Thursday, July 31, 2008

What? SUV and Doha?

How to explain the Doha collapse to a kid ... (of course with much, much, much simplification)

  1. OK, so you want a big, sport jeep...
  2. That SUV needs lots of gasoline
  3. Fossil fuel are running out, substitutes are needed
  4. Governments encourage biofuel and biodiesels production
  5. Big subsidies on biofuel/biodiesel
  6. Less incentive for farmers to plant corn for food, more incentive to plant corn for biofuel
  7. Less incentive for farmers to produce palm oil for cooking, more to produce it for biodiesel
  8. Massive acreage switch from corn-for-food to corn-for-biofuel
  9. Likewise in palm oil production
  10. Massive migration from producing wheat to producing corn for ... biofuel
  11. Less quantity of wheat and corn-for-food and palm-oil-for-cooking-oil in the world market
  12. Soaring prices of those wheat, corn, palm oil
  13. India, the wheat eaters, panicked
  14. India banned its rice export to induce consumption switching from wheat to rice
  15. Vietnam thought it should also ban its rice export following India
  16. Philippines had a bad luck: from rice exporter now is a rice importer
  17. Philippines put high tender on rice
  18. World rice price surged due to (14),(15),(16), and (17) above
  19. China grew faster, needs more energy (and so start again from (1) above)
  20. Developing countries are much worried then ever with food security
  21. Bring the concern in (20) to Geneva
  22. US and EU are still stubborn with their farm subsidy (see also (5))
  23. Doha collapses .... (i.e (21) vs (22))
  24. Countries lose hope on multilateral trade agreements
  25. Back to regional and bilateral negotiations
  26. Spaghetti bowl effects are coming
  27. Protections are on the rise again
  28. Less gains from trade
  29. ... (this is where the kid can't take it anymore. Treat him/her with a good dose of ice cream)

Friday, July 25, 2008

New poverty lines proposed

Now the line is going to be $1.25. More realistic. It's close to our own poverty line. Better yet, use the relative ones. (Note: make sure you read Ravallion clarification to Birdsall's post.

(General Wiranto, before you come up with another laughable statement in your advertisement, remember this: 1 is not equal to 2 and is not equal to either 1.25 or 1.54).

In other words, outliers are important

Monday, July 21, 2008

On political ads

"I'm sick of Sutrisno Bachir's ads everywhere"
"Why? Isn't this a free country?"
"Yes, ... but, I don't know... I'm a little annoyed here"
"Everyone's annoyed by one thing or two, don't you think"
"I guess you're right"
"But hey, why are now people doing ads? I mean political ads? We didn't have this back 5, 10 years ago. Right?"
"For one, I guess, because they are many now"
"What do you mean?"
"When there are many sellers selling similar products, each needs to stand out from the crowd"
"You mean, like that thing you called perfect competition?"
"No, one step before that. It is called monopolistic competition"
"Ugh, monopoly?"
"Not monopoly. Monopolistic competition"
"OK, you lost me here"
"Look. Market spectrum goes this way from only one seller to sooo many: monopoly, duopoly, triopoly, ..., oligopoly, ... all the way to perfect competition, where there are so many sellers already, no single one can affect the market price"
"I see... but didn't you say monopolistic competition?"
"Yes, I'm getting to that term. But first off, let me tell you that that term is an unfortunate misnomer"
"Because it confuses people. Many think that it means monopoly. While in fact the term refers closer to the other extreme: perfect competition. Many sellers ... but not too many as in the perfect competition... Why is it confusing? Because, basically everything in between the two poles -- monopoly and perfect competition -- can be termed monopolistic competition... So I don't blame you if you're confused"
"But here's an advice. Don't tell people that I tell you this. When you have four sellers -- ok, let's not call it seller too often, let's use player -- when you have four players, you can safely call the market monopolistic competition... The textbook will require you to prove that the products sold are pretty much similar, too. But don't get too harsh on this..."
"Why four?"
"Because it's not easy to say tetrapoly, hahaha, I'm kidding"
"Examples would be helpful here..."
"OK, since we're talking political advertisements... let me think... OK. Remember Soeharto's era? Back then in the general election, we only had one candidate. That's monopoly. Then we had Gus Dur, Mega, who else... I guess there were 3 presidential hopefuls competing? Oh, Amien Rais? SBY? That was triopoly, at least let's assume it is, I can't find better example... Nowadays we have a lot more: SBY, Wiranto, Prabowo, JK, Sutrisno Bachir, Amien Rais, Rizal Mallarangeng, Gus Dur, Megawati... who else? My point is, now there are many"
"... But not too many"
"That's right. Not too many. Not 200, not 300. Only enough to make it a monopolistic competition"
"Meaning: ads matter. Listen. When you have some competitors, say 5, 6, or 7. And your products are quite similar, what would you do?"
"Ugh... sell smarter? harder?"
"Yes, but how?"
"Nice marketing? Unique?"
"There you go. Unique marketing. Meaning: advertisement. Iklan"
"Yes, iklan. When you are monopoly, you don't need that. When you are in perfect competition, you don't need that. But you need iklan when the market structure is a monopolistic competition one"
"Oh I see... That's why Soeharto didn't use big billboards at Thamrin or Sudirman or Gator Subroto? No ads on TV? ... But wait, he did have some iklan layanan masyarakat, right?"
"That's different. That's propaganda"

