Sunday, January 01, 2006

Part 33 - Hyperwage Theory


Table of Contents

Part 2
Part 3
Part 4
Part 5
Part 6
Part 7
Part 8
Part 9
Part 10

Part 12
Part 13
Part 14
Part 15
Part 16
Part 17
Part 18
Part 19
Part 20

Part 22
Part 23
Part 24
Part 25
Part 26
Part 27
Part 28
Part 29
Part 30
Part 32
Part 33

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The Misadventures of the Street Strategist Vol 1 to 13


Hyperwage Theory
Part 33
December 29-30, 2005

I pictured a rainbow
you held it in your hands
I had flashes
but you saw the plan
I wandered out in the world for years
you just stayed in your room
I saw the crescent
You saw the whole of the moon

- Mike Scott and the Waterboys, 1985

Once in a while a song comes along that makes you think and one such anthem is The Whole of the Moon. It has since been covered by half a dozen artists including Mandy Moore. In 1985, I listened to Mike Scott and the Waterboys, way back in the time when Bruce Springsteen was mistaken for Rick Springfield. I had written about this mistaken identity a few years back. Even today, almost nobody knows about Mike Scott.

Why did the song inspire me? At a time when I was in the height of my intellectual curiosity attempting to imbibe any discipline of knowledge that I came across, the anthem put it all in perspective for me.

Was I to be the one who merely sees the rainbow or the one who actually holds one in his hands? Was I to be the one who merely sees the flashes or the one who sees the whole plan? Was I going to be the one who merely sees the crescent or was I the one who sees the whole of the moon?

Right there and then, I decided I was not the one who is grounded rather the one who fills the skies. Not the one who is dumbfounded by truth but the one who cuts through lies. Not the one who sees the lone empty valley rather the one who sees Brigadoon. Not the one who speaks about wings rather the one who just flies, not the one who wonders guesses and tries rather the one who just knows. Not the one who sees the crescent rather the one who sees the whole of the moon.

Normative vs. descriptive
Due to my intense desire to be the person who sees the whole of the moon rather than the one who merely sees the crescent, I sought to conjure up a normative economics rather than a descriptive one. By normative, I mean, a kind of economics that does not spend all its research efforts merely describing how poor the Third World is but a kind that actually prescribes a norm. For me descriptive economics is merely seeing the crescent. For me, normative economics is seeing the whole of the moon. Hyperwage Theory is one such normative economics.

Sutton’s Law
What is you action plan to solve poverty? Ask any economist or government policy maker, or the World Bank, and you will get the most circuitous, roundabout, indirect, beating-around-the-bush, skirting-the-issue reply. This is is the intellectual equivalent of “Honestly, I don’t know.”

Sometimes, the most brilliant of ideas comes from the most criminal of minds. In this manner, I am always guided by Sutton’s Law.
Reporter: “Willy, why do you rob banks?”
Willy ‘The Actor” Sutton: “Because that’s where the money is.”

Government: “Doctor, why are you going abroad?”
Doctor: “That’s where Hyperwage is.”

Economist: “How do you solve poverty?”
Street Strategist: “By giving them money directly.”

Hypowage is the problem, and hyperwage is the solution. Why beat around the bush? That is the application of Sutton’s Law.

Sometimes, we make the mistake of dismissing the simplest of solutions not because it is wrong but because our proud high education makes us think it ought to be wrong. On the other hand, simplistic solutions could really be wrong in the first place.

Skirting the issue
The solution to our poverty is federalist or parliamentary government. The solution to our poverty is to emigrate to another country as exported labor. The solution to our poverty to remove the withholding tax but still pay the same accumulated tax at the end of the year. The solution to our poverty is a slogan campaign against corruption. The solution to our poverty is to hold a summit on poverty.
We are too intelligent for our own good in thinking of these complicated but indirect solutions. Our problem is economic and the solution is economic. The solution is not political, not sloganeering, not separated families, not legislation.

The problem is lack of money for the poor, the solution is to give them money. Poverty is the problem; wealth is the solution.

