Pasuk Phongpaichit, pretender of economics | 22.12.05
Although there’s no shortage of quacks to ridicule in Thailand’s so-called academia, I’d always considered Thirayuth Boonmi the most laughably bogus of them all. Now, thanks to her paper titled “Corruption, Governance and Globalisation: Lessons from the New Thailand”, Pasuk Phongpaichit has proven once again the old Thai adage “above the sky, still more sky” (“เหนือฟ้ายังมีฟ้า”). Only in this case, it would be more apt to replace “above” with “beneath” and “sky” with “scum”. Not something I’d strive for myself, but a remarkable feat nonetheless.
An economics professor at Chulalongkorn Univeristy, Khun Pasuk is not a household name among Thais like Khun Thirayuth, but is well-known among non-Thais thanks largely to the book Thaksin: The Business of Politics in Thailand, which she wrote with her husband Chris Baker. It has been cited by The Economist and described in an AP report as “Thailand’s literary ‘Fahrenheit 9/11’” (yes, that’s supposed to be a compliment). She has also written opinion pieces for the Asian Wall Street Journal and the Far Eastern Economic Review. Two weeks ago her sound bite was played in a Voice of America story about the Sondhi affair and her assertions made up roughly half of the Bangkok Post’s lead story on December 8. Needless to say, she is a Thaksin critic.
That is, however, not why I am picking on her. Thaksin detractors are as numerous as complete idiots in Thailand’s alleged academia (not to imply any causality, although the correlation is undeniable). One doesn’t have to be a Thaksin supporter to be appalled when Khun Pasuk labeled both Prime Minister Thaksin Shinawatra and Venezuelan President Hugo Chàvez as “neo-liberal populist”, thus rendering absurd an already dubious term. Still even in that case, I’d readily admit that her sheer ignorance, stunning though it was, put the professor right among her Thai peers and not beyond them. Call it the inanity defense. Akin to the “just your average Jewish genius” put-down, only in reverse.
Rather, it is the least politicized part of her politically-charged corruption paper that drove me over the edge. Like Einstein, I believe that politics is temporary, whereas an equation is forever. Khun Pasuk desecrates the equation form with her tacky fakery:
Rent-Seeking and Politics
Another simple formula may help push the analysis a bit further:
V = A + B - K.
Here V is the total rent or final net corruption revenue. It is made up of two sorts of income, A and B, less the costs incurred, K.
Of the income, A is a kind of “corruption tax”, which politicians and bureaucrats collect by taking petty commission fees, padding expenditure budgets, skimming expenses, and so on. This is simple theft, and very familiar.
The second type, B, is more complex. This is the corruption or “rent” which politicians and their friends earn from businesses that are able to charge high prices through creation of a favourable political environment. Some of these are illegal businesses, like oil-smuggling or prostitution. Some are businesses which have been granted monopolies, such as mining or liquor concessions. Some are just businesses which have been given privileged or favourable treatment. They may include transnational corporations based in Europe, North America or Japan.
Thus, suppose a company acquires a licence to operate a mobile phone system. Suppose there are so few such licences that the companies conspire to charge monthly fees higher than almost anywhere else in the world. Then that company might make such high profits that its owner, like Thaksin, becomes a multi-billionaire in five years.
K represents the costs of rent-seeking or corruption. This also has two parts. First, there are the costs of getting caught. Under a democratic system of government with a judicial system, corruption has costs. Corrupt politicians might get caught, tried, fined or jailed. They might be barred from politics for a certain number of years. Second, they might lose office and face social derision. They might fail at the next poll and thus lose the benefits of the “externalities” attached to political office.
Net corruption income equals, roughly speaking, commission fees plus monopoly profits less costs. Once in power, political parties will try to maximise their corruption revenue by increasing the amount of A and B. They will also do several things to ensure that K is minimised. They will try to control the judiciary and suppress sources of opposition such as the media, opposition parties, and activist elements in civil society, as well as trying to redefine how corruption is perceived.
