New year's tears

Tsunami (photo courtesy of ThinkQuest)

Suboptimal riposte

Please, all you who appreciably want to donate to or to help the victims of the Tsunami, think twice. No, I'm not saying you should not participate. Your helps and donations are of course 'priceless' (or so you think). However, many, so many of the donations so far are suboptimal. People keep sending unprocessed food (raw materials) and nobody can cook over there! Even drinkable water is terribly scarce. The lists of volunteers keep expanding every minutes. But many of those who want to be sent are not the ones the victims need. They need paramedics. Not just anybody who in turns need to eat there too. If you have all the sympathy for Aceh's tsunami victims, and you have the urge to go there, make sure you can help, not to be helped. And those who want to donate, please donate money, so the centers whatever they are can use it to buy relevant goods: body-bags, disinfectants, medicine, biscuits, bottled water, etc. I agree with a friend: this requires a careful organization. And a quick, systematic one. Yes, military.

RIP: Susan Sontag

In the aftermath of the Tsunami, in the midst of my condolences to the people of Aceh and the surroundings, another one eulogy goes to Susan Sontag in New York. Unlike you, Dave, I am not happy about that.

Put back economics into Environmental Economics!

I was a little surprised today and last week to observe my students presentation on their environmental economics projects. ("Surprised" being a euphemism). Not a single group used economics to explain environmental policy recommendation. (Well there was one, and it was sadly irrelevant). Of course this is not entirely their fault. I felt guilty: I might have failed to teach them. Or, to make me feel better, I was silently blaming those who had supposedly taught them the basic microeconomics. Should really find out another way to deliver this course next time. One group dared to suggest zero pollution, while still implying the need of, well, growth! Others were not even suggesting anything: it's all about issues, newspaperic issues. I felt terribly, terribly guilty...

So in this other class, that was scheduled to be discussing sustainable development, I started with a pamphlet: "I'm an 'environmental economist', and I am going to talk today about 'environmental economics'. But first, forget about that first word in those two phrases. We here are learning economics. Later we are going to apply it to help solve the environmental problems". I went on talking about how I am more persuaded by Bjorn Lomborg instead of by the infamous doomsters, Club of Rome. How I agree more with Becker than with Posner regarding the Kyoto Protocol (by the way, the Becker-Posner Blog is getting better: in addition to their global warming debate, the recent one on disease and growth is noteworthy -- Becker being anti-Malthusian and Posner pro).

The challenge we in the field face these days is arguably not how to contribute alternative solutions to the environmental problems. But first of all, is to convince the general public that economics offers a way around them. And the difficulty lies in the fact that most of the economic approaches are simply... unpopular.

Tsunami next door

May they rest in peace.

Starbucks assumes my taste

I don't hate Starbucks like these people. In fact, I go to Starbucks quite often. But today I happened to notice: Starbucks assumes my (and maybe your) taste. I was ordering a small, black coffee, as usual. This waitress, she handed me instead a mug with ... hot water and black ... well, tea. Me complained. She goes: "Oh, sorry, Sir. So sorry. Let me make it up for you. I'll make you a ... cappuccino, alright?". WHAT? Why did she think I valued cappucino more than black, plain coffee? Of course I said no, I want BLACK coffee! (today they had Sumatran).

Bear with me -- more interesting one coming. There I was, sitting on a comfy couch reading my book. One subchapter done, and time for the next gulp of coffee. But, hey, what's that little thing moving around on my coffee? A suicidal fly! So, yes, I stood up for the second complaint of the day. This time, another waitress apologized. She goes: "Oh my good God! Please forgive us, Sir. I'll change your coffee..." (At the moment, I thought, she didn't need to apologize. The dead fly should). Anyway, she gave me another mug of coffee. Thanks God, it's black. Only that... "Here you are, Sir. As a guesture of our state of sorry, we give you a ... bigger mug... no extra charge"... Oh, my God! Did she think I ordered small coffee, because I couldn't afford the bigger one? Even worse, did she think I valued bigger mug of coffee higher than smaller one? (Now I think she should apologize!)

Both fiascos once again prove: most people confuse value with price. True, price should reflect value. But my valuation might be different from yours and therefore I might not think the price is right (for me), while you think so (for you). Disaster comes when you think the price is right for your valuation, and ... mine.

Chatuchak

Posted by Hello (photo courtesy of AsiaTravelTips)

...as you might wonder what it looked like...

Krung Thep

Hi, I'm blogging from an inn in Bangkok. Attended the annual forum of EADN -- a child organization of the GDN. We were discussing the current development issues and challenges in the East Asian region. The forum ended on Friday, but I extend my stay until tomorrow morning. A friend has been very generous to let me stay in his place yesterday. But today he has to go to Myanmar, so here I am updating you from this bed-and-breakfast place: yes, it is in that kind, but ironically, this is where I can get good internet connection (even in the hotel the forum was held, the connection sucks!). And, it's inexpensive. I pay only 550 bahts (that's 12 bucks) for one night plus another 100 bahts for a whole-day access to wifi-hotspot. Cool! (By the way, this place is recommended by Lonely Planet).

OK, what was it I wanted to write you again? Right, the EADN forum. But... I guess I change my mind. I'm more excited to talk about Bangkok, the Oriental City. I was expecting a city similar to Jakarta: busy, crowded, traffic jam every where. Well, it turned out very close to it, except that, Bangkok now has a very nice subway system that started to operate just recently. It is integrated with the older skyway train. This of course is a very big improvement to the city's problem of congested traffic everyday. However, to my surprise, not many people use that subway! A Thai friend of mine explained that people have not adjusted well with the new facility. In addition, for now it only serves limited routes. People still prefer the traditional road traffic. And that explains why the road is still chaotic. A stranger like me is probably one of the few people who can enjoy the nice subway. It's very clean and ... well, new. You don't even find posters or ads down there. Never mind stores or ... hobos. But maybe my friend is right: it takes time. I was wondering: in the next annual forum, I will probably see a very different subway... (if the subway were in Jakarta, you know exactly what I mean)

Another difference I notice between Bangkok and Jakarta is prices. To say it directly, it's cheaper here. I went to the famous weekend market, Chatuchak yesterday. It was awesome. You can find almost everything very cheap. Not only that, they imitate branded products massively. I saw an American female tourist bargaining over a fake Rolex watch. She got it for ... less than 50 dollars! (It might break after two weeks, but who cares?)

See it yourself. And don't you forget to try this.

So long, departure tax

(Sorry, can't find the link, this is a news from a high level official -- will update you later). The departure tax is going to be abolished (it takes 4 years to finalize, eh?). Good. But wait, rumor has it, application fee for passport will increase ... 5 times as much! So, those who travel frequently will be happy. Those who happen to travel only once in their lifetime will be sad. The former consist of, mainly, business people, academics, bureaucrats, etc. The latter, maids, low-wage workers, etc. See my point?

Becker-Posner Defense: Still Silly

So replies Becker, there are 3 options: 1) pre-emptive attack, 2) wait and retaliate, 3) accumulate information before decide. The most economic way today, says Becker, is the first one. Because, "deterrence is less powerful now as a tool against certain enemies than during the cold war when the adversary was a single major state..."

And Posner adds, "The case for preventive war must be debated on its merits rather than rejected outright on the ground that any war that is not defensive is aggressive and therefore "illegitimate.""

Again, Prof. Becker and Judge Posner: I can still use your arguments in favor of Iraqis and against Americans. Think about it. How would you define "irresponsible nations with powerful weapons"? What precludes it to be... the U.S., Professor? As for your assertion to merits: there you go. It has been going on forever, Judge.

Stiglitz vs Stiglitz

The Indonesian Economists Association (ISEI -- No, they don't have a website!) and Economica, a student-run organization at the Department of Economics University of Indonesia (I recall they HAD a website -- but it's lost in the cyberspace, no?) are hosting a public lecture featuring the Nobel laureate Joseph Stiglitz. Mind you, "public" here means you have to pay Rp 5 millions for the ticket. That's $500. Man, I'd rather use that money for more useful activities like this, this, or this.

Yet, I might be part of the conspiracy now. The committee has asked me to become a jury for an essay competition. The idea is, the first and second winner will get free ticket to the Stiglitz lecture. They have to write a good essay exploring Stiglitz's economics views on development. I repeat: on development. That means, he's going to talk again about the increasingly boring stuff of globalization (for better or worse). So yes, it's about Stiglitz the anti-IMF, not about Stiglitz the respectable risk-and-information economist. It seems to me, people take Stiglitz too much for a somewhat incorrect cause. Just because he won the Nobel prize for economics, people think he is good in everything. Well, I think he is good but he is certainly not the best, when it comes to politics. Or put it this way: when I need to learn about politics (or, even, development), I would not read Stiglitz for reference. As for a econ-popularizer, I'd rather read Krugman.

Poor Stiglitz. As I always say in my microeconomics class: read Stiglitz papers in JET (on risk and uncertainty), QJE (on imperfect information), and AER (on monopoly and the rate of extraction of exhaustible resources) -- each requires subscription. THEN, go ahead read the entertaining "Globalization and Its Discontents" or "Roaring Nineties". Then you can see his split personality: smart economist and somewhat-lousy political analyst.

So yes, Stiglitz is kind of overrated. But he seems to enjoy it. Well, At least I hope he will clarify what his Nobel was for.