180 degrees
Hyperwage is a 180-degree solution, a complete opposite of our economic brainwashing, this is the reason it was very hard to me to come up with this theory and that only an uneducated non-economist like the Street Strategist would ever dare to conjure one which proposes to increase the cost of production rather than reduce it.

If we ignore Hyperwage Theory we can always stay with the current practice of modern day slavery, where we pay hyperwage prices for all imported items and demand to pay only hypowage prices for domestic items, where we pay hyperwage salaries to the government-owned and controlled corporations and private corporations and pay merely hypowage salaries to labor who have no power to negotiate on an equal footing because they cannot afford to lose a day’s meal budget.

Disbelief is not untruth
I have always wondered: If we know so much about economics, and if our economic models are correct, how come the world is divided into two extremes, the super rich and the super poor, and hardly anything in between?

How come economics has not solved world poverty? How come I could not understand economics as a weapon of solving world poverty?

In my book Strategy Myopia, I recounted the time when I finally discovered the reason why I could not understand debit and credit. How did I understand them finally? It was when I realized that the problem was not me. The problem was in the defective way by which debit and credit are taught. Eventually, I resolved the issue by throwing away their textbooks and invented my own.
The same thing is happening with economics. Now I realized why I couldn’t understand economics, why I couldn’t reconcile current economic theory with the reality of perpetual poverty. Hence, I threw away all their economic models and invented my own.

At this stage, the only logical way to analyze and prescribe a solution to poverty is through the controversial lens of Hyperwage Theory. In the same manner that Keynes overturned the Classical economics that he once mastered, with Hyperwage, the Street Strategist is overturning all inflation-centric economics including Classical and Keynesian.

Now I finally understand the limits and defects of Classical and Keynesian economics with respect to the problem of perpetual poverty. I can finally say, I have understood economics.
The proposition is simple: Give labor its world market value.

Sometimes, the solution is too simple you disbelieve. But what one disbelieves is not necessarily the untruth. The truth is the truth even if you disbelieve, Disbelieving the truth does not make it the untruth.

Competing with China
The first test of Hyperwage is this: How does the Philippines compete with China?

The first reaction to Hyperwage is an automatic rejection. I can’t blame the economists and the general public. Come to think of it. How do we compete with China?

The obvious answer is that we should lower our costs, but since our materials are imported, we can’t lower these materials. Oil, computers and factory machinery are imported and based on world market prices. Who says we can’t afford Hyperwage? All those imported materials are made with Hyperwage salaries which the First World companies have passed on to us. We are paying Hyperwage to companies abroad, and we don’t even realize it.

So, if we can not lower our raw materials input what else is there to lower?

The only remaining way to lower our costs and to compete with China is to lower the one variable over which we have control. And that is our labor cost.

But there’s just one big problem. Chinese workers will even work for no salary at all. They are willing to work for food.

So how can we compete with China? With our English skills that are rapidly deteriorating as we speak? With the quality of our workmanship that is being eclipsed by China as you read this?

We still have this wrong notion that China is a low-wage, low-quality source. That is wrong. Many of the first class quality products in the US are made in China. China in fact makes two generic classes, the Class A which goes to the First World, and the Class B quality which goes to the Third World.

Quality-wise, China is already above us. The FDIs (foreign direct investments) going the Philippines is minuscule compared to the amount going to China. We are given the brownies and lollipops.

Let’s get back to the question: How do we compete with China?

Big question, big answer. And yes, I have spent much of my time conjuring up a strategy to compete with China.

And as usual, given the convoluted thinking style of the Street Strategist, my strategy will shock you.

Yes, I have formulated a strategy to compete with China, and yes, it will shock your intellectual senses.
Finally, here’s the Street Strategist’s strategy to compete with China: We should not compete with China because we cannot compete anymore.

Yes, you heard me right, throw in the towel. The head of the largest textile mill in the country went to China and conceded we can no longer compete with China. The local government officials who have visited China on a goodwill tour conceded we can not compete. I have spent a birthday in China and I declare we cannot compete with China.