From the very first glance, Khun Pasuk’s “formula” is strikingly trivial. V = A + B – K isn’t much different from my net winnings from Wednesday night pokers = my total takings – my total losses, only less practical. My equation at least has a scope (myself) and a time span (from my first Wednesday night poker to the present). Even assuming similar parameters for her equation, what would anyone get from computing Khun Pasuk’s “net corruption revenue”? Bragging rights may induce some casual poker players keep records, but a corrupt official has nothing to gain and everything to lose from keeping track of his exploits. (The official and the investigator alike would be far better off estimating his current net worth and leave cataloging and summing inflation-adjusted corruption proceeds to the geniuses in the Thai academia.) Such a calculation wouldn’t yield the cost of corruption to the society, either. The crook’s gain is not equal to the society’s loss1, and the former’s cost (K, more on which later) certainly does not translate into the latter’s benefit. Would computing V serve as a prop for an economic illiterate pretending to do economics? Perhaps, but even Khun Pasuk herself didn’t do that.
She couldn’t have. Khun Pasuk defined her K as potential cost of corruption, using “might” four times. Yet one needs actual cost to subtract from gross income and arrive at net income. Otherwise, in my poker example all the actual gains would have been cancelled out by the potential losses. True, for a future contingency that is likely to happen, one can and should set aside a reserve for it in accordance with conservative accounting principles. But corrupt officials obviously don’t think adverse outcomes are likely (and probably don’t adhere to conservative accounting principles anyway). If they did, then their net corruption income would be negative according to Khun Pasuk’s equation. That would be almost as absurd as Khun Pusuk’s positive contribution to the discipline of economics.
Note that because of the way Khun Pasuk set up this problem (summing gains from two types of corruption), we’re talking here about ex post facto accounting and not a priori evaluation. An equation for the latter would in fact be far more informative — and potential troubles for the would-be corrupter would indeed be a real and important factor — but it would involve at least two multiplications. And if that isn’t enough to scare off Khun Pasuk and her fans already, it would also assume some basic understanding of economics, i.e. common sense.
As an unpublished non-professor with no advanced degree, here’s my off-the-cuff attempt to capture the calculation that one makes, consciously or not, when faced with a corruption opportunity:
Ye = (1-p)X – p(S+PV) – M
Where:
Ye is the expected net benefit of this particular instance of corruption to the would-be corrupter;
p is the probability of his getting convicted for the corruption (ranging from 0 to 1);
X is the corruption payoff to him (which I assume will be seized in case of conviction);
S is the sanctioned penalties in case of conviction, such as a prison sentence or a fine in excess of the payoff that has already been assumed to be seized back. One way to put a money value on a jail term is to ask how much the convict would pay in order not to serve it;
PV is the value of the would-be corrupter’s current position, which I assume he must abandon if convicted of corruption. This is equal to the present value of all the pays and perks and estimated benefits for other corruption opportunities for the rest of his expected tenure;
M is the moral cost of corruption, i.e. the guilt and anxiety that the financial benefits must outweigh. It is a function of the would-be corrupter’s moral value, risk aversion (or risk addiction), and the risk and potential penalties involved in this corruption.
This quick and dirty equation can tell us not only about the main components of a corruption decision, but also other factors implicitly included in those five variables. For example, a bigger salary for an official will have a negative impact on corruption (lower Ye) as he has more to lose (higher PV) and presumably puts a greater value on integrity (higher M) vis-à-vis money. The last part is not pipe dream, but a simple and rational utility maximization given normal indifference curves for moral and financial well-being. Now maybe if I can come up with an equation for that, I’ll be able to do something neat using multivariable calculus…
SLAP! Sorry, I got carried away. But that is precisely the reason for all these mathematical equations and technical jargons in economics: they’re the raw materials and catalysts for the intellectual chain reaction that makes the discipline. Of course, to economic illiterates, all this is just gibberish. Their loss, but I can at least respect our different preferences. What I disdain, however, is the fraudulent illiterates who use equations and jargons to shock and awe other illiterates into thinking them savants. Khun Pasuk is one such phony.