A note on the essay competition. These 5 finalist essays: most of them mistake Stiglitz. Some even seem to think Stiglitz won the Nobel for his war against the World Bank, IMF, and the WTO. (Oh, by the way, I found one plagiarist. Rather than grant him a $500-worth ticket, I would suggest to fine him $1000 for the cheat).

Becker's debut: not cool

I'm always admirer of Gary Becker. But his justification on "preventive" war sounds silly -- the silliest "economics" I have ever read. If you say it's OK to attack Iraq for its "intention" to harm America, why shouldn't that apply the other way around, too? You watched Minority Report too much, eh?

Kids bricolage to economics

I have these 3 nieces and 2 nephews at home. They are cute and they fight all the time. One day I was going to take shower. Pachi saw me and asked me to lift her up. So I invented this new tool to lift kids around. I used my towel (don't worry, it's clean) as a hammock-like seat; my hands being the trees. She sat in and I carried her around in the house for 3 minutes. Well, not really 3 minutes, because Aisya, Fadhl, and Figo started to demand their rights, too (the 1 year old Dzakira had no idea what was going on). That morning I ended up carrying 4 kids around, one at a time. Muscle ached a little, arrived office in rush. Later when I came home I was welcomed by this cute riot once again.

So, it's time for economics. I gave them 5 pieces of card-sized paper each. Each paper is worth one ride with me, in the morning. For night ride, they should return 2 papers. I slowly explained them the idea. Aisya dan Pachi got it straight. Fadhl and Figo, the youngers had hard time, but slowly understood by way of example. I added, they should live with the 5 papers they each have for one week.

The next morning, Pachi "bought" 2 morning-rides from me. Then, she realized, she only had 3 left. She approached her brother Fadhl. She told him she had chocolate bar, and how about she gave it to Fadhl for 1 "ticket". Fadhl refused, but the cousin Figo accepted her offer. Market works. -- Ehm, not quite so. The next next morning, Fadhl lost one of his tickets. And Pachi somehow had an extra ticket...

Today they all demand their next batch of tickets...

Becker-Posner's Blog

The blogosphere welcomes: Gary Becker and Richard Posner.

Polygamy

This is NOT to say I recommend polygamy.

But here's an interesting talk I heard on the radio this morning. An interviewee argues that polygamy should be banned. Her reasons are 1) Almost all polygamy cases are not registered in the State administration and therefore prone to abuse when it comes to raising the children and leaving them with enough bequests before the father die; 2) Polygamy contributes significantly to domestic/household violence toward women; 3) [and this one is the classic] It is not fair to the wifes.

She goes on to offer a conclusion. Ban the practice. And allow polygamy only if the first (second, so forth) wive signs a consent sealed by the court in the name of law, that she wants her husband to have a second (third, so forth) wive.

Ehm, sounds like a good solution. Only that..., it is built upon an illogical logic called nonsense!

First off, if the registration is the problem, why should you ban it all the way? That's like burning a ship to punish one naughty mouse. Why don't you just fix the administration system and enforce it? Secondly, give me statistics on domestic violance! Thirdly, hey, it takes two persons to have one marriage (well, maybe more somewhere out there, but that's not the point here). If the wive disagrees, then why should the husband proceed? After all, they should have had a pact beforehand ...

Again, I'm not arguing for or against polygamy. I'm just talking about a... funny logic.

And, it's not over yet. A listener calls in. He argues, polygamy is good. Because... -- bear with me -- the number of women is far greater than the number of men...

Wow. These two people made my day. Smiley, smiley...

Lincoln, Gandhi, and Kalla: What's Common?

According to Wheelan, Lincoln and Gandhi are both "great leader and bad economist". Lincoln once said, "... if we buy the rails from England, then we've got the rails and they've got the money. But if we build the rails [in America], we've got our rails and we've got our money...". While Gandhi once "...proposed that the Indian flag have a spinning wheel on it to represent economic self-sufficiency...".

Now, meet Jusuf Kalla. He's proposing Indonesian economic development based on ... self-sufficiency! (read here, in Bahasa). Kalla has yet to be seen as a great leader or not. But he seems to be a lousy economist -- in Wheelan's sense. Only, I would add, the main difference between JK and Gandhi is, the former is way richer.

Now this is healthy

There you go. Really, all you claiming yourselves as market diehards should read Bodreaux. If every market half-cooked proponent were willing to put things into perspective like Bodreaux does, the field wouldn't have been this divided. Anybody see Dave Friedman?

No Rubba No Hubba Hubba

I am surprised that New Zealand government is sexist. The motto was launched by the Health Minister, Arnette King (a woman, I suppose?). So, men to blame? What say you, oh feminists?

Misc about the Eid Day

(Gmail is cool. But not cool enough -- Can't do link).

Pheew, what a week (or maybe more?). Eid celebration is always a big thing in Indonesia. This year is special to me, after having the Eid Day abroad for six years. Maybe not special enough since I haven't got a chance to visit my hometown.

Nevertheless, it's good to be back in your country, where lovely people celebrate some big day in their own unique way. Among all are the following.

Mudik ("upstream" traveling). Yes, everybody knows that Indonesia has the largest muslim population. But not many foreigners know that in observing the Eid Day, majority of the Indonesian muslims go visit their hometown. And this means massive flow of people (and money!) from (and later, back to) Jakarta, or in general, from urban to rural (then rural to urban a week or so later). The rushest days are usually D-3 (and D+4). The "mudik" activities come with lots of economic implications. Despite the official range of fares announced by the Department of Transportation, you should expect an up to 100 percent increase (you don't want it, you don't see your family). Workers from all levels, maids to managers visit their family at hometowns, bringing gifts or money. Almost 25 million Indonesians go on mudik. You see them on TV, they look happy. Unfortunately, crime rate increases too. So do accidents on the road. The police reported that accident rates triple during the Eid Day celebration.

Maaf-maafan (asking for and giving forgiveness). At the end of the Ramadhan people ask each other for forgiveness. It's sweet to see people greet one another in a very friendly way. I am a little surprised, however. Back then, people sent greeting cards to their friends and families. Now, digital technology has taken over. If you have a handphone (and you really don't need to give the number to everybody -- they will know it!), expect hundreds of short messages in the Eid Day. People send Eid greetings through handphone. I shouldn't have been too surprised, as Indonesia is the most advanced cellular country (trust me, ask Nokia or others). The Jakarta Post reported: "The country's biggest cellular operator, Telkomsel, reported traffic of 87 million short messages on Idul Fitri, which fell on Nov. 14 this year. Idul Fitri eve saw 72.5 million text messages sent, and the day after Idul Fitri, 50 million messages" And that's only for Telkomsel. Indosat has huge number too ... It's funny to see that many of the SMS senders use somebody's message to send to other friends -- just change the name (yes, suddenly everybody becomes poet!). So I made this experiment: I created a very nice, unique message. Sent it to some people. Within a day, I got an SMS from a friend with a nice message in it. My message :-) God, I love Eid Day.

There are some unpleasant news though. A traffic accident following a sudden stop in a highway cost 6 lifes. The traffic was halted by the police (for a "VVIP procedure") as the President and his convoy would pass by. The sad thing is, the President Spokesperson immediately blamed the accident on a bus driver! Arrogance, no?

Another thing that has made news is this whole thing about gift parcel and corruption. The Corruption Eradication Commission (KPK) has declared that gift-parcel-giving should be banned because it's a form of ... corruption! You can see the motivation, but can you see the logic? I have been applauding KPK's anticorruption mission so far. But this banning the gift parcel business is surely off the target. Rather than discouraging corruption, it puts end to small businesses -- those who produce the parcel baskets and the likes. Yet, the big corruptors keep feeding the state officials through ... internet banking. It's funny to hear that the governor of Jakarta has this notice on his front door "We do not receive gift parcels". OK, how about a transfer to your account, Sir? In fact, I think gift parcel is a nice thing if given from superiors to subordinates in the same office. The other way around? Now, that can lead to corruption.

Gmail to Blogger via Google

This is a test post. Last time I mailblog via Yahoo, it failed -- well
it was through, but with some Yahoo self-ads appeared at the bottom,
that's a failure. Now I use Gmail. Hope it works better, considering
that Blogger and Gmail belong to Google. Otherwise, still have to rely
on Outlook.

If even the NYT chickens out

Read this FAIR report. Why am I not surprised?

"Inlaander" mentality

So bothered with this news. It says basically that Indonesia has sent a team to US to learn how to conduct a good election. What?? Nazaruddin Sjamsuddin, the team leader, should really learn how not to fail like US. Read the Florida reports! And by the way, you can do it from here. You don't need to use our money to get you ticket.

No harm at all?

Bodreaux is defending free trade too much. As he points out, even the "convinced free traders" admit that "some people are harmed by free trade". But Don is in denial. Says he, you can be disadvantaged by free trade, but surely your children or grandchildren will benefit from it. Oh, c'mon. I love free trade, but I'm not a utopist, and that's why I love Bhagwati's stuff. I recall (I believe I got the impression from Landsburg's "Armchair Economist") that some economists once ridicule environmentalists by saying that people maximize their own utility, not their children's. That's one. Two, who can make sure if our future grandchildren will like a particular spot to be forest as it is now or to be a huge shopping mall? By that, Steve should ask Don: who can make sure if your grandchildren perceives the gains from trade the same way as you do? (To answer that challenge, you may want to use Thaler and Sunstein's "Libertarian Paternalism" in May 2003 AEA P&P -- subscription required)

Oh no, not again

Bush wins again. Tabarrok blames it on Karl Rove the Greed. I blame it on the American stupid winner takes all system.