Oh yes, we do get orders from US and Europe for our products but again, not to douse cold water on our local export industry, we are getting the brownie orders. Our exports are nothing. And if we continue to compete, we will eventually be wasting our prime youth desperately trying to win an unwinnable game.

Hong Kong
How does Hong Kong, Taiwan and Singapore compete with China? Remember that Hong Kong is just a tiny geographical province of China, a special administrative region. Surely, Hong Kong with one of the highest labor costs in world would collapse in the face of competition from China with one of the lowest in the world.

Come to think of it, the highest labor cost in the world, Hong Kong, is separated from the lowest labor cost in the world, China, only by a small creek in Shenzhen. (And yes, you are not allowed to photograph that bridge but I did get away with it.)

Yet, most of the Asia-Pacific headquarters of US, European and Japanese are in Hong Kong. It is because Hong Kong bends over backwards to accommodate businesses with its business-friendly politicians, government, and infrastructure. Their bad English does not deter the foreign investments to Hong Kong, nor does their expensive labor.

Let’s have an overview of Hong Kong taxation for example.

  • No sales, or value-added tax
  • company profits tax at 16% maximum only for income derived inside Hong Kong
  • currency gains are not taxable
  • income from subsidiary is not taxable on the parent company.
  • No withholding tax
  • salaries tax maxed at 16% even if you earn $1 million
  • no estate or inheritance tax
  • depreciation deductions even for salaries tax
  • educational deductions

A number of taxes that exist in most jurisdictions do not exist in Hong Kong. Thus there are no capital gains taxes, no withholding taxes, no sales taxes, no VAT, no annual net worth taxes and no accumulated earnings taxes on companies which retain earnings rather than distribute them. In the long term it is intended to completely phase out stamp duty on the sale and issue of shares and securities and to reduce direct taxes further.

Different ball game
If the competition is on labor cost, don’t compete on labor. Maybe we should change our paradigm. Instead of acting like some Third World country adopting the strategy of poverty, we should act like a First World country that gives the poorest of the poor some protection by providing labor its true value.

Hyperwage Theory
Part 33- section 2

Economics combines both science and human psychology and to ignore this linkage is fatal to any economic theory. Two equally good choices under economic equations may not be equal in the eyes of the human consumer.

Hourly wage rates
Corollary to Hyperwage, here is another convoluted proposal from the wild imagination of the Street Strategist. You’ll thank me for this, trust me.

Let me illustrate that economics combines both science and human psychology and that two equally good choices under economic equations may not be equal in the eyes of the human consumer. After this illustration which an example of non-economic analysis, I hope you will appreciate why I have been harping ad nauseam on the non-economic aspects of Hyperwage Theory.

I hereby propose to change our minimum wage calculations into hourly wages instead of daily wages.

Economically, it is the same. And yet, hourly wages and daily wages are not the same from the non-economic viewpoint.

This is another exemplification of the difference between the economist and the Street Strategist. For the economist, there is no difference. After all, the economics of daily and hourly wages is the same.

For the Street Strategist, there is a huge difference because he analyzes the non-economic aspects of a decision due to the plain reason that he is not an economist.

What are the non-economic advantages of an hourly wage rate?

Work attitude. “You mean to say that you came in 30 minutes late at 8:30 a.m., then you powdered your face for 15 minutes, and then arranged your table for another 15 minutes? I paid you for the hour from 8 am to 9 am and you have accomplished nothing?”

Proper overtime calculation. “Sir, I worked until 6 pm, but I did not get paid from 5 pm to 6 pm.”

Unambiguous daily calculation. “Sir, one working day is 8 hours, not 10 hours, not 12 hours even if our department store closes at night. I’m being paid by the hour. Anything in excess of 8 hours is overtime.”

Time consciousness. “Don’t waste 30 minutes on the phone with your girlfriend because the company paid you for that half-hour.”