And her use of jargons are, implausibly, even phonier than her equation. When Khun Pasuk said one potential cost of corruption to the corrupt is an election defeat and hence the loss of “the benefits of the ‘externalities’ attached to political office”, it isn’t clear to me whether she used the word to mean the official’s perks or prestige or future graft opportunities or all of them. But whichever it is, she totally misunderstood this fundamental economic concept.
An externality is a positive or negative impact of an action on a third party that the actor, as a selfishly rational being, does not take into account. Where there is an externality, a market failure is likely: positive externalities are underproduced because those who enjoy them do not pay for them, whereas negative externalities are overproduced because those who suffer from them are not compensated. An example of the latter: some unknown person within wind-blowing distance from where I live likes to make bonfires whose acrid fume smothers entire neighborhoods. Whether the purpose is amusement or low-tech waste management, the fire starter obviously figures the benefits of achieving that purpose outweighs the costs of the matches, the fuel, and enduring the toxic smoke himself. The rest of us, on the other hand, are outraged at suffering the airborne cost of the bonfire for no benefits whatsoever. Both are right, but one party runs an increasing risk of being pushed into the bonfire he created by the other. The solution to this is to internalize our costs to him and his benefits to us. For instance, if we can get the guy to agree (perhaps by kidnapping his family) to pay each one of us 500 baht for each hour of air-polluting, then he will make his bonfire only when its benefits exceed the cost of the match, the fuel, and paying 3000 people 500 baht each. So next time he’s out thanking the fire god for helping him twice to win the national lottery, we’ll be safely sheltered in the local mall. Everybody’s happy.
Except for Khun Pasuk’s students, who should realize by now that their professor is a total fake. She not only misused the word, but did so in a sentence that would be a perfect example of the opposite. The officials she was describing benefit from their “externalities” and take them into consideration when making their decisions. That’s as external as… well, as Hugo Chàvez is “neo-liberal”.
In case anyone’s thinking the good professor can weasel out of this by citing her quotation marks, that itself was another abuse. She was not quoting anyone. A Thai official is no more likely to have heard the word than Khun Pasuk’s students are to have learned real economics from her. (I, for one, don’t even know the Thai word for “externality”.) Instead, she used the quotation marks simply as an ever-popular “wink” at the reader. Like many a sophomoric writer before her, she winked not because the usage was ironic (it wasn’t to her), but because she found it cute or cool or creative. It was in that general spirit that my erstwhile French landlady, with a contented expression that mothers wear when using their children’s slangs, asked me whether I exercised my “abdo” and pointed, for the benefits of this clueless foreigner, at her biceps. Embarrassing, but at least she only mistook one group of muscles for another, not completely opposite things like, say, bikram and the X-games. And she certainly did not claim to be a physiologist.
If a supposed economist can be so hopelessly ignorant about a simple economic concept like externality, can she really understand ones that are two notches more complicated (though still ECON 101) like rent and rent seeking, which feature prominently in her paper? I don’t have time to explain here, but you should be able to guess the answer by now.
You may attempt to answer, too, why such an imposter, whose fakeries are readily and abundantly available in English, continues to be treated as a serious source of facts and polemics in the international media? What does that say about those hardened international correspondents and their worldly-wise editors? And what of the nameless other charlatans, who are simply referred to emblematically as “academics” in countless reports and op-eds? By my reckoning, Khun Pasuk is the queen of quacks for the moment. But remember, beneath the scum, still more scum.
Footnotes
1 If we think of corruption as an illegal excise tax, then in each case, the corruption gain plus deadweight loss is equal to the cost to the public plus the cost to the producer.
11:17 ▪ politics
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- JW 23.12.05
Tom
On the matter of Pasuk’s opinion of Thaksin, you might like what Pasuk had to say in a paper in 2001:
The international press got the event almost wholly wrong. More on the basis of hope than foresight, they expected the incumbent Democrats to win the election. Again more on the basis of hope than foresight, they willed the Constitutional Court to throw out the new premier. And they loaded Thaksin with the new labels of political demonization: populist, nationalist, cronyist.
We think the elevation of Thaksin Shinawatra as PM is truly a ‘first’, a change. But we don’t think the crude labels tell us much, except about the prejudices of the press.
Pot… Kettle… Black… Perhaps, Pasuk should think about the use of such labels instead of following the international press.