Ideas and growth

I have to agree with Don Bodreaux of CafeHayek. This guy Bryan Caplan is great (though, I'm sure I am not with his ideological stand). The idea of ideas for growth is surely not new. But the way Caplan models it is a hats-off (get the complete papers from his website). Quoted: "Good ideas cause good policies. Good policies cause good growth. Good growth causes good ideas." But, as he warns, the process can go the opposite way. That is what he calls "idea trap". Now, be prepared (and this is what might have made me reconsider my admiration; had I found a flaw in his model). How to get out of the trap? You need ... luck! Who else models luck, anyway?

Hero Yes, Enemy No

Over the weekend, got some time to relax. "Hero" is superb! Zhang Yimou is the greatest. He actually ... paints his movie! "Crouching Tiger" should bow to "Hero". Tony Leung's and Maggie Cheung's top performance. As for Jet Li, he can be better. "Rashomon" resurrected?

Also saw "Enemy at the Gates". Ed Harris aside, I should have trusted my instinct. Story is interesting, ending is terrible. Joe Fiennes is cool, Jude Law is bad-bad-bad. Romance is cheesy.

Solow was wrong?

Jesus Felipe of ADB gave an interesting presentation yesterday. His paper debunks the theories of total factor productivity, and hence the well-known Solow growth model. His main objections are 1) Aggregate production function is nonexistent, 2) Solow's Cobb-Douglas' growth function is not a growth function. It's a rewriting of an accounting identity at the aggregate level -- and hence, not a behavioral model, but an identity. I agree with him on the danger of aggregation. I agree that Solow proceeded his elegant 1956 paper realizing the growth accounting. But I don't see the connection of aggregation biases to his proof on identity to behavioral equations. As I raised in the discussion session, if he has problem on Solow's Cobb-Douglas function such that to him it is simply an accounting identity, then try doing it the other way around. Go from the Cobb-Douglas function and do the math back to reach the accounting identity. You WILL get there, too. I'm sure the same thing applies to CES and other functions, given the approriate assumptions on factor shares (by the way, he never discussed the main difference between Solow's growth model and the endogenous growth model: diminishing- vs constant marginal returns). And this reverse proof should also apply to micro behavior. So, if you say Solow was wrong (at macro level), you have to say that Deaton-Muelbauer was also wrong (at micro level).

Welcome, Moral Hazard!

Theory has it, if a principal and an agent engage in a deal, the contract should spell out everything in details. And all actions should be verifiable. Non-verifiable actions are subject to asymmetric information and therefore prone to moral hazard problem. Read the 100-day program of SBY announced yesterday (sorry, cannot find internet link, read it in-print). Most of them are non-verifiable. Take macroeconomic program for example. It says 1) To secure the 2004 Budget; and 2) To review the 2005 Budget. You can verify the first one. But how would you verify a review effort? This is like having a contract with your professor (you being a research assistant), and you have "I will work hard" in the contract. How can that be verified? In other words, what is the criteria to judge your "working hard"?

JK the racist?

Read why Steve Landsburg changes his mind from will-vote-for-Kerry to will-vote-for-Bush. It's because of the running mate: Kerry has chosen John Edwards the xenophob. Now, try to imagine that you were Steve and Kerry were SBY. Of course, Edwards were JK. Would you have voted for SBY? Considering that JK were truly a sinophob, ceteris paribus, I would have not. (The only thing that made me vote for SBY in reality was that Mega is way, way worse in all other aspects).

Ical and his vocabulary

Not a month yet, but Aburizal Bakrie (Coordinating Minister for Economic Affairs) has demonstrated how overestimated he is. When everybody should be really working real things out, he is busy doing word-game. "We are not going to be a subordinate of the IMF. So, we will change the name Post-Programme Monitoring into Post-Programme Dialogue". "We are not going to revise the Budget, we will just do some review-ing". What good in the world would these things do for the country? Mr. Bakrie, no time for trivia game.

What we did wrong back then

This piece by Stiglitz speaks for itself:

"Suppose the economy is operating below its potential -- say, because of a
lack of aggregate demand. In that case, an increase in aggregate demand can help
the economy. And deficits normally increase demand. That's because the
government is spending more money, or because low taxes encourage increased
consumer spending -- or both.


Keynes made this point clear a long time ago -- and he is still correct. No
wonder, then, that the IMF's imposition of fiscal stringency in East Asia and
Latin America -- when those countries already faced a downturn -- was a
disaster. The IMF policy had the predictable consequence of making the
economic downturns worse, turning downturns into recessions, and recessions
into depressions. The right prescription for the affected countries was not
balancing the budget, but running a temporary deficit to stimulate the economy --
as Keynes knew."

Intellectual honesty

I was once asked by a student: should we have ideological stand on economics and should we stick to it forever? I answered: yes and no. Yes, you should be unambiguous as to what perspective you are using in analyzing a problem. But it doesn't mean you are not allowed to refine your position. If you proclaim you are Keynesian and you think monetary policy is foolish even when it is needed, then you are dumb. I cited Keynes: "When the facts change, I change my mind -- what do you do, Sir?". It bothers me to see some people, without proper knowledge on history of economics thoughts, claim that they are Monetarists, or Keynesians, or Neoliberals -- you name it. But when you talk with them, they simply knew a three- or four-sentence definition from some textbook to describe their "ideology". I don't think it's honest.

In that light, this piece by Brad DeLong came to my attention. At least, this is what I refer to as "intellectual honesty". DeLong was an all-out Neoliberal -- as he confesses, believing that capital control is no-no-no. Read this and you'll see how DeLong admits that market can fail. There, we need government to help correct it. But be careful, government might as well fail.

Troy

Just saw Troy last Saturday. It was just OK. I like Eric Bana's acting (as Hector of Troy). The veteran Peter O'Toole (as Priam, King of Troy) could be better (reason why I decided to see this movie). Brad Pitt (as Achilles) surely had worked out his muscles a lot -- but not his acting talent. Diane Kruger (the seductive Helen -- the problem) acted worse.

The show could have been much better. One, it should have warned the watchers: "Warning: This is a VERY LOOSE interpretation of Homer's Iliad [and that's why we don't dare using that title]. We assume you already know that 1) Achilles has weak tendon [if you don't know, what the hell did you do when you were kid?]; 2) Trojan War is nothing but a place where men fight for a seductive woman [that's all you need to know, we'll guide you through some adult-only innuendo]". Such warning could make you less demanding. Don't ask why Aphrodite is not there or why Paris is so lame in contrast with his mighty brother, Hector. Also, don't ask why Odysseus seems so sidekicky next to Achilles (this is about -- I mean inspired by -- Iliad, not Odysseus!). Story aside, if you haven't seen Braveheart, you might think this movie is a thumbs-up. If you have, you don't need to see this one.

(I also watched Bulletproof Monk -- this one was a total waste of time, it is not worth a link).

Trial by anybody who wants

Talking about Adrian Waworuntu, the prime suspect of one of the biggest bank robberies in Indonesia. While I'm writing this post, he is being interviewed by a television. What really shocks me is that this interview is NOT an interview. It's a ... trial. Is legal institution in Indonesia so useless already that trial should be done by ... tv?

That's trial by tv. Now, another one: trial by so-called religious group. I can't understand, why each time the Ramadhan comes, this people calling themselves FPI (Islam Defenders Front) think they have the right to replace the police! They attack bars, night clubs, and the likes. These are the people who think they defend Islam while in fact they ruin it. Islam is no anarchy, but they make it seems like that. The sad thing is, the police seems so lame. So who's to blame?

IMF, MP, FP

A friend asked me again about this whole thing about pro- and anti-IMF. OK.

Let's look back to when the IMF was created. Bretton Woods meeting in 1944 was conducted as a response to the world wreckage due to the world war. The ideas was to help the countries recover. The meeting gave birth to the IMF, World Bank, and later, ITO (the latter became WTO). The idea was noble. Then people changed. Intitutions followed. Policies did, too. Now, IMF is perceived as neo-liberalist agency. (People forget that BW meeting was Keynes' idea -- the last person you would connect to neo-liberalism). To many people, IMF is identical to exploitation of people by capital. So everything related to it is rejected. That's what happens in Indonesia now, especially after the IMF recovery program failed. (It's very unfortunate to people like Sri Mulyani who happened to be the country's representative in the IMF. Her job was, among all, to negotiate with the IMF for Indonesia's interest. She suggested to end the IMF program in Indonesia. But people don't know and don't want to know that. To them, Mulyani is IMF. Cannot be more wrong. It's like you're having a war with a country and your government send you to negotiate. Before you know it, people think you're a traitor).

The friend asked me again. What's all this doing with monetary and fiscal policies? Alright.