Productivity mindset. “Sir, I have a proposal that can save our operations 45 minutes per day, in one year’s time we will save $500,000 but we have to buy an equipment $300,000 should we adopt this productivity measure?”

No more slow men at work. “Look guys, I paid you for 8 hours, you work for 8 hours, no smoking breaks at your leisure. Work, work, work.”

Eliminating non-essential work. “I saw you surfing porno sites for 30 minutes, shall I deduct it from your salary?”

Efficiency. “Your output per hour is lesser than your hourly rate, shall I replace you with a robot?”

Time and motion study. “You tire easily if you work continuously for 8 hours, shall I get a parking meter to do your work as parking aide?”

Thinking time. “Are you telling me that I am paying you for staring out of the window for 5 hours and you claim it as thinking time?”
Opportunity cost. “It took you three hours to deliver a letter worth $1?”

Filipino time. “For this one-hour delay in starting our event, we have 500 people who lost productivity worth $50,000.”

Father of non-economics
I trust that you can enumerate more advantages of the hourly rate. Do you appreciate now the importance of the non-economic benefits of seemingly non-economic decisions? Yet, how come nobody has ever proposed the change? It is because the policymakers think they are economically the same and one has no advantage over the other.

Somehow, this is another instance of seeing what everybody else has seen and thinking what nobody else has thought. Somehow, I don’t like this hourly thing. I’m the thinking type and I don’t have anything to produce on an hourly basis.

At any rate, with all these emphasis on the non-economic aspects of economic decisions, you may call the Street Strategist as the “Father of Non-economics.”

Throughout this exposition I have expressed my consonance with the brilliant, daring, and revolutionary ideas of Keynes especially regarding the importance of consumption and the economic multiplier and their corresponding implications for setting economic policy.

Yet many of our economic policies are geared towards reducing consumption and dampening the multiplier effect – completely the opposite of what Hyperwage intends to do. Why? Let me explain why.

Our country, or Third World countries for that matter, is like a sinking ship. The rats are leaving the ship and are going abroad as domestic helpers or caregivers. What does the captain of the ship – the government - do? It imposes a higher VAT in order to survive. The VAT is like a life jacket. The captain of the ship secures the only life jacket in the ship and tells the passengers to save their own souls. With the VAT the government survives at the expense of the lifeline of the public.

Isn’t the VAT an example of government selfishness and callousness to the plight of the poor citizens? The problem with VAT is that it is shifted to the consumer in the final analysis eventually reducing their purchasing power – exactly the opposite of what Hyperwage seeks to achieve.

Instead of the increased VAT, what could have been done given the Hyperwage Theory?

Let me think. Suppose the government intends to obtain an incremental P1.5 billion with the new VAT. Under Hyperwage, any increase in wages will be paid and shared between the government and the employers in the same proportion as the corporate tax rate, currently 35% by the government and 65% by the employer.

Instead of a new VAT rate, the government can impose a new minimum wage package totalling the estimated P1.5 billion. Eventually, using the multiplier effect, assuming a multiplier of 5, a total of P7.5 billion will be added to the economy. The economy will be stronger.

Can you see the difference? Direct taxation dampens the economic multiplier and increases the incidence of government corruption while a wage increase will directly benefit the hungry stomachs of the people and in a bigger sense sets the economic multiplier in action which eventually benefits not only the workers but the entire economy as a whole.

Completely opposite strategies but only the Hyperwage is a positive win-win solution.

The Hyperwage mindset ushers in a greatly different economic policy.

Monetary and financial economics
One of the most common questions about Hyperwage is its effect on monetary and financial economics. I can understand where they are coming from. It is due to the heavy emphasis these days on the monetary, financial and stock markets because these are the newsworthy fluctuating markets on a daily basis.

For example, will there be egregious devaluations like P1,000 to $1? What will happen to the currency rates and interest rates? Will the deficit spending affect the value of the economy? Will we be printing new money?

