sitting bull

Law and Economics Paper #3

Back in college, I remember watching a couple of documentaries about indigenous people and how they were driven out of the land that they had always occupied. To our forefathers, land was not something that could be owned. In a sense, land was classified according to function --- grounds for hunting, for washing laundry, milling rice, holding town meetings, etc. It was the westerners who brought the concept of “owning” land to our shores. Then ensued a long history of land grabbing, claiming and exploitation. It was then when we were made aware that land was something within the commerce of man. But that was not the only instance wherein we discovered something capable of appropriation. Intangibles such as stocks, copyrights, patents soon entered the realm of commerce. The concept of property is being revolutionized --- from corporeal phone lines made of copper wire and rubber to binary packets streaming through phone lines enabling Voice-Over-Internet-Protocol (VoIP).* If property rights can be asserted over something so… intangible (after all, the virtual world is composed of 1’s and 0’s), perhaps it’s only a matter of time when air too, can be within the commerce of man.

We have come a long way from defining property as something that could be grasped with one’s hands. Our laws are patterned with that in mind. In fact, more and more laws are being crafted to address increasing breakthroughs in technology that might further redefine property rights. In our haste to keep up with the changing times, I can’t help but wonder if we are slowly losing focus on the traditional meaning of property. It all began with the Regalian Doctrine. That was the rug pulled out from under our ancestors’ feet. It must have been refreshing to find out that land can be traded in exchange for food and clothing. But then again, it must have been a rude awakening to be told that the ground beneath your feet cannot be used to live off on without the express permission of the king. The laws that we copied from country A, B, C, etcetera don’t really address these problems. Thankfully, some legal luminaries thought up the IPRA and CARL but then again, despite these laws, justice is not always served on the deserving. Would the Hobbes or Coase theorems help?

Technology and economics may have a nexus. For example, the VoIP law’s aim is to encourage competition and improve telecommunications technology. Faced with such a policy, the hard neutral theorems would fit like a glove. For instance, although Globe was mandated to reach certain service levels, not applying the same policy to Sun Cellular could perhaps be described as an efficient solution which ultimately resulted in lower rates offered by competitor service providers.

Indigenous rights and efficiency or economics are hard to reconcile. It would be efficient and economic to award a tract of land to a rich landowner because he can cultivate it, employ more workers or put it to some profitable venture. Does justice lie in reimbursing the indigenous people the value of their land? There is more to this at stake than remuneration. Socio-political factors more often than not come into play. Even King Solomon’s seemingly fair solution of cutting the baby in half was merely a test. What is efficient or economic is always fair, but what is fair may not always be just.

*NOTE: The author is currently taking up the elective Law on Information and Technology

traversing boundaries

Law and Economics Paper #2

Is justice always the economic? Are laws made with efficiency in mind? These questions can be best answered by looking at the policy behind the law. What is right (i.e., what the law says is not wrong) may not always be what is efficient. Legislators craft laws with various intentions in mind, not always legitimate. Whatever intention might be behind the passage of a law, on paper, what always appears would be a reference to state policy, as enshrined in the Constitution. If the intention behind the law cannot be truly discerned, perhaps we need to examine the effect of the law. The obvious subject of scrutiny would be the courts and how courts apply the law.

Courts in the Philippines are courts of both law and equity. As for law, the courts dispense justice according to what the law says. Lady Justice is often depicted blindfolded, holding scales in one hand and a sword in the other. Equity on the other hand, if used apart from torts cases and application of penalties, would not be enough to interfere with the judgment of the court based on law, meaning, no matter how harsh the consequences, no judge in his right mind would rule for the party who values it the most, disregarding laws that are as good as etched on rock. In other words, “win-win” decisions (as in the case of Fortich v. Corona) are not favored if not based on law, even if such would be an equitable and efficient way of dispensing justice.

Due to the high cost of litigation, most disputes are resolved through out of court settlements or arbitrations. The Normative Coase theorem postulates that laws should be structured so as to remove the impediments to private agreements while the Normative Hobbes theorem suggests that the law should be structured so as to minimize the harm caused by failures in private agreements. Hobbes and Coase’s theorems are premised on the existence of private agreements, that both parties in dispute would try to agree on an equitable solution. These theorems are best suited for arbitration laws. It is through this medium that equity, instead of the hard and fast rule of law, can be applied in greater measure. With this in mind, it would be advisable for legislators to consider making economics the basis of laws. Incentives must be given to parties willing to bargain and give out correct private information without overreaching.

The creation of a law ensuring maximum benefit to both parties could prove to be quite a feat. In the last three readings assigned in class, the authors have intimated that law and economics is becoming a popular discipline or school of thought. Such optimistic view, however, cannot be applied to the Philippines yet. There is a need for more economists to traverse the boundaries between law and economics.

We are not neo-classicists

Law & Economics Paper #1


The world does not operate in a vacuum. Neither does the law. Various considerations come into play whenever one would try to explain what the law is and how it operates. Legal theories and ideologies analyzing the law from different perspectives abound. The two introductory readings assigned in class beg the question, what then is the nexus between law and economics?

It is obvious that laws are part and parcel of a country’s economic policy. If the President decides to meddle with tariffs, then her decision must be grounded on sound advice from economists, else, she and her cohorts will be in the poorhouse along with the rest of the country. The legislature could also direct the course of the country’s economy in formulating laws that would, for example, give incentives to manufacturers/producers of agricultural products. It is less perceptible, however, how economics could come into play in shaping legal thought or trends, especially in the Philippine setting.

