The Politics of Sugar 1

This can go on and on and on. Now is sugar time.

Kompas reports the government has set a new "support price" for sugar. Read here (in Bahasa).

What is "support price"? It's just another form of protection given by the government to, well, support the price of a product. The idea is to "ensure that farmers receive a reasonable, fair price" -- just like Minister Pangestu claimed.

As the name suggests, support price is supposed to keep the price not to fall below a certain level. (Clearly for the benefits of producers and at the consumers' expense).

What happens if domestic production of a good increases? Well, naturally the price should go down. But the government and the producer don't like that. Hence the support price. What happens if domestic production stays constant or even decreases? Obviously, you don't need a support price. Or you can have one, but it will be useless, or ineffective.

But, surely an effective support price is an incentive for foreign production to enter the domestic market through import. How to "protect the domestic producers"? Impose import quota, or stronger yet, just impose a total ban on import.

Now the best part. What if the government sets a support price which is ineffective? "It's politics, stupid".

After all, the whole idea is to protect the sugar farmers (again, as the Minister claims). Now, the world market price is Rp 6,200 per kg, while the domestic support price Rp 4,800. If you really want to do farmers a favor, why not letting them enjoy that higher world price? But the government says, the buyers out there are ... evil (an evil who offers higher price?). Let's get back to this evil buyer issue later...

The Politics of Fertilizer 1

"Government to ban fertilizer exports, permit some imports" is the head of this article from today's The Jakarta Post.

The natural question is: "Huh?"

Look one by one:

1. Government to ban fertilizer exports. Why does it need to do this? Of course, if the policy is to be effective, the existing situation is such that the world price is higher than the domestic price. Otherwise, "banning export" doesn't make any sense, because after all, there is no incentive to export.
2. Government to permit some imports. Why does it need to do this? Of course, if the policy is to be effective, the existing situation is such that the world price is lower than the domestic price. Otherwise, "permitting import" doesn't make sense, because after all, there is no incentive to import.

But how come the two come together as suggested by the headline? Which one is correct? What goes wrong? Of course your answer would be: "It's politics, stupid".

Thugs, thugs, everywhere

As I'm writing this, the online version of today's The Jakarta Post has not been updated. But go read the editorial of today's print. It is aptly titled "Thuggery as Law". What The Post means by thuggery is exactly what I refer to as the act of the "terminators".

Of worth-thinking, The Post says:

In a confused libertarian society such as ours, lawlessness is glorified and agents of chaos knighted as persons of authority.

Indeed.

As I said earlier, I don't understand why the police are so ridiculed by these thugs. Now, almost every political party or organization has its own army of thugs. They are happy to terminate whatever they don't like.

And the government keeps silent. Where does our money go?

Yet another minor makeup

(Coerced) readers of Exegesis complained about my new skin. Rizal said: "Dude, I don't like your new skin". Patricia complained: "Too plain, too pale", Oki (Ki, set up yours, would you?) suggested: "Be a lil' more colorful". Ces Mad told me, "That's so not you: changing things up...". Thanks, guys. At least I know you come visit :-)

But, as I found out, part of your dissatisfaction came from your using Internet Explorer as your browser. Guys, that thing sucks! It shows things worse than they actually are. Change to Firefox!

Consumer is the king. So I have made a little makeover. Not too much. But I have put some pictures in the sidebar. I hope my cute-half doesn't mind my using our picture.

I confess, I have way more ideas to improve this blog than I can. Alas, I'm not a CS-HTML-and-all-that guy. Don't even think of "view page source" this site. It shows how novice I am. (It reminds me of my GAUSS programming days. It was exciting and embarrassing at the same time. Especially when my CS friend who is also an economist saw my 30-line code and he quickly suggested tranforming it into 10-something-line code!).

Update: When I said "consumer is king", I was in sarc mode. So Rizal, don't ask too much :-)

Supercops Terminators

That's it. These guys just never get it. It amazes me how they are free to do this over and over again. I have no problem with their burning any magazine, as long as they buy it first. For crying outloud! Look, the man says:

We have reported the chief editor of the magazine, the models, journalist, photographers and 26 companies that have placed advertisement in the magazine to the police.

Yeah right and yet you go on with your usual brutality, ignoring whatever the police says. Who needs police if you heroes exist?

The Selfish Labor

No, there's nothing wrong with being selfish.

But calling your selfish act as social in the name of the people is dishonest and misleading. I'm talking about workers that protest the revision of Indonesian 2003 Labor Law. Central in their rallies is the fallacy that protecting their rights is good for the whole country. I say bull. It's good for them employed workers only. (And that means just those working in the formal sector). It's obviously a barrier to informal workers and unemployment in general. There's nothing wrong with negotiation. But don't lie. If you are protecting 30 percent of the people at the expense of the other 70 percent, don't say you're protecting everybody.

Revise that law. Now.

Update: Rasyad A. Parinduri says it better.

Great disruption

Together with Mochtar Pabottingi of LIPI (Indonesian Institute of Sciences), I gave a talk on Fukuyama's Great Disruption at Freedom Institute. (It's not really a new book, but Freedom has just published the Indonesian edition -- an appreciated effort). Here's what I said, more or less:

Summary

Social capital is “a set of informal values or norms shared among members of a group that permits cooperation among them. If members of the group come to expect that others will behave reliably and honestly, they will come to trust one another”. Social capital (in the US and Europe) has been depleted: rising crime rates and increased family disruption. This is a “Great Disruption”.