As I have written in the earlier chapters, because of the nature of my work and background, I started to seek the poverty solution in monetary and financial economics but failed to see any ray of hope until

I eventually settled on the minimum wage guided by Sutton’s Law.

Since then it has been my belief that monetary and financial economics will favorably follow the major structural reform brought about by Hyperwage. Given the multiplier effect, there is no way that currencies will devalue, in fact, most probably, the currency will appreciate.

After all, if the wealth that is saved by the rich will be redistributed to the poor in terms of hyperwages, then a $10 billion such increase in wages will redound to $50 billion for the entire economy. How can there be an increase in currency and interest rates? In fact, the rates in First World countries are very low precisely because of the intensive domestic commercial activity engendered by the huge purchasing power of the public.

But that’s not all. When I thought to myself that monetary and financial economics are not that important compared to the importance of the minimum wage as the weapon for purchasing power, it was only borne out by a logical chain of reasoning. It was without any serious economic thought on my part.

I don’t care if $1=P1,000 because the Korean Won or the Japanese Yen have shown us that it is not the exchange rate that matters, rather it is the labor hours of work needed purchase goods and services.

And I have proved that Third World countries are actually expensive countries.
But then I got another surprising, unexpected theoretical support. By the way, throughout this exposition you have seen that I keep on getting unexpected theoretical support for Hyperwage.

Unknown to many, including students and teachers of economics, one of the greatest contributions of Keynes’s General Theory was the incorporation of monetary theory into the general theory of supply and demand. I need to emphasize this because to the general public, Keynesian economics is merely equated to deficit spending.

What is the implication of the integration? Keynes emphasized the markets for goods and services as the source of macroeconomic perturbation. He de-emphasized monetary and financial
sources. Keynesian economics assumes that all the exciting action takes place in the
goods and services market, and that all other markets adjust passively, including the financial markets.

In contrast, the quantity theory of money assumed that the exciting action is in the market for money balances, and the market for goods and services adjusted.

But as we have seen in the 1997 Asian financial crisis, while the monetary markets are volatile, Keynesian policies still carry the biggest impact in the long run, and the markets with strong macro structures in place bounced back easily like Korea and Taiwan. As if Keynesian is for major swings while monetary is for small refinements.

In other words, my original uneconomic logic that monetary and financial matters will adjust accordingly once Hyperwage erects a superstructure of economic purchasing power was supported by Keynes all along.

Thus, I see no cartloads of useless paper money to buy a kilo of rice and any such generalization is not warranted under the intense domestic commercial activity, the increased employment, the larger tax base, the strong economic growth under a Hyperwage regime.

In summary, whenever you have a monetary or financial issue, try to acquire a sense of magnitude and proportion as to how that issue impacts the economy in comparison to the benefits of Hyperwage and the purchasing power it brings.

In a manner of speaking, Hyperwage builds an economic superstructure, a huge cathedral, while financial and monetary economics are merely interior decoration. Don’t be confused with the cathedral and the interior decoration.

Magnitude and proportion
Now, there are thousands of economic variables, and a macro model for a country’s economy involves hundreds of equations.

Economic theories differ in the interpretation of the variables, which are important and which are not.

For example, for Marx and his labor theory of value, the commodity is owned by labor after paying off the capitalist for use of his money.

According to Marx, capital is an expense while labor is capital. Ironic, isn’t it?
Well, this could be true of a painter. The painter owns the painting after paying off his benefactor for the cost of the painting materials and canvass. But this painter-owns-the-painting model is an exception.

In the real world, the capitalist does not merely provide the funds but also the intellectual capital to build the commodity.

Remember, the ideas and brainpower used to design and build factories come from the capitalist as well. Thus, it is far more realistic to state that the capitalist owns the commodity not the laborers.

But without doubt, the labor theory of value could easily seduce the workers into forming a communist or Marxist economy.

But such a communist economy is against the human nature of individualism, freedom of choice and the desire to be above the rest.

That is an example of what I mean by differences of interpretation of the same economic variables.

Anyway, let’s proceed.