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- Naphat 23.12.05
Tom, jai yen na krub - I don’t like to see you bent out of shape needlessly. Consider my comments below:
1. The Formula
My understanding is that formula was presented as a shorthand, to reflect the general logic of that part of the paper.
Tom asks, “what would anyone get from computing Khun Pasuk’s ‘net corruption revenue’?” My answer is that it’s not the author’s intention for you to plug in numbers and compute the revenue. More likely it’s like a way to illustrate a concept, rather than to quantify with real numbers. For the later, I think we need some formula like yours.
So, yes, her formula can be called high-level I think it has done its job in the context of the paper.
Note: I’m not surprised you found the paper to be “politically charged”. Both Pasuk and Khan mainly do research in the field of political economy, which seeks to understand “how political institutions and the political environment influence market behavior.” I would expect it to be less reliant on formulas than mainstream economics.
Have a read through the book cited by Ajarn Pasuk, Rents, Rent-Seeking and Economic Development: Theory and Evidence in Asia …
2. The Jargon
Tom says:
When Khun Pasuk said one potential cost of corruption to the corrupt is an election defeat and hence the loss of “the benefits of the ‘externalities’ attached to political office”, it isn’t clear to me whether she used the word to mean the official’s perks or prestige or future graft opportunities or all of them. But whichever it is, she totally misunderstood this fundamental economic concept.
First I think we have to examine Ajarn Pasuk’s use of quotation marks around externality. Taken in context and with the deliberate punctuation with quotation marks, what sense of externality was meant?
Tom realised this too later on in the post:
In case anyone’s thinking the good professor can weasel out of this by citing her quotation marks, that itself was another abuse. She was not quoting anyone… Instead, she used the quotation marks simply as an ever-popular “wink” at the reader. Like many a sophomoric writer before her, she winked not because the usage was ironic (it wasn’t to her), but because she found it cute or cool or creative.
From the MLA Handbook for Writers of Research Papers ( caveat lector : I got a friend to quote this to me via IM)
[One can] place quotation marks around a word or phrase given in a special sense or purposefully misused
In the context of an economics paper, the least likely “special sense” of the work is the usual economic jargon sense of the word which Tom has eloquently explained and then illuminated with his very amusing anecdote.
So I don’t think Ajarn Pasuk was equating the benefits of graft in office as an externality in the economic sense. More likely her usage here colloquial, to denote that profit from graft is an unexpected benefit of holding public office. The conclusion that Tom takes that Ajarn Pasuk is clueless about externality as an economic concept is a bit of an over-reach.
When Tom says (my emphasis) “Khun Pasuk desecrates the equation form with her tacky fakery,” I would not fault him for misunderstanding the implicitly religious meaning of the word.
I’d like to see you to tackle the bigger points the paper seems to be advocating. An interesting one is that her contention that “popular movements are crucial in combatting corruption” and the fact that the Thaksin government is working hard to weaken the movements.
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- Tom Vamvanij 23.12.05
Naphat:
My understanding is that formula was presented as a shorthand, to reflect the general logic of that part of the paper.
A shorthand? It’s more like a prop. Khun Pasuk’s fuzzy thinking is best expressed with words, if at all. But she probably thought, quite correctly, that it wouldn’t be like a real economic paper without an equation. So she threw one in there and gaudily said it “may help push the analysis a bit further”. Not surprisingly, it did no such thing.
Tom asks, “what would anyone get from computing Khun Pasuk’s ‘net corruption revenue’?” My answer is that it’s not the author’s intention for you to plug in numbers and compute the revenue. More likely it’s like a way to illustrate a concept, rather than to quantify with real numbers. For the later, I think we need some formula like yours.
Au contraire. It would be at least as difficult to plug numbers into my equation as Khun Pasuk’s fake one. But if somehow one manages to do that, the numbers will add up, because it is, if nothing else, an equation. Hers is not. The two sides simply aren’t equal.
Even if it were a real equation, it still wouldn’t yield any insights into corruption any more than my poker equation does so about poker. I like logic and concepts, too, Naphat. My equation (the corruption one) represents a relationship that can be used as a starting point for further analysis. Khun Pasuk’s inequation represents nothing, and that’s why it’s just tacky gimmick.