Main reference

To elaborate on the views on “the contradiction of capitalism”, FF refers to sources like Edmund Burke (who blamed French Revolution and Enlightenment Era for the GD), John Gray (who blamed the fall of the Berlin Wall), Fred Hirsch (who blamed growth), and even goes further to Schumpeter, Daniel Bell etc (for possible conflict between market and social order). Thank God, FF doesn’t buy all this stuff – at least not all. In fact, he says those arguments are not even-handed. He then balances the literature with the likes of Montesquieu, Samuel Ricard, and Adam Smith (rightly, FF uses “The Theory of Moral Sentiments” rather than “The Wealth of Nations”) who argued, among all, that trade is good for developing social capital.

Where FF stands

FF stands quite on the center. But not exactly. Note, for example, he says that the view that social capital belongs to the society is wrong. It is produced by private market. Being honest, trusted and all that is every firm’s way of maximizing its profit, not because it is concerned with the society (pg 314 of Indonesian edition). It’s not surprising. Had he been more in-depth on Hayek, he might not even need to write this book. A point that leads us to “spontaneous order”. “Slug” is definitely a spontaneous order. (Did I just reveal where I am in FF’s Figure 8.4?).

My impression

This book is confusingly ambiguous. You can easily find contradictions here and there (and you are asking yourself: Is this really that famous Fukuyama?). It might as well be just a reflection of FF’s political pendulum (neocon or what?). Or even his swinging academic viewpoint (We still remember how he declared liberal democracy as the last man standing and then later seemingly declared the death of the last man and turned to the state again). But anyway, I think the main weakness is on the methodology. It's one thing to say that social capital is declining and that the quality of life is lowering. But establishing the relationship -- causal, if possible -- between the two is another. FF fails to establish such connection. And what's so special about "trust" anyway? That guy Thaksin Sinawathra, to take a very recent example, lost the trust from his people. But what forced him to step down is also another trust: a trust that grew up within the people he had been oppressing. So, which trust are we talking about? Most dangerously is FF's attempt to persuade us to give trust to the State -- at least that's what he's implying by worrying that the participation rate in general election or membership in political parties were declining and that's not good for life quality, again no strong connection. What? The state should earn trust, not "get" it. If FF's line of argument flawless, we should just register to as many organizations as possible. That will increase our life quality.

If I were to write on this topic

I propose Sobel’s 2002 JEL paper definition: “Social capital describes circumstances in which individuals can use membership in groups and networks to secure benefits”. It is drawn from Pierre Bordieau (1986): “Social capital is an attribute of an individual in a social context. One can acquire social capital through purposeful actions and can transform social capital into conventional economic gains”. Obviously FF’s argument is not unique. Putnam (1995, 2000, “Bowling Alone”) has similar view, that, as summed by Sobel, “a dramatic decline in the level of participation in group activities” threatens the quality of democracy and the quality of life. He lists some negative effects e.g. destabilizing democratic institution, lowering schools effectiveness, etc. In short, Putnam’s view is pretty heroic. And Sobel attacks all that. If I were to review FF, I’d save time by suggesting people to read Sobel’s review on Putnam. The tone would be the same. Because GD is just another way to lay out Bowling Alone all over again. FF is Putnam. They both argue that, again borrowing Sobel’s sentence, “measurable declines in group activities cause bad outcomes”. As for me, SC is just a possible consequence of human action in his or her society. When it’s beneficial for him/her to engage with other people, vice verse, then SC is developed.

My countertrend

Just like Nicholas Lemann (1996, “Kicking in Groups”) who offered countertrends such as small business and restaurants, I would like to offer the … blogosphere. If Putnams says “You can’t make friends using telephones; but you can use the phone to maintain friendships”, I’d suggest him to go look Friendster. If you can measure somebody’s social capital by looking at the size of his Rolodex, why don’t you want to look at somebody’s circle of friends in his Friendster?

Can a scientist be wasted?

My brother-in-law works for the Tokyo-based NSK Ltd. He went to Tokyo Institute of Technology and got his PhD in "impact energy absorption technology" -- I have no idea what that is. Having earned his degree, he went home, trying to find a job. He couldn't find any that matched with his qualification. He even visited ITB (Bandung Institute of Technology) only to find that the Institute doesn't have a course of his specialization. He did pursue academic career further, but he likes "to apply it in a real life".

So he went back to Japan. Now he's busy with NSK's R&D Dept, researching "crashworthiness" -- again I don't know what that thing is. Despite his constant urge to come back home and work in Indonesia, he lives a happy life with his family in Tokyo. As I can tell from my sister's stories.

Why am I telling this? Kompas today runs this headline, saying that Indonesian scientists' talent and skill are wasted. The article blames the country's lack of "grand strategy" to develop science and technology and of good long-run program of human resource development.

I know what it means. But I don't think scientists can be a waste. If you can't "use" them, somebody else would.

Greg Mankiw's Blog

It's always a good thing when a professional economist comes back. The blogosphere welcomes Greg Mankiw. Yes, it's *the* Mankiw.

Via Arnold Kling.

Labor IS a factor of production

SBY seems to have missed his Solow chapter on growth. While he's correct that "real wage should equal productivity", he insists that "labor shouldn't be treated just as a factor of production". How not so?

Read here (Bahasa Indonesia).