Classical economics considers production and savings as the more important variables and that prices are adjustable upwards and downwards.

Keynesian economics considers effective demand as the important variable and considers financial and monetary economics as lesser in importance. This was revolutionary such that many so-called “famous” economists are famous because of their defense or attack of Keynesian economics and because they don’t have their own original theories.

Hyperwage economics considers the minimum wage as the most important factor and considers the same as the only variable that needs to be seriously tampered. The other variables will move in a domino effect and could be refined further with less impact as the setting of minimum wage.

Christian economics
What is the linkage between Keynesian and Hyperwage? Keynesian economics places great importance on the consumption function. And yet, despite the importance it accords to the consumption function, Keynesian economics fails in one thing. It does not have a great theory on how to increase the consumption.

Yes, Keynes correctly identified that the rich who save should share their wealth with the poor who spend and consume. But his method of such wealth sharing is weak, namely, taxation and similar remedies. This failure to provide enough firepower to the consumer to consume is caused by their steadfast adherence to inflation-centric policies.

In other words, while Keynes was arguably revolutionary, he was not revolutionary enough.
Keynesian economics doesn’t go far enough. There is a failure to empower the consumers directly, relying instead on trickle-down economics. Hungry stomachs can’t wait for any trickles.
Keynesian economics is inadequate in the sense that it is inflation-centric and that it failed to make a distinction between First World which should be inflation-centric and Third World economies which should be purchasing power-centric.

By focusing on the plight of the poorest of the poor, Hyperwage is probably the most Christian of all economic theories. Whatsoever you do to the least of my brothers you do unto me. Hyperwage is the only theory that can enforce a distribution of wealth under a win-win proposition.

Minimum wage debate
Should there be a minimum wage at all? Many economists do not want any minimum wage at all. Yes, economics is their expertise. How about the non-economic aspect of the debate? That is their strategic failure.

Minimum wage is not about economics, it is about justice and equality. A labor contract is never a meeting of the minds, because left alone, labor is not in a position to bargain.

An equipment if not purchased because of lack of meeting of the minds can stay in the warehouse and can wait forever.

But a hungry stomach is never a bargaining weapon. Thus, this no-minimum wage debate is futile.

I have the same argument for the economists who want to legalize narcotics. Economics cannot take precedence over chemistry. Drug addiction is a non-economic chemical problem, not a problem of supply and demand. Sometimes, economists could be too enamored with data forgetting that there are physical laws that overpower their models.

Issues of the day
Throughout this exposition, you may have wondered: What is the relevance of the Street Strategist’s columns with the issues of the day?

What is the relevance? Let me try to relate Hyperwage with the issues of the day. Hospitals closing down because doctors are going abroad as nurses. Broken homes because the father is in the Middle East while the family remains in the country. Lack of housing because workers cannot afford them. Parliamentary government to bring us out of poverty. More VAT on goods and services. Church and state warring over population control. Abused migrant workers. Tax evasion. Selling political souls. Low productivity. Competing with our Asian neighbors, and many more. Aren’t these the issues of the day?

You probably don’t realize this but due to our Hyperwage discussions you already have the intellectual firepower to critically analyze the implications of the above issues and such intellectual gain remains with you in the long run. At least you now have a frame of mind, and you are aware of the economic and non-economic aspects of the issues. You know what questions to ask, even if you don’t know what are the answers.

The economy is 70% dependent on consumer spending but are we dampening or enhancing this spending activity with more VAT? Since the VAT is a dampener of the economic multiplier effect should we pursue this strategy? Why does Singapore has 3% VAT and Hong Kong has zero VAT?

Since consumer spending depends on purchasing power, are the current policies strengthening or destroying purchasing power?

What is the paradox of thrift? Is saving on a personal basis harmful or useful for the economy? Will saving for a rainy day a self-fulfilling prophecy that it actually brings on the rainy days?

Zero-sum game?
Is Hyperwage a zero-sum game? I don’t think so, and in fact, I have discussed the overall positive impact to the economy as a whole. Hyperwage is not a Utopian theory. All First World countries are hyperwage countries.