Why do some economists tend to promote free market and others seem more prudent and consequently rely more on the State? I always believe, both have good rationale. Both are reasonable. People believes in market because they are afraid that relying on the government means putting money on it and asking it to manage the money for social welfare and development. Meaning, it gives room for corruption. To avoid this, you should minimize the role of the government. How? Don't trust it by putting your money in its hands. On the other hand, some people believe in State intervention because they are hopeless with their own people (read: market). They think market alone cannot solve the chronic problem of poverty and unemployment. Something needs to be done and somebody needs to do something. And invisible hands are just utopia. Therefore they want to use the government to help allocate the resources more efficiently (I like to say: we need the government to correct market failures, no more -- but nobody hears). In practice, the two camps might emerge. But ideological stand usually comes in the way. And lay people see it as a war between market and the State. Or, when it comes to policies, a war between monetary policy (in particular, inflation targeting) and fiscal policy (in particular tax collection). Unfortunately, the war -- for lack of better term -- has been misunderstood by press, too. News and even analysis seem to believe that this is a binary problem: either you use monetary policy or fiscal policy. You can't use both. This is a total mistake.

Bad press corp

Lately, I've growing exasperation toward these news presenters in local televisions. It seems to me tv companies have been hiring presenters based on their look only. Intelligence and press ethics don't really matter. Many times I have seen the way these tv chicks conduct their interviews with politicians, academicians, and other resource persons. It's terrible. They ask their target in a very unprofessional way. Well, they don't really ask. They nag. Same questions often repeated many times. It's obvious that none of them do (even a small) research before interviews. Consequently, they nag with silly questions. Back then, when TVRI was still alone, they were very professional. I recall world-class reporters such as Toety Adhitama and Usi Karundeng, to name a view. Now, when we need news, these many private tvs now bring Vivi Yahya, Rosiana Silalahi, or Ira Kusno to our glass. Why don't they learn from TVRI?

Three points on SBY

So, finally we have this new president, SBY. Bye, Megawati, it's time for you to stop pretending. I have bigger hope for SBY-JK -- much bigger than to Mega. But I won't spend time comparing them here (but as a note, I believe, high expected utility always comes with higher risk -- JK is a risk factor). Just three quick points on interesting issues lately.

First, this whole objection toward "pro-IMF cabinet" is really off the mark. Not many times I am against PKS' (Justice Party) stand. But I guess, this is one. I have written elsewhere about my take on globalization and eventually the IMF. To me, the Indonesian bad experience with IMF's programs in the past was partly OUR fault (worsened later on by people like Rizal Ramli). On the other hand, the IMF's share to that problem was due to a malpractice by its staff. So, banishing the Fund for having incompetent staff in managing Indonesia is like banishing a whole hospital that happens to have some careless nurse. Do you think all nurses in such hospital are careless?

Second but might as well be related. Some analysts have brought the issue up to the tension between growth and unemployment. Corollary: macroeconomic stability versus fiscal stimulus. This, too, is a misnomer. I don't understand why some economists really hate fiscal stimulus -- even when it is needed. Many anti-Keynes economists don't know that JMK clearly argued for BOTH fiscal- and monetary policy depending on the situation. The supply-siders (read: Friedmanites), in contrast, think there should be NO fiscal policy AT ALL (it's funny: many times they even forget that "tax cut" -- one of their mantras -- is in fact fiscal policy!). These people should really start to realize that demand management matters, too. Lots of empircal evidence out there. Reaganomics-Thatcherism has its time. But not all the time: Bush has proven it. Think about this: supply-siders' backbone is Say's Law ("supply creates its own demand"), fine. But, they also say they believe Walras Law (that "ALL markets clear). It doesn't take too much time to see the flaw: Imposing both laws together is theoretically impossible. Say's Law only concerns with goods and labor markets. Walras Law adds the third one, namely money market. Saying that "supply creates its own demand" basically imposes that goods- and labor markets clear (because Investment = Savings should be paired with Labor Demand = Labor Supply). But if that's the case, while you ALSO hold Walras Law, then money market should also clear (Money Supply = Money Demand) -- Now, look around: do you think all markets clear? I don't. I don't buy Say's Law, because it implies that the cause of unemployment is EXCESS aggregate demand for goods (and, this is funny too: they call that "voluntary unemployment". To me, it sounds like an oxymoron). I don't think so. I think the cause of unemployment is more of INSUFFICCIENT aggregate demand. This is where fiscal stimuli is needed. Remember: you can also use monetary policy in OTHER situation. I am not against monetary policy.

Third. SBY waited too long before announcing his cabinet last night despite his promise. The doubter has come back?

Not happy with the Nobel this year

"Damn, it's Kydland and Prescott. Not good for Keynes", I wrote an SMS to Rizal last night. I learned macroeconomics from Stephen Parente, a former student of Ed Prescott, and his co-author for "Barriers to Riches". Steve is really proud of him -- and of Finn Kydland (also a former student of Prescott). He took three consecutive meetings to talk about Kydland-Prescott's time inconsistency model. (I had a chance to meet Prescott when he was giving a lecture on the causes of difference in productivity between American and European workers. It was boring).

Back to what gives Kydland and Prescott the Nobel. It's that time (in)consistency model. It's about credibility of policy. It is THE real business cycle. The more Steve taught me about Real Business Cycle, the more I appreciated that elegant model (Steve likes the example of credibility in monetary policy: once you deviate, you're screwed). But... the more I read the paper the more I was and am questioning the plausibility of its key assumption. I am always skeptical when people start saying "... in infinite horizon..". Infinite? Gimme a break. This is what Keynes really hated. Hiding behind infinite horizon. Loooooooooonnnnnggggg run. And mind you, in that infinite horizon, there is only one representative consumer. How come? Isn't that too heroic an assumption?

Emily or Lakisha? I bet it's Emily!

In a recent AER issue (Sept 2004, subscription required), a paper by Marianne Bertrand (Chicago) and Sendhil Mullainathan (MIT) is worth discussing. They investigate job market dicrimination in the US. It's not the content that is really interesting. It's the method. In particular, it's the way they conduct their experiment. Bertrand and Mullainathan sent thousands of fictitious (!) resumes to help-wanted ads in Boston and Chicago newspapers. They use African-American- and White-sounding names to manipulate perceived race. After controlling for education, military experience, and other skills, they find that discrimination is significant. In addition, the study finds that the White-sounding names (Allison, Anne, Carrie, Brad, Brendan, Greg, etc) receive 50 percent more callbacks for interviews than the African-American names (Aisha, Ebony, Keisha, Darnell, Hakim, Jamal, etc). Interesting experiment. Would ethicists disagree? Ugh, I wonder: would the result have changed if they had targeted "athelete-wanted" ads?

Good public servants

So I bought three books from Amazon.com. I paid $332.96 including about $40 for S&H. To my surprise, in the notification form sent to me by the Indonesian Postal Service, I had to pay an extra Rp432,852 -- that's almost $50. I complained.

 

First, I visited the Indonesian Postal Service. A staff explained to me that the 50 bucks were charged by the Indonesian Directorate General of Customs and Excise. The Postal Service only shared part of the S&H with the US Postal Service.

 

So I went to the Customs and Excise Office. The gentleman there nicely explained to me that for any personal purchase from abroad with value of $50 or more, the State would charge either 1) Import tax, and/or 2) Excise, and/or 3) Value-added tax, and/or 4) Sales tax, 5) Luxurious good tax, and/or 6) Income tax. My books were subject to numbers 4 and 6. That is, 10% for sales tax, and 7.5% for income tax. The base was my books' CIF value minus $50, or $274.37. 

 

OK, I paid a lot for the books. But I am fine: the people in the Post Office and in the Customs&Excise Office were very nice and helpful. They showed me all the regulations related to my questions. And I understand. If it's transparrent and lawful, I pay. No harm done.

 

(SBY, I vote and I pay tax. Watch your back!)  

Tax cut

I am no big fan of coalition. But I applaud people who express their standpoint explicitly, reasonably, and with clear argument. These Nobel economists are the examples more of the latter than the former. Akerlof, Arrow, Kahneman, Klein, McFadden, North, Samuelson, Sharpe, Solow, and Stiglitz say it all: Bush's tax cuts plan is a flaw. So vote for Kerry.

A week ago or so, we were watching the first episode of Commanding Heights, The Battle of Ideas at office. I have an impression that it does not do enough justice to Keynes. CH series are about market superiority against government "intervention". And Hayek is the man. Keynes is the loser. Market means Hayek, vice versa. Intervention means Keynes, vice versa. This is a total misunderstanding. Unfortunately, some economists think it is not. It's like saying that: tax cut is always good. Ah, Friedmanite.

Aside: Should really have another in "I live this office" series. Three days in a row for dead internet. Ah, Jurassic Park.

Ex post feasibility study, eh?

What a weekend. Was giving a training on valuation techniques to Bank Indonesia officers. Yesterday was terrible. Had to teach ("You don't have to teach us. We want a discussion. Let's work together". Ah, well) more than 6 hours. And it's not the worst of it. What bothered was the whole idea: they wanted to conduct a cost-benefit analysis -- and this means feasibility study -- of a big investment in a machine AFTER purchasing it. Say what? Never I wanted to end a training so desperately.

It feels good to finally be home again (even though mail-server is down again -- why am I not surprised?).

Aside: Health test results are good. No problem of chollesterol (sp?) as Mom suspected.