So I don’t think Ajarn Pasuk was equating the benefits of graft in office as an externality in the economic sense. More likely her usage here colloquial, to denote that profit from graft is an unexpected benefit of holding public office.
Externality is a highly technical word and thus has no colloquial sense (unlike, say, “capital”). Of course, there’s always a chance laymen may mistake it for “by-product” or “side benefit”. Now do you think Khun Pasuk misused the word purposely in her serious-looking paper to add to the laymen's confusion, or is she one of them?
PS Thanks for the MLA excerpt, but I disagree with it. That usage is not only confusing, but a cheap and easy way to set up a straw man. I’d like to see the entire entry about quotation marks if I may.
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- Kitjar Sukjaidee 30.12.05
I have to agree that Ajahn Pasuk is much more noticeable OUTSIDE Thailand. His works are considered good reading materials for Malaysians interested in contemporary Thailand.
I have always reccomended Ajahn Pasuk books as they are available in English, and suprisingly, in some editions also in Malay!
Anyway, สวัสดีปีใหม่ ขอจงมีควมสุควมเจริญ
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- Naphat 23.01.06
Here’s the MLA entry:
a. Place quotation marks around a word or phrase given in a special sense or purposefully misused. Example: Their “friend” brought about their downfall.
If introduced unnecessarily, this device can make writing heavy-handed. Quotation marks are not needed after so-called. Example: Their so-called friend brought about their downfall.
It’s from an older edition - I checked the newest (6th) edition at a bookstore and the entry remains intact, with an addition of a new example:
A silver dome contained the robot’s “brain”.
Tom, I still think you have no grounds at all for saying (and not to mention repeating) that Ajarn Pasuk is ignorant of “externality” as an economic concept. Reading from the context and punctuation, she clearly did not intend to use the technical meaning of the word.
I’m a bit disappointed that you would characterise Ajarn Pasuk as a “charlatan” on such little evidence (in your comment you link that word to this post). If you don’t like her ideas, I think you should rebut them headon, rather than just label them as “fuzzy” and take issue with a single word and a formula.
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- Tom Vamvanij 26.01.06
Naphat:
For a sentence like the MLA example to work, two conditions must prevail:
I The audience must understand the irony. No problem with “friend” and “downfall”, but consider this sentence:
Despite intense pressure for the defensive line, Brett Favre’s “stochastic” passes always found their targets.
Huh? Yeah, exactly. And externality is no less technical a concept than stochastic, it just looks less threatening.
II The quoted condition must be believed as true or presented as true by at least one party that the audience is aware of. And that party would normally be understood as a subject of mild or not-so-mild derision. In the MLA example, “they” may have mistaken the “friend” for a true one and are now laughed at. Or he might’ve advertised himself as one and is now scorned. Or people may have just wrongly assumed they are friends and are now debunked. Or some combination of these. But it wouldn’t do to have nobody recognize or even claim that they are as friends. That would be like saying “Capulet and his ‘friend’ Montague disapprove of the romance between their children.” Semantics is complicated enough without such outright nonsense, just as economics is already misunderstood enough without Khun Pasuk’s quackery. And please don’t blame the laymen, for none of them use the word “externalities” to mean “perks” with any currency. (And what if they did, would Khun Pasuk be mocking their ignorance? Luckily they don’t, so we in the know get to mock hers.)
Reading from the context and punctuation, she clearly did not intend to use the technical meaning of the word.
She did not use the word correctly, that much is crystal-clear. Much more dubious, however, is your contention, citing the context and the punctuation, that the misusage was international.
First, the context is the basis of my argument, not yours. Only thanks to the context can we guess what she was trying to say and know that whatever it may be, it is certainly no externalities. You can’t claim the very existence of an error as evidence that the error is deliberate and thus not really one. And you are using this flattering fallacy to defend a Thai “academic” of all people! (Note the purposeful misusage.)
