Nobel Prize winner backs subsidy for the indigents

A visiting Nobel Prize winner in Manila on Tuesday cited the need for developing economies to increase subsidy for the poor, saying economic growth is not enough to lift them out of poverty.

“It is slow and inefficient to leave poverty relief to growth, particularly, since agriculture income seldom grows nearly as fast as urban income. Subsidies can speed the process,” Professor James Mirrlees said during the Distinguished Speakers Program at the Asian Development Bank headquarters in Ortigas.

Mirlees, a world-renowned economist, was awarded the Nobel Memorial Prize in Economic Science in 1996 for his contributions to the theory of incentives under asymmetric information. He is currently a Master at Morningside College of the Chinese University of Hong Kong and a distinguished Professor-at-Large at the same university.

The Philippines is one of the developing economies that have adopted the conditional cash transfer program, which provides subsidy to select individuals, but Mirlees said countries should learn how to distribute the job at less cost.

His suggestion is that countries should use local information that can be obtained cheaply in order to identify the individuals who need subsidy and devise forms of subsidy that automatically limit recipients.

He said local information can be obtained at the village level such as conducting an unemployment survey in the village. The size of the cash transfer can also be based on the state of the local economy.

Aside from cash transfers, Mirlees said there are strong cases for providing free healthcare, public education, low-cost housing or even low-quality grains such as rice.

He also suggested basic pension for the elderly, child allowances and agriculture subsidy for seeds or fertilizers.

Mirless, who discussed poverty and redistribution in emerging economies noted that at least a billion people in the world live below the poverty line of $500 a year as of 2005. Roderick T. dela Cruz, Manila Standard Today