Title-less as in speech-less

You won't believe this. Attended a presentation held by the Bappenas on strategic plan of Indonesian mining industry. That presenter, a professor from a good private university, goes: "We have to improve how the state manages the natural resources. The governnment... as THE OWNER of the natural resources..." Oh, my God.

Wedding gift for a brother

I have tried not to be sentimental.

Daniel is travelling tonight on a plane
I can see the red tail lights heading for spain
Oh and I can see Daniel waving goodbye
God it looks like Daniel, must be the clouds in my eyes

They say Spain is pretty though I've never been
Well Daniel says it's the best place that he's ever seen
Oh and he should know, he's been there enough
Lord I miss Daniel, oh I miss him so much

Daniel my brother you are older than me
Do you still feel the pain of the scars that won't heal
Your eyes have died but you see more than I
Daniel you’re a star in the face of the sky

Daniel is travelling tonight on a plane
I can see the red tail lights heading for spain
Oh and I can see Daniel waving goodbye
God it looks like daniel, must be the clouds in my eyes
Oh God it looks like Daniel, must be the clouds in my eyes *

You are not Daniel. You are not older than me. But you're leaving. To your "Spain". Goodbye, Brother. Best of luck.

* Bernie Taupin and Elton John, 1973. When my brother was -5 years old.

More econoblogs added

Just added three blogs on the sidebar: Agoraphilia (Glen Whitman), WinterSpeak (Zimran Ahmed), and Asymmetrical Information (Jane Galt and "Mindles Dreck"). Enjoy.

25/8

Lessons from last two weeks : 1) Never say yes to teaching 3 individual courses in the same semester, 2) Try to avoid revising grant proposals in a day -- even if they told you everything is near done, 3) Do not get anxious when journal editor gives you an extra one year for revising your paper, 4) When you're little brother is getting married, devote some time for him.

Misinterpreting Ricardo

Attended a roundtable on Indonesian investment and industrial policy yesterday. One speaker, a professor from Keio University offered a disturbing claim: comparative advantage and factor proportions paradigm are "old theories", "static", and therefore irrelevant for today's world. He went on offering "the new" approaches: fragmentation and agglomeration. I was wondering, where he had been so far? Fragmentation is another word for division of labor! And it all goes back to 1776 Adam Smith. And, urgh, agglomeration is "new"? Even worse, is his misunderstanding of Ricardo's comparative advantage. He basically said CA is old and static, so change it to networking based on fragmentation and agglomeration. As a discussant pointed out, there was nothing new in his talk. He was simply applying Ricardo's CA from country-level aggregates into (networks of) firms. He surely had not updated. Or, he simply didn't understand what Ricardo meant.

Fiqh and Utility

This post by my friend, Aria, is very insightful. He neatly links between utility theory and the principles of ushul fiqh. Namely, 1) "... Select the higher of the two benefits, or incur the lesser of the two harms when faced with them both", 2) "... Repelling harm takes precedence over procuring benefits", and 3) "... Certainty is not invalidated by doubt".

Now, with the risk of misinterpreting Aria's insight, let me take it to the current Indonesian politics. Given that there are only Megawati and SBY, I will vote for SBY. Why? (I personally don't see that not voting in this election is wise. You can't give your support; nor you can scream at a game if you keep avoiding paying for admission ticket -- you are simply outside. Some say that letting the ballot uncast wil give room for manipulation: ballot committee can be bribed to put a check on the empty ballot. Right. But the solution is not to put check mark on both options so as to invalidate the ballot. It might reduce modes available for cheating, true. But there are ways -- many ways -- other than that for manipulation (remember Florida case?). Then, why would I bother to vote if it might as well be manipulated? Well it will give me my ticket -- at least emotionally -- to support or to scream or to curse the players. Secondly, I don't feel good being indifferent -- and not voting is not a strategy (in the Game Theory sense) here. I will choose and bear the consequence. I won't use the oxymoron "choose not to choose". It's a little irresponsible) .

OK, back to Aria's points. Mega and SBY are "the harms". I think SBY is less harmful, though (the "contract" with PKS, and not with Golkar is an indication. Some doubt it. I say, give it a chance, and smash it if it turns lie -- you've got a ticket!). Next, I tend to believe that those in PKS have better intention than those in the other big parties. History has examples. The fact that they choose SBY as their "ticket", in my opinion, is more of a way to put control over him (this is "repelling harm") rather than to secure positions in the cabinet (or, "procuring benefits"). It is obvious that PKS can't capitalize on SBY being president -- too many interests around him, but at least it can remind him of his promises. And the people saw the sworn. Why not Megawati then? Don't tell me you don't know the answer. "Certainty is not invalidated by doubt".

Dirty coalition

While Krugman is worried about the "Rambo Coalition" in US, I'm scared of the 4-party coalition in the ongoing Indonesian presidential race. Our case is even worse: it's a coalition between the biggest three parties (PDI-P, Golkar, and PPP) plus a strong new comer (PDS) to support Megawati. Why bad? Because it's an unholy alliance. The former three have been known as long time enemies, as they are the traditional competing parties thus far from 1950s until the fall of Soeharto. (The latter one is only a new kid on the block, but has scored quite a success in the legislative electorate). This coalition (they call it "Koalisi Kebangsaan" or "nation-state coalition"-- what a misleading name!) is simply a bunch of greedies trying to beat another running party. Wanna bet? If -- I say if -- SBY, the other candidate, happens to be the one elected as president, these people -- Akbar Tanjung of Golkar, and others-- will immediately leave that coalition (and most likely start kissing SBY's a**, for a position in the cabinet).

So much for shallow politics. Where is the economics? Kevin Murphy and Andrei Shleifer write in May 2004 AEA Papers and Proceedings (subscription required) about "Persuasion in Politics". Murphy-Shleifer insightfully present a model of social network creation and how politicians might use it to obtain support. The idea is that "... people are influenced by those inside their networks, but not by those outside, because those inside a network talk to and persuade each other...". Who forms the network? It's entrepreneur. Such "entrepreneurs" use core issues important to members and then "rent-out" the networks to politicians who seek votes. Sounds familiar? Yes, Akbar Tanjung, Hamzah Haz, and ... -- who's that guy from PDS again? -- are all entrepreneurs trying to lure out Golkar, PPP, and PDS constituents to joint force and then rent them out to Megawati. Money talks, bulls**t walks. But wait a minute? Will that work? Murphy and Shleifer argue that such network should have at least some close "distance" among its elements, in order to be effective. Distance here can be regarded as "circle of influence" (my marks). And that influnce comes from "friendships, emotion, or group identity". OK, now you know why I call Akbar Tanjung's coalition as "unholy alliance". It won't work. Distance between Golkar and PDI-P is well too far. So is between Golkar and PPP. (Well, they do have close distance: greed! But that's not what it should be). No wonder, within a week of its declaration, the coalition already have to face resistance and reluctance from their constituents. Even, there are heavyweights in each party opposing the coalition. This coalition is a joke.

Once again: are choices rational?

Am I betraying my students? I have to teach a matriculation course for new students. It is supposed to make economics attractive, less dismal, and ... well, easy. So, should tell them that all choices are assumed rational. (To make it more jocular, I borrow David Friedman's -- or is it Steve Landsburg's? -- "Economists assume everybody as rational, except... themselves"). Almost simultaneously I also teach this course on how "irrational" choices can be. This is challenging, but more realistic. Take for example, a recent paper by Thaler and Sunstein (AEA Papers and Proceedings, May 2003 -- subscription required), "Liberal Paternalism". I quote, "... Research by psychologists and economists over the past three decades has raised questions about the rationality of the judgments and decisions that individuals make. People do not exhibit rational expectations, fail to make forecasts that are consistent with Bayes' rule, use heuristics that lead them to make systematic blunders, exhibit preference reversals,...". I remember we discussed this in Carl Nelson's class on Risk and Uncertainty (e.g. Kahneman-Tversky fanning-out utility function). Yet, he never mentioned the word "irrationality", as far as I recall. I am worried, that our problem is on how we define rational (or lack thereof). Who are we to call somebody acting differently with what we think he would, irrational? Who says I am irrational just because I refuse to do something known as my hobby so far? Assumptions? The failure to define rationality (or, the mistake of calling their models "rational") has caused economists to call the opposite "irrational". While what they mean is in fact the deviation from the models they use. They (oops, "we") fail to model complicated behaviors. So we just call them irrational. Nice.

I love this country # 3

What's good about riding in a public transportation? Many. First, information. There are things you would miss if you keep away from interacting with lay people. It's ironic that you talk about poverty on TV while you don't have the slightest idea on what poverty really means out there. Using traditional mass transportation is one way to get in touch with them ("them" -- for lack of better term, sorry). Second, reality. You surely know how bad the traffic situation in Jakarta is, by driving every morning and evening. But you don't know tidbits beyond that. When you drive your car, you close your window; turn on your AC and maybe, your radio. You feel the fresh air and enjoy your morning news -- to ease your frustration out of the traffic jam. But you certainly "miss" these: the toxic combustion from, especially, buses, trucks, minibuses, and motorcycles; the ammoniac smell from abandoned rainwater (even, human-) drainage/runoffs by the street (really, BY the street, uncovered and blackish!); and of course, the many-kind of "human fragrance"!

