• Filipino reformers should study Nobel awardee Jean Tirole

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    THE works of this year’s winner of the Nobel Prize for Economic Science should be the subject of intense study by Filipino good governance reformers.

    But we suppose these Filipino reformers would only be able to introduce what new methods and systems they learn from Jean Tirole’s works after a new president replaces Mr. Benigno S. Aquino 3rd. For as even Aquino’s adoring fans have now realized—except the deeply brainwashed true yellow believers—he is not working to reform the corrupt Philippine system but is even condoning the corrupt practices of his friends, playmates and political allies. These are, in the lingo of disgusted critics, his KKK or his “kaklase, kakampi at kabarilan.” These words mean classmates (kaklase), allies and close associates (kakampi) and target-shooting buddies (kabarilan).

    He never fires, disciplines or even merely orders probes into the doings of KKKs. As a result, to cite only a few examples, smuggling has increased six times more than the annual average during the regimes of former president Erap Estrada and Gloria Macapagal-Arroyo (who is under hospital arrest for plunder and other charges despite her being seriously ill).

    One of the research works for which the French economist Jean Tirole won the respect of colleagues worldwide and won the Nobel Prize is on how governments can effectively moderate the greed for profits of monopolies and gigantic businesses. This research also quantified the destructive effects of monopolies and overly large conglomerates on the common good of society as well as on the business climate.

    Regulatory capture
    One of the banes of the Philippine economy, and a cause of great suffering for the 70 million Filipinos who are poor and almost poor, is what economists and governance analysts call “regulatory capture.” This is commonplace in Third World countries, but perhaps it is a phenomenon seen most nakedly in our country than in any other in our region.

    Regulatory capture is what is happening when government regulators of industries or a range of businesses serve the interests of the industrialists or the businessmen they are tasked to monitor and regulate. They do that instead of working for the benefit of the public, the consumers of the products of these businesses and industries. It is of course corruption. And it is treason and economic sabotage when regulators are actually servants of the corporations they should regulate.

    With his associate, Jean-Jacques Laffont, Jean Tirole, developed a model to address the problem of preventing regulators from being captured by a regulated industry. This is something Filipino socio-economic reformers should learn to apply.

    It would immediately improve the delivery and pricing of electric power here, which is among the world’s most expensive. The cost of cell telephone messaging, the toll of dropped calls being charged to telecommunications subscribers, for example, would decline overnight in the Philippines if the Jean Tirole model were used.

    Another area where he has found new insights is banking. In the 90s, papers he co-wrote with associates anticipated problems that beset banks and finance houses and erupted into the 2008 crisis. He has offered a model of how to jump-start a financial market that has sunk, suggesting to government central banks a safe way to buy weak assets (and therefore protect them) and to lend against assets of medium quality. This would be the alternative to bailing out gargantuan banks and risking total loss if the bail out doesn’t work.

    But as we said at the very beginning, these tools and models are only for reformers in the administration of a future Philippine president who is seriously—and not hypocritically claiming to be—pursuing reforms.

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    1 Comment

    1. Gloria M. Kuizon on

      True, Manila Times. The wisdom of Jean Tirole and the new tools and models to be learned from his works will be useless in this corrupt, lazy and criminally uncaring and negligent Aquino government.