Monday, March 22, 2010


Via Greg Mankiw (who if you're not currently reading, add him immediately to your daily list!)

Wednesday, March 10, 2010

Well, an issue certainly

Sebastian Piñera becomes President of Chile this Thursday.

Chile is, by nature, a centre-of-right country. The energy sector and the waterworks are within the private sector and the law makes the existence of wide-scale deficit-financing basically verboten.

So, after the years of Bachelet, who was in all accounts a terrific president, pushing constantly for the social aspect of liberty, Piñera's reign was bound to be pleasant and straightforward.

He would overturn slowly but surely many of Bachelet's economic decisions and steer the country gently back towards the path that has shown to lead to immense progress.

But the earth was shaken from beneath him.


So now, Piñera's first years of economic progress will instead be dedicated to a large-scale project for the restoration of Chile.

When disaster strikes, the reply "Let the markets take care of it" sounds callous, evil yet. Even if it
works (PDF link).

Now, Piñera, who must fight to keep afloat above Bachelet's exiting 80+% exit approval rate, will no doubt invest heavily in government solutions to the earthquake crisis.

I'm not saying this is right or wrong. In the face of strong adversity, it is even inhumane to stand back and wait for the market to take care of things, even if it will necessarily do so.

Politically though, this means that Piñera's honey-moon year will be spent on rebuilding. With deficit-capping legislation, the Piñera administration might even have to raise taxation percentages to fund the restoration.

Within the realm of palatable politics, the Piñera administration should help eagerly in the rebuilding of Chile, even if it means reshifting its planned budget to fund mainly infrastructure projects.

Parallel to this, however, he should also press for market solutions, viz. (i) enforcing property rights to prevent looting; (ii) avoiding price controls which would force already destroyed businesses out of, well, business; and (iii) cutting government expenses across the board (except in infrastructure brackets) so that the private sector can rapidly fund itself back to its feet.

If this path is taken, and the expenditures and results are carefully monitored, Piñera will come out with a strong case for market forces and will have earned sufficient approval to carry out system-wide free market reforms.

Reforms which, after all, got Chile to its current superior economic position.

Monday, March 8, 2010

O kírios tha plirósi giá óla

This bit of news comes as an interesting study between short-term gain and long-term catastrophe.

I am thoroughly uneducated with regards to this matter, but from what I can deduce from the article and additional research, a law is in the making in Nicaragua that would allow thousands of local low-income producers to renegotiate their debt with microfinancing institutions.

Usually, poor families do not have either the money to pay and sustain a bank account or gain proper credit rating or do not have sufficient collateral to pledge as security for bank loans.

Therefore, they are usually left outside of traditional banking schemes. Not because banks are evil profiteering entities, mind you, but because if they granted these loans with very little security they would be losing your money in the process.

Enter the microfinanciers. Microfinance seeks to take care of that demand of loans by providing low-income families with low quantity, short term loans at reasonable interest rates, allowing millions of families around the world to have funds to finance their own projects, say, a new chicken coop or a new cow. Nothing big, but it definitely is substantial for them.

However, this article points out an interesting trade-off. One the one hand you have the short-term gratification of producer interests. They can't pay back right now, so a renegotiation opportunity would allow them to get lower interests within the same or longer time frames. This goes against the natural grain of lending practices, which states that the longer a loan lasts, the higher the interest rate.

On the other hand, if you were a microfinancier, you wouldn't be interested in setting up shop in a country where government could unilaterally modify private loan documents.

In fact, you would be driving microfinanciers away, because regardless of their kind hearted goals, they still must break even or profit if they are to continue in business.

So, what is the solution? Renegotiate debt and save thousands of indebted producers? Or protect the microfinancing industry from the ravages of government sanctioned intervention?

Maybe the correct response lies in neither option.

Many economists agree that local low-income families in many Latin American nations have thousands of dollars of collateral, but cannot touch that bounty because of socialist land redistribution schemes.