This morning, I rode a "mikrolet", again. This is the kind of Toyota-made economy car modified for use as a public mode of transportation. Many of you might not have seen it, so click here (you will also see other modes: "bajaj", "becak", "bemo", "bis", "ojek", etc). Now, look closely at the mikrolet. Do you know how many passengers it can take? Six? Seven? No. Thirteen! Including the driver, we are thus looking at 14 persons in one mikrolet. How so? Well, 2 passengers can sit next to the driver (if you are lucky enough, you can assume the by-the-window seat; otherwise, you have to sit in the middle: should prepare your right thigh and knee to meet with the manual transmission stick every now and then. Girls, don't sit there with miniskirt -- don't say you haven't been warned, later). Now, put 4 people on the left side (by the door) and 5 (or 6, sometimes) on the right side (behind the driver). That makes it 12 or 13 persons. Hey, there is more room. See that brownish, wooden box on the side door? That's a seat! And it can be used by... 2 more persons. There we go.

A little economics quiz. Where is the safest place to seat in a mikrolet? Remember the dictum: one, "people respond to incentive"; two, "people act rationally". From the first dictum, we know that a person will move to where (s)he can gain marginal increase in utility. Talk about "safety" as "utility" for now. So "incentive" here means "extra safety". By the second dictum, we realize that everybody maximize his/her own utility (let's assume away altruism for now). As for the "safety" story, think about the situation in the mikrolet. Do you care with other's safety? Honestly, I care with my OWN safety. Everybody cares with his/her OWN safety. So, the driver cares with his own safety. Naturally he (I haven't seen a female mikrolet driver so far) will act as to protect himself.

Now, look at the situation on the street. Traffic lights are to be violated. Vehicles cross one another, from either side, within 3 centimeters apart. Motorcycles intercept cars every second -- sometimes in high speed. In short: traffic is chaotic. What would you do? Thinking economically, I would sit as close as possible to the driver. Why? Because he cares with his own safety. The closer you are to him, the safer you are. If another mikrolet rear-ends yours, you have less likelihood to feel the impact. If your driver crosses another car, your mikrolet might bump that car from its left side (or if it happens to be its right side, he would surely have been more careful, because ... he IS on that right side. Note: To add to your confusion, in this country we drive on the left side of the street). Now, there are only two seats closest to the driver. Right behind him, or right to his left. I would choose the first one. Why? First, I hate that transmission stick. Second, accident can always happen regardless of how your driver drives. Suppose, a truck run into your mikrolet from the opposite direction. Who would get hit the most? What's the downside of sitting right behind the driver? He, and many I have seen, smokes! Wind will blow the smoke to your face. But, well, any passenger might smoke, too. You cannot really avoid this one.

By the way, the driver of the mikrolet I was riding in this morning was constantly grumbling. Instead of the expected total of 13 passengers he would have gotten, he only got 4, including me. What a "diseconomies of scale". "Damn motorcycles!", he said. I asked him why. It turns out, these days, people have been switching from using mikrolets and other public modes to owning motorcycles. (Not to mention those who use them as another mode: "ojek" -- go back to the picture). The driver explained to me that now you can buy motorcycle "very easily". Meaning, you don't even need to pay "downpayment" (big chunk of money in advance prior to a series of flat installments). Before, if you choose installment scheme, you have to provide Rp 4 million (about $ 500, assuming Rp 8000 per $ 1 rate -- conservative) in advance as the downpayment. Installments thereon were around Rp 500 thousand ($ 75) each month for 2 years. Crudely calcualted, at the end you actually needed to spend around Rp 16 million or $ 2,000 for claiming that motorcycle (yes, vehicles are expensive here, relative to, say, there in the US. With that amount you could have bought a 1990 Corolla DX in Illinois). But, now, as the driver said, you don't need to pay down-payment! You can get that motorcycle "just" with flat installments as much as Rp 500 thousand each month for 3 years. The only "down-payment" which they call "insurance" is Rp 800 thousand ($ 100) in the very first month. And... the driver said, "this one is easier". Well my back-of-the-envelope (again, ignoring inflation and interest rates) calculation makes it Rp 18.8 million or $ 2,350 (a 1990 Camry DX in Illinois). It appears to me that the driver perceived the Rp 4 m down-payment as "too hard". It is very likely that others think the same. And translates to more and more motorcycles on the street.

Note, the motorcycle I am using in this illustration is the most expensive one for its class. I have been talking about Honda Karisma 125 cc which is priced at Rp 13.5 m ($ 1,688) for without installments. In fact, you can have a "cheaper" one (a Chinese-made Honda! I'm not kidding!) for Rp 8 m ($ 1,000) -- again, if you pay everything in advance. But the story remains.

And... as "people respond to incentives" -- no matter how misleading the incentives are, there are now more motorcycles on the street then ever... To the mikrolet driver's headache.

Too much beautification kills

Remember that stupid show in Fox? Talk about cosmetic surgery. That reality show -- "Swan" -- is about some girls having plastic surgery, lipposuction, etc. And Fox follows and reports the metamorphosys from not-so-good-looking women into some ... swans. No, actually, they mean beautiful girls (hey, who wants to marry a swan?). The show -- or so reported -- has been a hit for Fox channel, the TV station with so many dumb reality shows. (The only thing I like from Fox is ... The Simpsons). And, this beautification story of course spreads. Many teenagers and young women think cosmetic surgery is the easy way to go. Forget about diet or fitness programs. Just "cut and paste".

But this business is going too far now. Kompas (yet, the paper confuses it with "fetishism") reports (in Bahasa) that a female student wanting for more beautiful breasts died right after being injected collagen -- something to bury under your skin so you look more "curved" . Surely, this is sad. The girl (and many other victims reported thus far) might as well have known the fatal risk of such treatment. Especially since, many of those who perform the injection services are not medical doctors. They are just certified beauty counsellors. Risks are there. But being beauty seems to be more attractive, even in the highly probabilistic world. In the girl's case above, risk-loving has cost her life. She prefers doing it the ramdom way over having it through the natural one: eat healthy food, practice healthy life, exercise. In von Neumann-Morgenstern's words, we say, her utility function is "strictly convex" in being beautiful, i.e. her "expected utility for being beautiful" is higher than her "utility of getting expected beauty".

I love this office

So frustrating. Every morning you wake up with plenty of ideas. Then you rush to office with a smile on your face (assume your smile is bigger than traffic jam). Only to find out that you're ... back in Jurassic Park! No internet connection. Wait, there IS internet connection. Just, .... EXTREMELY slowly. Wait, maybe not always, but ... ALMOST ALL THE TIME.

It's a privilege if you can work in the cyberspace an hour effective, each day. (Wondering now how I could blog this post). Many times, you find only 15 minutes of smooth connection, followed by total pause for the rest of the day. They say this is an unavoidable problem. Lack of infrastructure. I start to doubt it. This is also a matter of incompetency: you rely on one --repeat: one-- person to handle your IT problem. Once that guy is on leave or sick, then your office is practically dead. Nobody knows what to do. If it's pure infrastructure problem, why in the world do those offices in the Sudirman-Kuningan CBDs not have such problem? And, mind you, ours is listed as "one of the best research institutions" in the nation, or so we say. "Research"? How many persons in this world today doing research by reading newspapers? Welcome to Offline Academy.

OK, I'm burnt out. Talk about office more. This is supposed to be a group of so-named reseacher-cum-educators. On economics. We talk about efficiency. We are for development and against corruption. Add to that, for social (Neoclassical socialist? Social neoclassic?) reason. We (well, "we"? I am not sure) believe in market. We (well, "we" again?) discourage big government. But mind you, I said we TALK, and that doesn't necessarily mean we DO it. In contrast, we show you here "counterexamples" of our mantras. Anybody interested in "disguised unemployment"? You're welcome. We here don't really do MP = w, as we promote in the class rooms constantly. We are practically doing w = AC -- in that order. So, yes, we are family labor, not wage labor. We are actually in Lewis' traditional world, but ... hey, we talk about modernity, don't we?

Yet, I think I (am willing to) love it.

I love this country # 2

I was driving back to office after a student's final defense (next time, I will discuss the sad quality of students nowadays). There was this oil truck (the kind of truck with gallons of kerosene) to my right, in the midst of traffic jam. Suddenly, a 30-something man approached the truck with two plastic bags (I was so close I could see those plastic: he had bundled one after another to make them thicker). Without hesitation, he went directly to the cranes. He was ... stealing those oil! Wait, "stealing"? Not really. He did that openly! There were two policemen regulating the traffic -- the "stealing" was right within their reach. Other street users looked at him as if it was normal. Guess me the only one amazed? I was so worried that some motorcycle guy could have passed by the truck and ... drop his cigarette butt very close to the draining kerosene...

My class had just discussed the Lewis model of urban and rural labor dualism, two or three days before. That oil-stealing guy above might be a correct example of the loser in Harris-Todaro model: a rural/traditional labor migrating to urban, finding extremely high wage rate in formal sector and therefore could not afford to deserve it; finally pushed to the urban informal sector. In Debraj Ray's words, informal sector people who are "failed aspirants to the formal sector dreams". Crime is cheaper. Or, should I not call it "crime"?

