense of society.

India’s structural problems has important parallels with the Philippine political economy.

Nonetheless people’s opinions signify as the most important force in determining political trends that ultimately affects the state of the economy.

Another quote of wisdom from the great Ludwig von Mises

Many who are aware of the undesirable consequences of capital consumption are prone to believe that popular government is incompatible with sound financial policies. They fail to realize that not democracy as such is to be indicted, but the doctrines which aim at substituting the Santa Claus conception of government for the night watchman conception derided by Lassalle. What determines the course of a nation's economic policies is always the economic ideas held by public opinion. No government, whether democratic or dictatorial, can free itself from the sway of the generally accepted ideology.

Bottom line: the direction of economic growth will run along the prevailing ideology held by the citizenry. The greater the dependence on governments, the lesser the dynamism of the economy and vice versa.

Economic freedom ultimately determines the society's prosperity.

Mega-Success, Downfall and Sentimentalism

Libertarian columnist Robert Ringer writes,

Seems like we’ve been here before … many, many times. Whitney Houston’s tragic death is the latest in a long string of drug- and alcohol-related celebrity deaths, going back to Jimi Hendrix and Janis Joplin in 1970, Jim Morrison in 1971, Elvis in 1977, Andy Gibb and John Belushi in the eighties, and, of course, Michael Jackson in 2009. And these are just a few of the names that come quickly to mind.

When a show-business icon dies prematurely, we tend to focus on his/her death rather than the life that led to that death. In the case of Whitney Houston, her travails were in the news so much over the years that even I — not a frequent showbiz reader — was aware of them. Anyone who watched the evening news couldn’t help but know about her bouts with drugs and alcohol, and, perhaps even worse, her fifteen-year marriage to a man who physically abused her.

Mr. Ringer says that immaturity (from youth) compounded by loneliness, rather than mega-success brings about the typical downfall of many celebrities.

In my view, mega-success and too much expectations of one’s value to the world can exacerbate ‘immaturity’, aside from inability to adjust to realities. In the average person, wisdom usually supersedes immaturity as people age. So if age doesn’t usher in maturity, then there must be something else wrong.

And possibly intractable egotism bloated by mega-success can be a factor in one’s downfall (not necessarily limited to celebrities). Again the inability to adjust with changing times could bring about loneliness and frustrations.

Of course, all the above depends on the individual’s value scales. This means that while some celebrities fall for the above traps, many others don’t.

But there is another factor I would like to point out. While I lament the loss of many artists of my generation, I usually get miffed at the excessive sentimentality expressed by many to recently deceased celebrities.

For me, this represents an action inconsistent compared to when the celebrity lived. Then, nobody seems to given a whit to what the celebrity did (most especially when they were down). Somewhat like schadenfraude, death becomes an opportunity for credit grabbing, promotion of shows and for social signaling.

Yet this seems part of how public opinion gets molded.

Quotation of the Day: Fickle Public Opinion

In a sense, public opinion is like one of those mountain snow accumulations…. As snow builds up, the likelihood that the whole drift will come crashing down the mountain steadily increases. Finally, as the ultimate snowflake falls on top of the drift, the weight is now too much too be borne, and the whole drift comes down. Major changes in public opinion tend to take the same form. A very large number of books, articles, and lectures which appear to have no great effect nevertheless prepare the way. Eventually a critical mass is reached and what appears to be an overnight change of opinion occurs.

That’s from Gordon Tullock’s “Foreword” to J. Ronnie Davis’s 1971 book The New Economics and the Old Economists (source: Don Boudreaux at Café Hayek)

Public opinion is fundamentally driven by mawkishness and unctuousness.

Public opinion, today, can be characterized by several dominant cognitive biases; particularly, the comfort of the crowd, appeal to tradition, appeal to majority, appeal to experts and appeal to the emotion.

There hardly have been any critical thinking involved in what have been deemed as ‘cerebral’ discussions among conventional experts. Debates mostly revolve around the acceptance of current circumstances, conditions and methodology, where variances of ideas mostly deal with interpretation of events and or on personality issues and or semantical dimensions (mostly bordering on the abstract).

This means that public opinion has been largely influenced by the way elites or how the intellectual class think and project on the issues.

Yet questioning on the validity and the biases of the sources of information, the socio-economic political theories and or the philosophical underpinnings of the current institutional framework would be considered as heresy that risks ostracism for the expositor. Thus, conformity and social acceptance are prioritized at the expense of reality which drives the popular mindset.

And that’s why politics has mainly been centered on the manipulation of public opinion.

Nevertheless, times have been changing.

Real time connectivity has been encouraging on more critical thinking. A diffusion of critical thinking could influence a shift in public opinion through a change in the direction of the way the intellectual group thinks.

Structural changes are happening at the margins. So will public opinion.

Opinions As Opiate

I like this graphic depiction by Jessica Hagy on opinions because I find it poignantly relevant.

While Ms. Hagy calls it Opinions are like bellybuttons, I would call this ‘opinions as opiate’.

For me, the proportion of mainstream opinions are tilted towards what Ms. Hagy describes as based on low evaluations:

- parroting someone else ideas or regurgitating statements like an incantation or

-engaging in nice sounding political or economic talking points that in the end only signifies gossip.

Since gossips are hardwired on us for social/peer acceptance or for “feel good” or for attention generating or for self-esteem purposes, this may seem like an opiate. After all, gossips are hardly premised on sound evaluation but mostly on heuristics or mental short-cuts.

Obama's Job Approval: Different Polling Agencies, Different Results

From Rasmussen Reports

From Gallup

From Pew Research

The firm's ideology or political affiliations could be driving these divergent poll results.