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The Misadventures of the Street Strategist Vol 1 to 13
Hyperwage Theory Part 03
Hyperwage Theory Part 3
Chapter 3: Paradigms
“The secret of the Hyperwage Theory is that price modifies behavior. Its beauty is its elegant handling of non-economic issues.”
- Street Strategist
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.
I am going to incorporate a research think-thank to be called the Hyperwage Foundation to conduct statistical and econometric studies. This is probably with funding from the World Bank and the ADB so that, finally, their funds will be put to good use, instead of the aimless so-called anti-poverty strategy studies they have conducted over the last 50 years that resulted in worm-speed improvements.
I will also run for the next senatorial elections. All the security guards, domestic helpers, OFWs, janitors, sales clerks, and students will put me as the last candidate in their ballots. At least, they will vote for somebody who has actually spent time thinking about their modern-day slavery and who has a political platform, instead of mere acting personality, to offer to the voting public. Mine will be the last name in each ballot.
Here’s the outline of this series. Contrary to my usual cliff-hangers, in the Part 2 of this series, I immediately described the Hyperwage Theory.
Instead of a cliff-hanger, I opted for a jammer. I jammed the gears of your intellectual engines with a proposal that you would dismiss outright without further thinking.
Then, I will describe the paradigm or mindset that I used to arrive at a solution to the poverty of the Third World.
I will explain why I think the World Bank, Asian Development Bank, African Development Bank and other development banks, and all the Nobel Prize economists have failed for 50 years to come up with a solid strategy in solving Third World poverty.
Then, I will discuss the inadequacies of economic theories in solving Third World economic problems.
After that, I will discuss the beauty and strength of Hyperwage Theory, especially in the manner it addresses the non-economic issues which are left untouched the ordinary economic theory.
Then I will try to prove that Hyperwage Theory finds succor in the current theory of the firm, and other theories of microeconomics.
Next, I will prove that it is possible for Hyperwage to co-exist with current macroeconomic Keynesian theory.
Then finally, I will prepare a Question and Answer (Q&A) to directly answer your questions.
So, I ask you: Did your brain stop working immediately? Did the minimum wage of P20,000 (P769 daily) for domestic helpers - not sales clerks, mind you – trigger your automatic transmission-line fault relay into a trip-off? Did you instantly exclaim, “That’s baloney, that’s wishful thinking, that’s impossible?”
This is what I mean. The moment you tell yourself that it’s impossible, that means you tell your brain to stop working. You do not even attempt to think of the possible consequences. How do you know it’s impossible? Knee-jerk reaction? Academic brainwashing? Small-business-will-collapse bogey?
The most common reaction by economists is: “There will be hyperinflation!”
The rejoinder of the Street Strategist: “So what? Does that scenario paralyze your thinking process?
Why, what happens under hyperinflation? Have you really thought about it, or you’re just mouthing the inert textbooks and professors?”
Education vs. innocence
Contrast this: The Nobel Prize economists have a preset reply, therefore, they don’t have to think anymore. Due to their high education, for them, hyperinflation is terra incognita.
Remember that the Street Strategist is an aborted economist, therefore, he does not know what happens under hyperinflation.
For the Street Strategist, it is an economic twilight zone where his intellectual innocence does little to remind him he is committing intellectual hara-kiri.
Don’t worry, we will dwell on this later. Suffice it to say, the Street Strategist found heaven for the Hyperwage Theory in the twilight zone of economics.
In my book Strategy Myopia, I wrote an article The Metamorpher, which exemplifies my propensity for thinking along the lines of metamorphosis. Pursuing along the same wavelength I would like to invite you to keep an open mind to the Hyperwage Theory.
In effect, what I’m saying is that we are like caterpillars in the caterpillar world in the book Hope for the Flowers. Whatever we do, as long as we think of ourselves as caterpillars we will never achieve our destiny which is to become butterflies. In turn, butterflies are the hope for the flowers to bloom.
Pursuing the analogy economically, as long as we don’t make that quantum leap to hyperwage levels, whatever we do will be useless, a mere maintenance of the status quo.
This is the reason why for the last hundred years or so, the poor countries became poorer in a negative downward spiral while the rich countries became richer is a positive upward spiral. But that’s jumping the gun. I’ll discuss all these issues later.
You might think of the Hyperwage Theory as crank economics, but keep an open mind until after I have completed my exposition.
Some of you will be asking for empirical data, I’ll attempt to provide some along the way.