Marriage Gap

This is a re-post (written 3 days ago). Somehow mail-blogging didn't work:

Hal Varian writes about marriage gap in the NYTimes today. (My apologies: I have been blogging through emails; and somehow links don't work -- reason why I don't provide links. But, hey, borrowing from Al Franken: "Let there be Google!". For this Varian's note, however, you can access it easily on his Berkeley website. Otherwise, subscribe to NYT).

As usual, Varian's popular article is not "tasty": you don't get anything until almost at the end of it. So you can skip all the razzle-dazzles in the first 14 paragraphs -- just go to the one started with "Recently two economists...". Got it? Its preceding paragraphs are nothing but: researchers has "agreed" that usually, the wage earned by married men is somewhat higher than those by single men. Many studies have tried to explain the possible causes. Some thinks it has causality; others, mere correlation.

OK now, the economists' research is really interesting. They assumed that -- in Varian's words, "[T]wins have the same genetic endowment and (usually) the same upbringing. Since twins have the same underlying physical and mental capabilities, they should have similar productivity. Even if employers are biased toward certain irrelevant characteristics, monozygotic twins should be affected by such biases equally..." So they go on investigating the wage behavior of identical twins where one is married and the other is not. Conclusion? Yes, marriage does increase your wage!

My take? They still should (seems they did not) control for all fringe benefits provided for married employees: child(ren) benefits, holy-days package for families, maternity fund for the wives, etc. (This may seem strange for some of you; but that's what happens here and other developing countries).

Anyway, if that conclusion were true, why don't you get married multiple times?

... and convenience!

Tyler Cowen (MargRev) and Russ Roberts (CafeHayek) are discussing the economics of iPod. Tyler worries that iPod will lose in the near future. Russ thinks iPod will survive due to its beautiful look, spacious storage, battery innovation (soon), etc. I agree with Russ. I would add one -- no, two: convenience and ... logo (don't tell Naomi Klein!)

Salute to Gutawa

When you were kid, you might get exposed to series of music or songs or movies. Of which you still have their memories till now. At least some melodies or tunes or beats stay in your head forever. I recalled some of those memories last night.

 

I am talking about the ever-talented Erwin Gutawa's new album: "Erwin Gutawa's Salute to Koes Plus Bersaudara". I couldn't help listening. ... And remembering those old days when Om Dahlan my uncle look after me. He's a Koes Plus-maniac, and later, Koes Bersaudara. (Those of you out there, Koes Plus was "Indonesian Beatles" -- well this might hurt their fans, but what I'm saying is nobody could have such tremendous musical impact on youth at that time in Indonesia, beside the Beatles. The band was banned for being "pro-western" or "pro-capitalist" or so it was accused by Soekarno. The members were jailed. But their music lives forever. Also in me the kid. And in me the adult now). Om, wherever you are, I thank you for the caring and friendship!

 

A word about this album. Great. Gutawa is dead serious: he invites 17 current Indonesian modern artists, 177 supporting musicians, and 7 sound engineers. They also collaborate with Victorian Philharmonic Orchestra from Australia. Of particular interest is Gutawa's creative arrangement: he combined some of Koes' songs into one composition. (Koes Plus' -- and later Koes Bersaudara's -- music is simple, yet melodically strong. Gutawa manages to combine those with very similar melodies). Of this album, I am particularly recommend the nice interpretation of "Kolam Susu" by the superb Indro (Halmahera bassist), "Mari Berjoget" by Dewa Budjana and Kikan Cokelat (never before I like "dangdut" to this level), and many others. But I hate Armand Maulana's take on "Jemu" (I still don't see the point of techno-funk).

 

Well... so much for music today. I have to give exam to a student.

Spidey 2

Finally I had the chance to see "Spiderman 2". I wasn't dissappointed when I watched the first one -- "Spiderman", so I expected at least the same as that. And Sam Raimi did it very well. This time, the focus is on Peter Parker the human who is in love with MJ but cannot have her, because he is... Spiderman. The antagonist is Dr. Ock -- my favourite Spidey's villain. Looks like this version draws from "The Amazing Spiderman". Sam Raimi adds a lot of healthy jokes: 1) An employer named "Ditkovitch" --surely this is for Steve Ditko, the comic artist, 2) Relativity vs TS Eliot (Dr. Octopus was a physic geek trying to win a heart of Rosa, an English literature major -- as he friendly tells Peter in a dinner), 3) and many others (MJ's play is "The Importance of Being Earnest"!). However, the e-bay joke is a little too farfetched (Peter is sick of being Spidey. He quits. He throws his costume. Some guy picks it up from dumspter. He offers it to Jonah Jameson the Bugle's boss, for money. Jonah, as usual, is difficult, offering so little. That guy says, "I could get more from e-bay").

Other comments: 1). This draws from "The Amazing Spiderman" (I heard that was the chosen running title, before it changed to "Spiderman 2"), but expect some creative upgrading from Sam Raimi! For example, Dr Octopus controls his robotic limbs with a fuse chip on his backbone (in the comic, it's a panel on his chest). Also, he becomes the evil Doc Ock because there is a
miscalculation of incoming energy that happens to destroy the chip on his back (in the comic, it was a simple accident that made the limbs alive and became part of Doc Ock) -- of in both version, the limbs can occupy Doc Ock's mind. 2) Don't expect to see Human Torch here. In the comic we know that it's Torch who inspired Peter not to quit Spidey. In the movie, it's Aunt May's talking about "hero" (she was saved by Spiderman -- the hero he had been hating because "my nephew is so obsessive with him") and Peter's memory of Uncle Ben. I think Sam would have hard time to present Human Torch (in case you don't recall, Torch is the fire guy from the
Fantastic Four).

Other, other commets: 1). The revealance is staggering! I was shocked that Sam Raimi let the unmasking so easy (but realistic). I happened to think, oh maybe he wouldn't do the third sequel -- but then, he implied otherwise, by Harry Osborne got into the late Norman Osborne's secret
Goblin's room. I recall, only once Doc Ock succesfully unmasked Spidey, but even Jonah didn't get that Spidey was Peter ("I sent him to take Doc Ock pictures, not to pretend to be a stupid hero"). Was Stan Lee and Steve Ditko alright with Sam Raimi's version of revealing? I guess -- Lee is the executive producer of this movie! 2). The train scene was too much. Could Sam think of other things for substitute? 3). As one of my friends commented, if all metals got sucked into the energy sun, why didn't Doc Ock's limbs?

Anyway, it is a good movie. The "It's A Wonderful World" innuendo is nice (Parker decides to quit Spidey and he comes back to school: the background song is ... the rain is falling on my head....). It's very human(e), as said by Peter to MJ, his love: "I'm not an empty seat anymore... I'm different... Puch me and I'll bleed..."

I love this country

There are two things I kept thinking about on my flight home a month ago. Six years should have changed many things. (I am alright with changes -- I like changes). What I was really concerned with were internet connection and traffic jam.

 

And my concern has just been confirmed (one month of observation should be quite robust, I would argue). The internet connection has not improved. It's pathetically slow. Traffic jam does change -- it's gotten worse!

 

OK, one more thing: tv programs are all crap. I happened to see this program one day on one of the now-many channels. It was about a supposedly-generous guy giving big amount of money to a poor man. He asked this guy to spend that money (it's 10 million rupiahs) in 30 minutes and thus be given the right to whatever he managed to buy-- if I remember correctly. I don't really care with the theme -- but look at it closely. I have never seen such insensitive, stupid, snobbish, disheartening- show! That poor guy (a "bajaj" driver?) was treated just like an animal. He had to rush here and there trying to spend that money (he couldn't even imagine how big/small it really was, I conveived) in ... half an hour. And people are... laughing, really laughing, on him. He even, in the midst of hurriness and desperation to buy things, collapsed! Some guys tried to "help" him. He woke up after a while... and people... yes, laughing! Clapping hands and cheering him. I felt so terribly sad, especially because he didn't seem that he was being treated so badly. That was barbarian, heartless show. In the end of the show, a guy -- that "supposedly generous"-guy -- came. He wore an outfit as if he was a godly person, with a stupid Lincoln hat and stupid sidebar and stupid shoes and a stupid stick (well something was telling me, it couldn't be possible that that guy was NOT stupid in real life --  otherwise, why was he doing all that?). He came to the poor guy, counting all the stuff that poor guy managed to purchase and gave him the rest of that damn 10 million... People were clapping hands...

 

Is this society so sick already?

Again, software piracy

International Herald Tribune reports today that costliest software piracy is in Europe. The report is based on a study by Business Sofware Alliance. The report says, "In Western Europe, 37 percent of software running on PCs, servers and mainframe computers wa illegally copied in 2003... The worldwide loss to software piracy added up to $29 billion for the year...". So, who said it's Indonesia (only)?

Competition, ethics, and efficiency

Another provocative paper by talented Prof. Shleifer. In the recent AEA Papers and Proceedings (May 2004, for online, subscription required), Shleifer asks and answers "Does Competition Destroy Ethical Behavior?". He departs from focusing on efficiency, and instead he talks about ethics.

 

The cases he choose are interesting: child employment, corruption, excessive executive pay, corporate earnings manipulation, and involvement of universities in commercial activities. His exposition leads to a conclusion that competition can encourage the spread of censured conduct! This sounds negative -- and surprising, given it comes from Shleifer the Beckerian. Yet, Shleifer is Shleifer. He proposes three strategies for curtailing unethical conducts: long-run market pressure, moral suasion, and government regulation. Interesteingly, he asserts, "...These arguments about long-run competition are not compelling...", "... Moral suasion is likely to work better when competition is less keen...", and "... [O]ne should not expect too much from regulation, especially where the state's enforcement powers are limited...".