But if all Third World countries adopt Hyperwage then would be no poor countries to provide cheap labor?

Well, not everybody will be convinced of Hyperwage so those countries which refuse to leap to Hyperwage status will become our dumping ground for the dirty work. We will exploit their labor to maximize our profits.

What if all the countries adopt it? Well, by that time, we will be equals. The world will be better if we are all equal right? Is that vision too foreign for you? Hyperwage is a win-win solution. Don’t be afraid.

Economic and Non-economic analysis
Hyperwage is a folly, but let me give you a small advice. Don’t ever study economics without reading
Hyperwage Theory. Why? Because at least you will not be brainwashed completely by the traditional economics.

Furthermore, even if Hyperwage is wrong, the theory highlights the defects, inadequacies and the inequities of the current economic models. Even for awareness or awakening purposes only, Hyperwage achieves its goal.

Besides, the constant emphasis on the non-economic aspects of Hyperwage will guide the economists and policymakers that economic decisions are not necessarily correct just because they are academically, economics-wise correct. The non-economic analysis should also be considered.

By the way, one tip for scientists and technologists who want to study economics, marginal analysis is actually differential calculus, and try to equate the economic term “marginal” to the mathematical term “derivative”. And try to equate “average” with the mathematical term “delta y.”

Thus, marginal revenue=marginal cost is actually the point of tangency of the curve where the derivative is zero or dy/dx=0. Remember the maxima and minima analysis in differential calculus? That is exactly what maximum profit analysis is.

In my view, it is the fear by economics teachers to use mathematics that makes economics hard to understand. I believe that it is faster to teach economics if differential calculus was used to introduce marginal analysis, rather than the current method of “average cost vs. marginal cost.”

In fact, whenever I read an economics textbook today, I ignore the “average” and “marginal” explanations because they confuse me and I pity the student who has to distinguish average from marginal. I focus on the derivative of the curve and everything else falls into its own place.

Also one thing I noticed is that modeling in economics has extremely lagged that of other fields. Mathematics is always ahead of its time but economics is lagging far behind in using mathematics for its models.

Quality of life
Again, another non-monetary non-economic indicator is quality of life. People who are hungry have no regard for the garbage in the streets. They don’t care about pollution. They don’t care about ugly wires and transmission lines above the streets which Hong Kong and Singapore don’t have. They don’t care about the potholes in the streets, which again our rich neighbors don’t have. They don’t care about unlighted streets.

We have wrongly assumed that high income in First World countries will be eradicated by the high cost of living. Yet, that isn’t simply so.

There are no potholes in Singapore’s roads, that is a telling indicator of the quality of life they enjoy which we don’t despite our supposedly low-expense living. Lighted streets, well-paved roads, efficient postal system, high quality of products are simple things that First World countries take for granted but are contributors to their quality of life which we don’t enjoy and which don’t take into consideration when comparing our economic status with them.

Implementing Hyperwage
The implementation process needs its own study but as long as the public, the businessmen, and the government are synchronized that this is the way to go, then we can surely work out a less volatile transition period.

I have not given it much thought yet but here are my sketchy ideas.
1.Economists must believe that Hyperwage is the long term viable structural solution to poverty. That Nobel Prize for Hyperwage will certainly help. This is the biggest hurdle, and I doubt if we can hurdle this in a decade, if ever at all.

2.Political leaders with political will to implement Hyperwage

3.Businessmen who can see beyond the tip of their nose.

4.Legislated wages for stronger legal teeth

5.Staggered implementation maybe over five years on a constant wage basis. But remember the CK study where New Jersey took a single 18% step.

6.Safety net for the initially displaced workers during the enterprising streamlining stage. This may include interest-free loans, free skills training, entrepreneurial development

7.Support from World Bank, IMF, and the rest of the world governments

8.Educate the populace for hand holding

9.Elect me senator.

10.Elect me president.