In addition to the metamorphosis paradigm, I believe that Hyperwage Theory enters into the twilight zone of economics and it is probable that in this zone the normal laws of economics will be violated, or at least be suspended in animation giving space to the possibility that a theory like Hyperwage can exist. What I’m saying is, do not rule out Hyperwage just because it does not fit your everyday modern economic theory.
Newton vs. Einstein
In addition to the metamorphosis and twilight zone paradigms, I used the Einsteinian relativistic mindset.
Does Hyperwage call for the complete disposal of current modern economic theory? No.
Let me make an analogy. Newton was the greatest scientist of the human race. He deduced the three laws of motion. He also deduced the laws of planetary motion. He invented the theory of universal gravitation. He even invented calculus independently of Leibniz. Newtonian mechanics is valid for speeds in our ordinary working lives.
But in his lifetime did Newton ever create equations that accounted for motions at the speed of light? He didn’t.
During the time of Newton, every scientist believed that his laws of motion are applicable at any speed. It would have been unthinkable for Newton to think that there would be a different set of equations at tachyon (light) speeds.
Today, every school child knows that Newton’s laws break down at tachyon speeds, and that Einstein’s equations of relativistic mechanics take over.
Anyway, to answer the question, yes, the current principles of economics and Hyperwage theory can co-exist because they will have different sets of equations and curves to define the economic variables in their respective domains and ranges.
Modern economic theory may be likened to Newtonian mechanics, while the Hyperwage Theory may be likened to Einsteinian mechanics. Both can co-exist although at different planes. As I said, as I’m going to prove later on, Hyperwage is applicable only to Third World countries, the current theories are applicable to First World countries.
Marxist vs. capitalist
During one radio show, some leaders of the militant labor and cause-oriented groups reacted that they liked the Hyperwage Theory but that their asking price for labor is only for an increase of P125 daily.
Many reacted to say that I’m a communist or a Marxist. That’s completely wrong. In fact, I am a capitalist, and I base my pricing of labor from a capitalistic point of view.
The Marxists merely pluck out a figure from some NEDA statistical table without thinking of its effect to the entire economy or to the world economy.
On the other hand, I use market-based figures. That’s why our figures are completely different and disparate. In fact, I started from looking at the world economy then all the way to the household economy.
Survival vs. profitability
Yes, I’m not kidding. I started my thinking process from a macroeconomics viewpoint, on a world-wide basis until I ended up with the domestic helper’s wages.
The Hyperwage Theory was conceived from a completely capitalistic approach. The thinking process was completely different.
The militants are demanding for their wages for their survival, and despite their pro-poor sentiments, they have excluded the domestic helpers. That’s not really pro-poor is it? The businessmen, the wage boards, the economics professors, the government policy makers, and even including the president are working from the bottom up. They only want to solve the economic issues.
On the other hand, I was analyzing the world economy and arrived at a conclusion that for the profitability of the entire country, not merely survival of the laborers, we must give them the minimum wage that they deserve, and I am forced by my theory to include domestic helpers. I am analyzing this top down. I wanted to solve not only the economic issues but also the non-economic issues.
Expense-side vs. revenue-side
The difference in perspective is tremendous. They are thinking about the survival of labor, hence, they are demanding wages for labor’s survival. I am thinking about the profitability for the country’s economy, hence, I am giving labor wages that it deserves for the country’s profitability.
The businessmen, the economists, and the government are treating labor as an expense. I am treating an enriched labor as revenue. And yet, that’s not all. The Hyperwage Theory brings on hundreds of flow-on effects.
Again, that’s jumping the gun. Allow me to lay the predicate first.
First train vs. third train
In addition to the butterfly mind-set, I invite you to think of the train mindset. The Third World countries are riding on the Third Train on Track 3. The First World countries are on the First Train on Track 1.
Whatever the people on the Third Train will do, they will always be in Track 3. They will never go to Track 1. What is needed to move to Track 1?
The Hyperwage Theory is the quantum jump needed by the Third Train to jump to Track 1.
And there’s one more big problem. The people on the Third Train are using the Rules of Track 1 in the hope that they will jump from Track 3 to Track 1. This is a completely wasteful experiment.
What I’m saying is the Third World countries have been using only one set of economic theory but that theory is good only for the First World countries. Under the Hyperwage Theory, it is wrong to use First World economic theories to Third World countries. For one, First World economics is inflation-centric. The First World are afraid of inflation so much so that they want to control it.