The Philippine legal system can perhaps be summed up in the separation of powers doctrine. The legislature makes, the judiciary interprets, and the executive implements, the law. This seemingly clear-cut allocation of the powers of government is still subject to the first premise above, that the world does not operate in a vacuum. For instance, the oft-quoted legal maxim, Dura lex, sed lex, suggests that for laws to be effective, there must be no deviation from what the law says. The rigid application of the law, although ideal, is not always the rule. Consider the Manila Hotel case where the Supreme Court suddenly used national patrimony, evoking thoughts of a hundred years of struggle to regain the Filipino identity, in ruling for the losing bidder. One would wonder if the court really knew what it was doing. In Congress, it would also appear that the only thing related to economy would be how much money it would take for a bill to be passed and approved and how much this year’s pork barrel allocation would be. As for the implementation of the law, a P 100 bill would be enough to write off that MMDA ticket. For all the considerations behind each law, decision or implementation of the law, it would appear that economics takes the back seat.

The two readings submit that it might be possible to use principles of economics in shaping/analyzing legal thought. If laws do not operate in a vacuum, how must they be construed and more importantly, what approach must be used in ensuring that the laws achieve their ends? Economics is scientific in its application. In economics, certain conditions always give rise to certain results. Can this approach seriously be used in the Philippine legal setting where even an obvious interpretation of the law can be glossed over so glaringly? Is there a pattern in Philippine jurisprudence that can be explained away by principles in economics? Is it feasible for the judiciary to consider economics as a factor in its decisions? A negative answer might prove to be just a symptom of myopia.

SoaP Opera

“But it turned out when they said this movie was ‘shitty,’ they didn’t mean it ironically. They just thought it would be a piece of shit.”
-New Line marketing president Russell Swartz (from Dateline Hollywood)

Snakes on a Plane was marketed to be a crappy B movie, so crappy that it creates a following, so notorious that people would want to go to a movie theater, shell out some $s and see for themselves how crappy it could be. The very concept of the whole movie, from the crappy title to the crappy marketing strategy (or marketing strategy based on the crappiness of it all) ultimately did not spell out success in terms of revenues. If we were talking about fodder for sarcasm, then perhaps, the movie could be said to be a huge success.

Maybe the producers relied so much on the internet as a revolutionary form of media. The film itself created a strong following in terms of web content. Googling up “Snakes on a Plane” yielded 65,300,000 hits. Did the avant garde marketing successfully relegate “Snakes on a Plane” within the happy bounds of pop-culture? I guess so. But does that mean the New Line Cinema Executives can retire early and buy an island or two off the coast of Fiji? Hehe. I don't think so.

If you think about it, based on the premise of their marketing strategy, the ploy worked well, So well in fact, that maybe people started thinking that the movie was so crappy it wasn't worth spending $10 on. Looking at it another way, maybe it wouldn't have done so well were it not for the online publicity. In the end, what the producers achieved was just another topic for discussion. But then again, is it JUST another topic for discussion? Incorporating bloggers into their marketing strategy created an online macarena/ketchup song monster.

Look again at the figure above. 65 million hits!!! Try typing “Nacho Libre” in the search field and you'll get only 11 million results. Nacho Libre is a seriously funny movie, although it probably didn't gross as well as its producers hoped. What about “Austin Powers?” (who doesn't like Austin Powers?) Only 7.3 million hits.

Wow. That is brilliant marketing strategy. Perhaps if they venture into merchandise, they'd make a killing in sales.

asl?

'The internet is a vast and confusing place, where is a little girl to go?"- Major Motoko Kusanagi, Ghost in the Shell

The internet is a virtual world which transcends boundaries of culture, religion, countries and thought. It is a parallel universe where each transaction, each reality has its virtual counterpart. In this virtual sphere of existence, rules and and norms applicable to the material world may not necessarily be efficiently operationalized in online transactions or inter-relations.

Electronic commerce laws try to establish rules and norms to govern online transactions, but despite the attempt to create a virtual government, the long arm of the law cannot reach every nook and cranny in this infinite universe of 1s and 0s. The concept of government and its functions cannot easily be constituted in a realm where everything is virtual. Who will be governed, how will they be governed and most importantly, who will govern them? Personas over the internet are represented by a mere succession of numbers (IP addresses). These IP addresses can easily be masked and merely point to a general location. Any attempt to discover the identities behind IP addresses tread dangerously on the right to privacy. Existing as it does in the virtual sphere, there are no clear cut territorial lines delineating jurisdiction.

Take one of the 3 inherent powers of any sovereign --- taxation. In ordinary transactions, especially transactions involving services, the situs of the transaction is paramount. The tax situs is the place where the service is rendered. What is the "place" where service is rendered in purely internet-based transactions? Sections 23 of the e-commerce act and Section 33 of its implementing rules try to address this virtual dilemma by pointing to the originator/addressee's "place of business" or usual/habitual residence. But this again begs the question, "Which address?" "Places" in the internet are merely represented by numbers. These numbers are easily masked. Not all businesses have brick and mortar offices and a lot merely exist unregistered in virtual space. Another issue would be the source principle of taxation. How does one tax a resident German national who sells webpage templates through a website whose domain name is registered in Tanzania? If the BIR cannot even efficiently collect taxes in the real world, the possibility of taxing online transactions proves to be a herculean task.