Intellectual history
One flow-on benefit for me in conjuring up Hyperwage is that I have sort of created my own personal intellectual history.

I’d rather create intellectual history rather than memorize the intellectual history created by others.

I’m pretty sure there are millions out there who can memorize faster and memorize more than I could of the thoughts of other intellectuals.

That Hyperwage Theory is an original thought is without question but whether Hyperwage is a correct or wrong theory is the greatest question.

The scales of current modeling and economic thought are heavily weighted against the plausibility of the Hyperwage Theory.

On the other hand, assuming zero knowledge in economics, if we start from zero base and build up from there, Hyperwage is a self-consistent logical natural and direct theory. If Hyperwage came first, then Classical economics will not be accepted in the first place, and Keynesian economics will be considered incomplete.

I am therefore caught in a dilemma. Using the current state of economic thought, Hyperwage has got to be a folly.

Yet, if we build from zero base, Hyperwage Theory is the only theory that can explain, and most of all remedy the poverty of nations. Indeed, in my opinion, Hyperwage Theory is the only possible economic theory that can explain and solve poverty.

As intellectual history, Hyperwage could be completely wrong but at least before you reject it, you have seen the thought process behind the theory. Thus, when you reject it you deliberately know what you are rejecting.

In general, the strength of the final decision also depends of what ideas you have rejected before the decision was finalized.

After all, it is highly improbable that Hyperwage is correct. Hyperwage Theory has got to be wrong.

Otherwise we will be forced to conclude that all the economists in the world are wrong and the Street Strategist is right. Unthinkable.

Yet, somehow, somebody must tell Third World economies that they are not slow moving caterpillars; rather, economic butterflies.

The Street Strategist is that person. Climbing the caterpillar pillar is not the solution; in fact, it is the opposite solution. The Third World must give themselves some thinking time, and act and pursue matters in preparation for the lepidoptera metamorphosis such as building their cocoons.

Consumatum est
Exactly 70 years after John Maynard Keynes destroyed Classical economics with this General Theory of Employment, Interest and Money, the Street Strategist supersedes Keynesian economics by focusing on the minimum wage and by dividing the science of economics into inflation-centric and purchasing power-centric theories.

The Hyperwage Theory could launch the Street Strategist as the world’s most infamous intellectual eunuch. In the same breath, the Hyperwage Theory could land the Street Strategist the fastest Nobel Prize in Economic Sciences in history.

You bet on the former, I’ll bet on the latter. No in-betweens. Indecisiveness is for the faint-hearted.

Yes, the Hyperwage Theory deserves a Nobel Prize but, no, it will never earn it. The members of the Nobel Prize Committee are the very same people that the Street Strategist accuses as lacking in original thought. The judges and the nominators are the brilliant economists whose economic theories, in my opinion, are the culprit of the perpetuation of Third World poverty.

The Nobel Prize Committee will have to oversee their own intellectual destruction just like Gorbachev did in breaking up the USSR.

I have come to the conclusion that the reason economics failed to solve our problems is not that the people are out of touch with economic theory but that economics is out of touch with the people.

I have come to the conclusion that the reason I have been confused by economics is not that I couldn’t understand economics but that economics cannot be understood.

I have come to the conclusion that the reason I couldn’t understand economics is not that I wasn’t right but that the science of economics, as we currently know it, is wrong.
Consumatum est.

- end of the series -
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Table of Contents

Part 2
Part 3
Part 4
Part 5
Part 6
Part 7
Part 8
Part 9
Part 10

Part 12
Part 13
Part 14
Part 15
Part 16
Part 17
Part 18
Part 19
Part 20

Part 22
Part 23
Part 24
Part 25
Part 26
Part 27
Part 28
Part 29
Part 30
Part 32
Part 33

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The Misadventures of the Street Strategist Vol 1 to 13

1 comment:

Anonymous said...

Brilliant!!! The only problem is how to apply it. Haha!!! Maybe the theory could be tested on a small closed town just to show to people that it's doable. =)