With proper property rights and a decent credibility in the rule of law, low-income families could use the land they own (but is currently not recognized as property by the government) to access thousands of dollars in loans. Rather than building a new chicken coop, they could invest in high-end technical solutions, like the Chickentron Egg Replicator 3000.

Ok, well, maybe two new chicken coops.

Monday, January 4, 2010

On AVATAR, The Greens and Private Property

So...beforehand I was warned I was about to watch a "greennish" kind of movie. Still, decided to go and contributed to the $1 plus billion it had made, worldwide, after its opening weekend. I wanted to see the "awesome tech" behind it. Here are my pennies on it:

1. Production was incredible, 3 hours of landscape made interesting by watching it on a huge screen and the 3D thingy. However, there were not remarkable quotes or lines throughout the movie...let alone memorable speeches. The story plot itself was pretty plain.
2. The way Cameron tried to make the fiction real. Read this piece to learn the “real science behind Avatar”. One of the elements I liked the most was the explanation Dr. Augustine gave of the connection of the Na'vi to all other living organisms within Pandora was great. The neurological connection linked as a net was pretty neat…would have prefer more of this and less of that…(asking forgiveness for killing their food type of thing....) Anywho,
3. The Avatar concept itself. The sci-fi potential behind the idea is mindblowing. If your one body gets ruined, you could reborn -sort of- in a new body with your very own mind. Yeah, cool.

1. The senseless-cliché of having "private corporations" as the essence of pure evil. I agree with Felipe when he states “[Cameron] does not portrays a critique against laissez-faire. He rather criticizes corporate mercantilism and violation of property rights”. However, there’s never said -or imply- a critique to the government by providing privileges to this company. Therefore, the audience walks away without grasping that it is mercantilism which is wrong, not free market competition.
2. Again another cliché: making look bad wanting to make profits, by saying they get them at all costs. This is represented in the scene where the company director explains his stockholders do not like the bad press generating from the Na’vi been killed. However, he then asserts that what it would upset them the most would be the fact of losing profits. That is so not true. It is indeed the sole purpose of private enterprises to make profit by respecting individual rights, of which one is to respect others private property.
3. Contradiction people contradiction: they spent around $300 million to do it, including more than $150 in marketing that includes banners, toys, set, all the set props for the movie (products coming from mines anyone...?) They are criticizing the very same wealth that allowed them to do this high-tech movie.

1. This was an issue of property conflict.
Roy Cordato tells us that "environmental problems" are problems of "interpersonal conflict" which arise from the incorrect definition of property rights. In this particular case, it appears the Na'vi were the rightful owners of the property the "evil humans" wanted to get. Humans were invading some sort of private property. They surely didn't have the right to claim such property by force, because it wasn't theirs to get. It should have been a negotiation. If the humans in fact had nothing the Na'vi would find valuable, well, they would have to go somewhere else. Commerce is the most pacific transaction among humans. Two entities who are willing to voluntarily exchange one value for another of higher value to them.

2. Intrusion is indeed a violation of individual rights, but I would dare to say it is mostly done by governments and not private enterprises. Besides, it is very likely that in the future, the "evil human" will be played, in fact, by government officials since "space anything" is permitted by legal-law (this isn’t really saying the same, another whole post on it…) only to the government. There are, so far, very mild and timid efforts by private enterprises (Virgin's commercial suborbital flights to be precise). As the book "Space: The Free-Market Frontier" states, space enterprises are still legally under the government power.

3. The false dichotomy between preserving the environment or reaching a better standard of life by acquiring services or technologies that destroy the environment. It had been showed that the issue is rather to whom the property belongs to. When in private hands endangered species or total ecosystems are better preserved when in the hands of government.

However, these points weren’t quite understood by the director of the movie. Cameron laid it out on the context of the global warming mainstream propaganda saying it is us humans who destroyed our planet and then go like virus destroying the home of somewhere else (Matrix anyone...?). They do all these by atrocious greed of making money by killing if necessary.

I mean, what a coincidence it was released just the week the Copenhagen Climate thingy went through.

Well, and that’s that.

The picture comes from the wikipedia site