 

Shleifer also rhetorizes: "... Globalization and the victory of laizzes-faire economics has made competiotion keener in many countries and markets around the world. Does this imply that unethical conduct is also becoming more pervasive?" Of course, Shleifer the Chicagoan answers: "No", for two reasons: "Competition is the fundamental source of technological progress and wealth...", and "...[A]s societies grow richer their views of what is ethical change as well...". Shleifer concludes: "Competition is likely to propmote ethical behavior in the long run". My take? In the long run we are all dead.

Runoff very likely

As expected, we will have a runoff for the presidential election. But that's not the problem. Megawati is the problem. I smell money politics.

Non-use values

Attended a meeting on "Road Map for Indonesian Forestry" -- or something like that. I was bothered by the way some people calculate non-use values of forestry. Well, in fact, they did not calculate or estimate them. They took them from studies published some years ago, and simply normalized them with 2000 dollar prices. They did not consider growth rate of the forest. Not to mention damage rate. I was worried because the values are pooled in one table along with the use-values -- also combination of previous studies' figures. Forest grows (or dies). You can't simply normalize its value.

Back now

More than two weeks since I last blogged. Partly because this whole resettlement takes time. Other, extremely slow e-connection. I have talked with several people, and they agreed this is a national problem. There are only 3 main providers that serve the internet in the country. Bottleneck in the gate.

Anyway, I haven't really tuned in to the country's economic problems. But it is obvious that Rupiah has been very volatile lately due to the oil price ups-downs, and presidential election. An editorial in Kompas yesterday said: "Market, please do not overreact". What in the world is that? An analyst also said, "Government should tell government enterprises not to demand too much dollars" -- what a wishful thinking (and stupid, too).

Mergers to be blamed, too

While waiting for a shuttle to Narita airport this morning, I read The Japan Times (sorry, look for the links yourself, I am blogging from an internet cafe -- got limited time). A report says that the record high US oil prices have something to do with mergers of oil giants. The report cites a rencent study by US General Accounting Office (GAO). Among all, it says that the mergers of Exxon Corp. with Mobil Corp. plus 5 other oil companies since 1990 lifted US gasoline prices an average of 1 or 2 cents a gallon (another big merger was of Texaco Inc. and Shell Oil and Saudi Refining Co.). But, FTC (Federal Trade Commissioun -- FTC) called the GAO study flawed, because "it did not take into account other factors..." -- it is not clear what "other factors" the FTC meant. But isn't FTC suppose to be critical of such mergers?

Economies of scale, as it turns out...

Russ Roberts of Cafe Hayek offers an answer to the Kling-Cowen discussion on Hotelling-Simon puzzle. Kling follows Hotelling ("oil prices rise at the rate of interest"). Cowen rises the Simon's finding ("natural resources get cheaper over time in real terms"). Roberts reconcile the two with "creativity and innovation". His coblogger, Don Boudreaux, on the other hand, invites us to think of mosquito sucking on a balloon of blood. It's the size of the balloon that matters. But we don't know for sure how much blood the balloon has.

... and they said: don't blame it on OPEC

As if commenting on Adelman (see my earlier post), OPEC's president pleas not guilty -- or, as you read the piece, not solely. He also points on other non-OPEC members, speculation, so on. How about Bush's war, President?

One Terabyte!

Have you experienced bugs acting for YOUR advantage? Gmail, the email vehicle provided by Google is having "problem" with the new service. Instead of providing a free 1-gigabyte storage to users, for some reason, we get 1 terabyte! -- "too bad", they said this was a bug...

India's Djatun

In Indonesia, we have Dorodjatun Kuntjoro-Jakti. As an economist, he is one of the bests the country has. But history tells, being a good economist doesn't mean you can be a good politician. Now, India has just appointed Manmohan Singh as its next prime minister. Singh is a well-known economist trained in Cambridge and Oxford. He has been the man behind Indian liberalization. However when it comes to politics, "...He's miserable..." -- or so says Jagdish Bhagwati, Singh's friend.

It's not the deposit. It's the management!

Scroll down a little bit, you'll find my earlier post commenting skeptically on Indonesian's Minister of Energy and Mineral Resources overconfidence on Indonesia and OPEC in regards with oil price hysteria. Now, this news confirms my distrust. We are now a net CRUDE importer! (It's widely known that we are not good enough to refine our own oil. But now, even the crude we have to import!) We really have problem inside. It's the bad management.

Oil will not perish. Not in our lifetime...

Reading discussion on oil by Kling and Cowen, I follow Cowen's link to Julian Simon's bet with Paul Ehrlich. Eventually Simon wins. Does this mean Hotelling (a finite resource will increase in price by the same as the interest rate) was wrong? Or, just like Cowen said, we simply are confused?

Countdown, mixed feeling

I am leaving back for Indonesia. It's been four years since I last saw Jakarta, and eight years since I visited Makassar, my hometown. Have been looking forward to come home. To places I love. To people I long for. Then enter... this mixed feeling: Graduation ceremonies yesterday and the day before, they were so ... -- can't find the word. Now, feel really sad to finally leave this campustown. And nice friends...

Rationale for Bush's war

An opinion in Arab News introduces an interesting study by an Illini senior, Devon Largio. She has been studying the rationale for Bush's war in Iraq. One of her findings is that Bush switched focus from Al Qaeda to Iraq (i.e. Osama to Saddam) even earlier than 9/12/01 (as told by Richard Clarke). Here is the link to the thesis.

Stop coffee-ing? No way.

I appreciate advices. But against drinking coffee? Wait a minute.

The Commons

Kiesling recommend this new blog, The Commons. And I think it's worth it.

... and can we trust other members?

Indonesian Minister of Energy and Mineral Resources who is also the acting secretary-general of OPEC is confident that OPEC members would agree to increase oil production ceiling to stabilize price. As for me, I have little faith on cartel. Are we going to be 1980's Saudi Arabia? Or can we just rely on cooperation from non-OPEC members like Russia, Mexico, and Norway? My hunch is, no.

Economics of oil, again (and blame the problem on OPEC, again)

So everybody is talking about a recent article by oil economist, Morris Adelman in Regulation. (To my regret, I was lazy when I wrote a paper on this issue for Resource Economics class). Adelman goes "...There is not, and never has been, an oil crisis or gap. Oil reserves are not dwindling. The Middle East does not have and has never had any 'oil weapon'.". Commenting on U.S. policy, Adelman writes "... From the Nixon White House to the present, all administrations have approached oil and energy with command-and control policies. None of them attempted to analyze the problem using the price mechanism...". He conludes, "... U.S. policies are based on fantasies not facts: gaps, shortages, and surpluses... The myth is part of the larger myth that the world is running out of oil".

The Six Duos

So here they are. The candidates for the next president and vice president of the Republic of Indonesia. To me, it is down to 2 pairs: SBY-JK and AR-SY -- in that order.

Hat tip to Blogger

I just noticed Blogger has new face. More and more cool everyday. I am posting through email now.

"Six degrees of separation" for power elite

Alex Tabarrok of Marginal Revolution introduces a very cool website created by Josh On. This link brings you to Alex's post. It has an example of how the New York Times relates to Pepsi, Sears-Roebuck, Lucent Tech, etc. Are all these business giants necessarily biased to the left? Well, maybe not. Economics doesn't really care with political ideology.

Oil so expensive

Just came back from a long trip. Driving to Washington DC, New York, and Boston, I found gas prices so high. Paul Krugman explains about the oil crunch. He argues, "...We can neither drill nor conquer our way out of the problem. Whatever we do, oil prices are going up. What we have to do is adapt...". He also mentions that oil prices hike has something to do with big populations in China and India: "...Lately we've been hearing a lot about competition from Chinese manufacturing and Indian call centers. But a different kind of competition — the scramble for oil and other resources — poses a much bigger threat to our prosperity...". The latter bothers Tyler Cowen, who thinks Krugman is being inconsistent with his stand on free trade: "...I am surprised to see Krugman so qualifying his former belief in the virtues of free trade. Keep in mind that the core theory of international theory is a barter theory. "The Chinese buying oil" and "the Chinese selling bicycles" are just two sides of the same coin. If you don't think one can harm the U.S., you shouldn't, in general, think the other will harm the U.S. either. (Of course if your vision of free trade is we get the bicycles but give up nothing in return, we are worse off relative to that state of affairs!)..."

Paatje is still the same!

After four years of not seeing him, we finally met again yesterday. I was a little worried... I was told that I should expect to see an aging man. He'd been always my role model. A man with integrity, commitment, faith, and power. And, high quality sense of art and humor. Yesterday, I saw him again. Was so relieved: he's still the same person.... Good to see you back, Dad!

El Norte

His name is Enrique and her name is Rosa. They are brother and sister, survived from murder attempts by their parents killer in Guatemala. They are trying to find a good life in the North. El Norte, the United States of America. What they do find is hardlife. They loose more than they get. Rosa looses her soul. Enrique looses her sister. El Norte is no paradise....
Good movie. As Ebert introduces it: this is an American epic...