Upward vs. downward spiral
One more thing about the train analogy. Track 3 is a downward negative spiral track. On the other hand, Track 1 is a positive upward spiral track. Therefore, Train 3 will always be going down while Train 1 will always be going up.
Come on, guys, you know that. Just a brief teaser: All the doctors on Train 3 are migrating to Train 1 as nurses. The quality of medical care in Train 1 can only go upward given this trend, while the on Train 3 it can only go down. Isn’t that proof enough that we are on the wrong set of tracks?
So now we approach Hyperwage with a different mindset. We are caterpillars who think we should be caterpillars forever when in fact we are butterflies.
We are Train 3 people on Track 3 but we refuse to entertain the possibility that we can be on Train 1 on Track 1. Why? Because our brains stop working. Our brains are the first casualty of the Hyperwage Theory.
Summa cum laude
“But they are a rich country while we are poor,” is a typical reaction to the Hyperwage Theory. “We cannot be like them.”
Think of yourself as a teacher, are you going to tell a student that he is a “natural born flunker” or a “natural born summa cum laude?” Can you imagine how absurd that is?
Take my case. It took ten years before I understood debit and credit. But when I finally did, I eventually invented the world’s fastest, most effective, most efficient way to learn debit and credit with perfect accuracy.
Anyway, in my mind, like any student, any poor country can become rich.
Apples vs. oranges
During one of my talks about Hyperwage, one of the panelists who happens to be a member of a Regional Tripartite Wage Board said: “Your theory is flawed. You keep on comparing our country to Japan, Hong Kong, USA or Singapore. But you cannot compare these countries. They are rich, they can afford to pay.”
Can we compare apples with oranges? Why can’t we? If we can transform matter into energy under Einstein’s E=mc2, there is no reason we cannot transform an orange into an apple, if needed.
Don’t make the mistake of turning off your brains. Better a wrong idea than no idea at all.
Economic vs. non-economic issues
What is an economic issue and how does it differ from a non-economic issue?
An economic issue is one solved or addressed by economic theory or economic equations. Other issues
Examples of economic issues or economic problems are inflation, monetary levels, unemployment, wages, purchasing power, and similar data.
Examples of non-economic problems are slow wheels of justice, underdeclaration of income, inefficiency, bureaucracy, migration, brain drain, corruption, population control, lack of computerization.
Why is it important to distinguish economic from non-economic issues? Because ordinary economic theories attempt to solve only economic issues. For example, how does economic theory solve the population explosion? There is no solution from them.
On the other hand, Hyperwage Theory addresses a large number of non-economic issues in addition to solving the economic ones. For example, Hyperwage addresses computerization, automation, population control, corruption, and brain drain in one single sweeping stroke.
It is this dual nature of Hyperwage that holds promise for Third World countries
If you are a computer programmer, you know the one-to-many, many-to-one, one-to-one, and many-to-many database relationships.
I have identified about 50 major problems of Third World countries. Under ordinary modern economics, each of these 50 problems will have 10 solutions each for a total of 500 solutions. How can the government pursue these without spreading itself thin?
That alone will give you an idea of why the government cannot solve our economic problems.
This is an example of a many-to-many relationship. Many solutions for many problems.
On the other hand, Hyperwage is a panacea of sorts. It can address all the 50 issues using only one solution: Domestic helpers should be included in the minimum wage coverage and at a level of P20,000 monthly.
This is an example of a one-to-many relationship. One solution for many problems. Can you imagine the elegance of the Hyperwage Theory? It is a one-to-many solution.
In this installment, I have shared with you the combination of paradigms that I used to structure my analysis and gedanken experiments in formulating the Hyperwage Theory.
Why did I do this? Because I want you to vicariously feel the sense of direct, logical, natural and elegant genesis of the Hyperwage Theory when one uses the insight and paradigms above.
If I did not think along the lines of butterfly metamorphosis, twilight zone violations, Einsteinian relativity, Marxist and capitalistic pricing, survival and profitability, expense and revenue, trains on different tracks, positive and negative spirals, summa cum laude and flunkers, apples and oranges, economic and non-economic, one-to-many, I would not have arrived at the Hyperwage Theory.
Whether or not, you will eventually agree with the Hyperwage Theory is secondary. However, I hope that you will engage yourself in this debate, vicariously, because I am sure you will never look at economics the same way again. I will have the pleasure of making your imaginations run wild.
And you know that’s a scarce commodity among policy-makers, businessmen and economists: imagination.
(Thads Bentulan, May 19, 2005)
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