Friday, October 28, 2005

Marxian call for, well, market

CafeHayek, in a Marxian tone calls us:
Economists of the world, unite! Help the world understand the role of prices.
I'm in.

Thursday, October 27, 2005

President should buy ... helicopter

Surely this kind of news shocks everybody. First, it shows how uncoordinated the administration is. Second, the timing is bad. In this account (in Bahasa), it is explained that the budget increase is for buying the president a private airplane.

I think, instead, the president should buy ... a helicopter! I hate it when the government officials are transported. It always creates traffic jams. That costs me time.

Tuesday, October 25, 2005

What? It's not Ben?

I don't know if this means official already. But CafeHayek tells us that Bush has chosen the new Fed chairman. And it's not Ben Bernanke. I don't know much about Robert McCleskey. What I know from the candidates list, Ben is quite the best replacement for Greenspan. I'm not alone.

Update: It's Ben.

Wednesday, October 19, 2005

Keynes is more than that, my friends

Recently, I gather that critics of Keynes usually don’t understand Keynes very well. They believe, Keynes is all about Big Government, and that is bad; full stop. So, they find it strange that a person like me, who loves how the market works through price mechanism and hates big government still has belief in Keynes. Worse yet, when I argue for liberalizing the market, they think I am a convert. Strangely enough, they are the ones who come up with policy recommendation such as cash transfer as a compensation for oil subsidy removal, that economic downturn is caused by investment shortage, that herd instinct is more desirable than hoard instinct in stimulating growth, that monetary policy “might have its limits”, that deficit spending is sometimes -- many times -- needed. And they say Keynes should be despised? In fact, they even call for bastardized Keynesianism: that the government should create jobs; that the government should lead growth. These two, even me have reservation.

Tuesday, October 11, 2005

Schelling gets the award

The 2005 Economics Nobel Prize is shared by Bob Aumann and Tom Schelling. I am not too good in explaining who they are. In fact I think it would be tough to explain their works to students in undergraduate level, especially Aumann's contrbution. As for Schelling, his works are (or, could be made) less complex, yet are powerful building blocks of evolutionary game theory. So, how would I explain them to my students? I will go:

Both Aumann and Schelling are top notch game theorists. Aumann's papers are tough. By contrast, Schelling has written some non-technical books. Go find them, especially The Strategy of Conflict.

Somehow I know what to answer the next time my wife complains to me why I don't like too many open options offered to me. ("You're strange. I thought economics is an art of choice. Why do you complain when I tell you that to go to Building X you can choose either way 1 or way 2 or way 3 or... so forth. You always want less options"). Now I know the answer. Schelling has taught us! It's the focal point that interests me. Too many similar options can blur my focal point. Yes, it's the... Schelling's Point.

Tuesday, October 04, 2005

BBM price hike and a credit for the govt

I was attending a meeting in Thailand when the news broke out (yes, another one was the Bali bombings -- I am too sad to talk about this). It said, the government of Indonesia cut the fuel subsidy and accordingly raised the price. I was admittedly a little surprised with the magnitude, having seen all the resistance while the policy was underway. For premium gasoline, for example, I was hoping a full subsidy removal, but expecting somewhere between 50 and 80%. It was 87.5%. As for kerosene, I wasn't that surprised (it was a 187% hike) -- knowing that its former price had been the root cause of illegal mixing with premium gasoline.

But, I applaud the decisiveness. After all, this was a brave, unpopular call. And it was inevitable. It was really a matter of time. Some people argue that the timing is bad. I think it's not. In fact, there should be a dampening effect with the seasonal Ramadhan shopping spree, as opposed to that if the price adjustment took place before or after the Ramadhan. In addition, experience has told us that such price hike will on average have only 3 months of effective impact. Therefore, while we should submit to a double digit inflation this year (probably 11-12%), next year should be better.

Having said that, I am not hesitant to give a credit to the government. I even raised a discourse among fellow critics that cabinet reshuffle might not be the most important issue anymore (I think the demand for reshuffle is a function of the success of dealing with the oil problem). The recently launched "October 1, 2005 Package" provides another justification for that position. The October Policy includes, among all:
  • Reduction of sugar import tariff.
  • Removal of industry raw material import tariff.
  • Removal of converter kits import tariff.
  • Reduction of container handling charge and installment of a 50% cap on surcharge.
  • Closure of 73 truck inspection stations ("jembatan timbang").
This might be hard for some people. But that's the bitter pill for the better will.