The Politics of Rice 5

[Crossposted at CafeSalemba]

Kompas today has a report with a subheader: "It's a like a rat dying in a rice warehouse". This is an old saying Indonesians use to express the irony of someone's inability to make use of generous opportunity; or when someone is prevented to do what's best for him/her.

The saying applies to Indonesian peasants. The article reports that majority of the recipients of "raskin" ("rice for the poor" -- a government program that gives rice to poor families at price significantly lower than the market price). Why the irony? Because those peasants produces rice. Yet they have to buy rice. This is just another way to say that the poor peasants are net consumers.

Question: 1) For net consumers, which is better: higher or lower price? 2) Does import increase or decrease domestic price? 3) Is it good to give import license to only ONE company?

If you read my previous posts you surely know what my answers would be. Yes, higher price might stimulate increase in employment. But see my previous post citing a study by Warr. Yes, it's good to remove import ban. But giving a sole authority to Bulog is not. Allow everybody to import. If only Bulog can import, the effect is the same with quota. Every economics student knows that's bad.