But what are the quotation marks for then? In order to explain this, let us look again at the MLA prescription (many thanks for quoting it). Before the “purposefully misused” is an altogether different case of “special sense”. That’s what I referred to as a “wink” in my original post, complete with the self-referencing quotation marks. My nerdish quip in college — “my test score is ‘study-inelastic’” — would qualify as such an instance. Such a usage is uncommon and humorous but not wrong, and indeed cannot be if it is to be humorous as opposed to ridiculous. Although I would rather not use quotation marks in this case, many would. Some like the “here comes the punch line” quote so much that they add to their arsenal the “here is one jargon I know” quote, which is the literary equivalent of my French landlady’s winking at the word “abdo”. But whether it is the funny or savvy effect that one is aiming for, it falls utterly apart when the word is so badly misused, as in the cases of both the French lady’s “abdo” and Khun Pasuk’s “externality”
If you don’t like her ideas, I think you should rebut them headon, rather than just label them as “fuzzy” and take issue with a single word and a formula.
Khun Pasuk devoted a whole section, consisting of six paragraphs, to her “formula”. Shouldn’t it count as one of her “ideas”? Well, if that doesn’t quite reach the standards of an idea, how about “fuzzy thinking”? That was the phrase I used comment no. 3 to mean precisely what she was trying awkwardly to translate into pseudo-mathematics. Of course, other parts of the paper may be just as bad or even worse, but I didn’t really read them and wasn’t talking about them. Between this “Rent-Seeking and Politics” section and the “Thailand under Thaksin a regional and international perspective” paper (in which she labels Hugo Chàvez “neo-liberal”), I’ve wasted enough time rebutting such an obvious fraud.
You may think I am overreacting. (To the math and externality matters, that is, as I fail to see how one can overreact to the Chàvez-as-neoliberal theory.) To that, I can only say we all have our sensitive triggers. I truly meant it when I said this in the original post:
Rather, it is the least politicized part of her politically-charged corruption paper that drove me over the edge. Like Einstein, I believe that politics is temporary, whereas an equation is forever. Khun Pasuk desecrates the equation form with her tacky fakery:
It’s not about politics, if that’s what you meant when you said “if you don’t like her ideas”. I despise fakers. And the more they try to assume the air of respectability through tawdry and phony means, the more fake they are and the more I despise them.
I generally respect your reasoned dissent on this blog, Naphat, but I am afraid your defense of Khun Pasuk here is a lost cause.
PS By the way, if the question of “externality” is still unsettled to you, there are also her misuses of the terms “rent” and “rent-seeking” to pick apart. No pesky quotation marks this time.
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- Naphat 27.01.06
I guess we have to agree to disagree on the whether it’s valid to call Ajarn Pasuk a charlatan/faker. While I don’t agree completely with her on all areas, I’m still interested in her work, esp. studies she did on the informal economy of Thailand.
It’s not about politics, if that’s what you meant when you said “if you don’t like her ideas”.
Don’t take it the wrong way… I’m not talking about personal partisan views here. The “ideas” I referred to are the one she presents after the “Rent-Seeking and Politics” section we discussed.
PS: You may want to read more about neo-liberal populism/neopopulism here and here .
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- JW 28.01.06
Naphat & Tom:
Apologies Tom for going slightly off-topic, but as Naphat links to an article talking about neo-liberalism and the Washington Consensus reminded me an excellent article I read recently in the New Yorker
Neoliberalism failed in Bolivia because a macroeconomic checklist is not enough to make an economy work. Incorporating a new business in Bolivia, for instance, takes fifty-nine days, entails fifteen separate procedures, and costs twice as much as the average person earns in a year. So, according to a recent World Bank study, most of Bolivia’s businesses remain “informal,” which means that they have no legal protection, and limited access to credit markets. Corruption is rampant—a survey in 2000 found that it was a greater problem in Bolivia than in about ninety-five per cent of other countries surveyed. And the state bureaucracy has been more interested in patronage and clientelism than in good policy.
Even if Bolivia got the big picture right, it got the details all wrong. And it’s increasingly clear that when it comes to development God really is in the details. A country’s history, institutions, and power structures have a profound impact on whether reform can work.
(via Marginal Revolution)