Thursday, July 10, 2008

a credit card conversation

"Hi, my name is --- I am your customer for the card number ---"
[usual identity checking]
"Alright, Sir, thank you for your cooperation. How can I help you?"
"My credit card is broken. I guess the way I put it inside my wallet is responsible for that"
"That's too bad. But can you still use it?"
"Sometimes yes, many times not. And that's why I'm calling you now. Even if it works, it's only after multiple sweeping by the store guys"
"I see"
"So, can I get replacement?"
"Let's see... Yes you can. But your card will expire September. That is... in two months"
"And your point being?"
"For a replacement you're charged 50 thousands rupiahs"
"That's fine. I need the card. I travel a lot"
"Do you have other credit cards"
"Yes I do. But why is it relevant?"
"Because I think you'd better use them while waiting for the new card in September. That way, you save Rp 50,000"
"Oh, you're suggesting not to use your card in this coming two months?"
"Ugh, yes, sir"
"What if your boss know this?"
"What do you mean?"
"Never mind"
"Sir, if you have another card, why do you want to use our card?"
"Well, for one, I want the points. I want to convert them later to my mileage bank"
"Oh I see. But again, Sir. Just use the other card. You save Rp 50,000"
"Alrite, I have to hang up now"
"Ugh, Sir... may I ask where you work?"
[I told him where]
"Ugh... is there an opening? Vacancy or something? I have an S1 in ...."

Wednesday, July 02, 2008

New paper

Heterodox Reform Symbioses

Christian von Luebke
Neil McCulloch
Arianto A. Patunru
Siti B. Wardhani



Many countries are embracing investment climate reforms in order to facilitate higher investment and economic growth. Interestingly, these policy efforts – although based on similar institutional recommendations – give rise to distinctly different results across and within countries. Much of the existing investment climate literature favors a rule-based 'good governance' approach, in which less advanced economies are advised to boost investment and growth by adopting well-established OECD-type institutions and practices. While there is little doubt that the protection of property rights, low corruption, and effective public services are desirable long-term objectives, it remains questionable whether orthodox institutional prescriptions are the most promising pathway to get there. By taking a deeper look into the political economy of the city of Solo, we argue that relationship-based (rather than rule-based) cooperation can be a key factor for policy reform. In this paper we demonstrate that informal deliberations between government leaders and local firms can provide an effective mechanism to improve local investment climates. In the case of Solo, a 'heterodox' public-private symbiosis – between the mayor and a broad spectrum of multi-sectoral/scale/ethnic firms – has stimulated important regulatory and administrative reforms and contributed to a rise in private investment. ***

The paper was presented last week at IDS, Univ. of Sussex, UK. The revised version will be posted here.