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...

Spoiled BraD

I knew it! Of course Brad is happy to be an intellectual giant. Oh, narcissism...

Got one giga?

Google launches a webmail with huge capacity and without popups. Sign up here (Note: this is a beta version and for now, it's exclusive for Blogger users).

Maddux, not Clemens -- Aria's protest

Commenting on my post yesterday, Aria seems bothered by Solow's comparing Clemens to best economists. He believes, it should be Maddux, his favourite. Sorry, I know nothing about baseball! Aria recommends me to read the bestseller Moneyball.
By the way, thanks for the link to a guy who declares DeLong as his blogger hero -- I'm not kidding!

Wheelan said it all

In Naked Economics, Charles Wheelan writes about how important human capital is:
"... I once interviewed Robert Solow... I asked if it bothered him that he received less money for winning the Nobel Prize than Roger Clemens, who was pitching for the Red Sox at the time, earned in a single season. 'No', Solow Said. 'There are a lot of good economists, but there is only one Roger Clemens.' That is how economists think..." pp.100.

The Sixth Ebertfest is coming to town

The Sixth Roger Ebert's Overlooked Film Festival is coming. Checked on to my calendar: "My Dog Skip" and "Once Upon a Time... When We Were Colored". What I like from Eberfest is discussion following movie screening. For this year, Ebert promises, there will be a surprise guest onstage after My Dog Skip. Kevin Bacon or Diane Lane?

Why I don't care with "fair trade" coffee campaign

I am a coffee addict. Lately, all coffee houses that I go to offer "fair trade" coffee. Even Starbucks claim to only use coffee from fair trade (I don't buy their claim). The idea is to protect small coffee farmers. But I am always suspicious with this kind of "protection". Because there is always room for manipulation in the middle. And as this article notes, "...another sticking point inside the movement are the requirements for being certified. Germany's Fair Labeling Organization (FLO), which certifies all fair-trade coffee in the world, charges farmers $2,431 to certify plus an annual base of $607 for recertification and $.02 per 2.2 pounds of coffee sold under the fair-trade label..." And you say you're helping the poor farmers?

Of course it's exclusive!

Is there a single organization in the world that is NOT exclusive? This whole criticism against certain political parties for being "exclusive" really annoys me. For example, one party is accused for being exclusive only for a certain segment of muslim population. Other is "exclusive" for being open only for christians. The critics say they can't accept such "exclusiveness" because it will lead to antidemocracy. To me, the criticism is just another form of religio-phobia. Why are those critics fine with political parties that are "exclusive" for "nationalists", "exclusive" for labor, etc? The worst thing is that, they seem not to understand that any organization is inherently exclusive. If an "organization" is open to all types of segment, personality, religion, education, etc, then why was it formed in the first place? By definition, organization is a group of people with the same objectives. Repeat: the same objectives. Is it possible that everybody's objectives are the same? No. That's why you form an organization. And that means: exclusive!

Moving more leftly?

I wrote once that I was a moderate, libertarian leftist. Yesterday Aria and I drove up to Chicago. We listened to Al Franken's audiobook, "Lies" (I hate long titles, so check it yoursef). Interestingly, I found myself agreeing to almost all of his argument against conservatives. Maybe it's not really the ideology that I am against with, totally. But I surely hate Ann Coulter, racist Russ Limbaugh, and especially King Liar Bill O'Reilly. Maybe that's why I agreed with all the bashes by Franken. Even though he seems to have big mouth too, sometimes. Am I liberal?

Dangerously comfortable zone

Had a chat with a colleague over the phone. He is a deputy director of leading research institute and also a respected economist. He was concerned with the fact that most bright, young scholars have been spoiled too much by the media. The information business is making good deal of money selling academicians into the public. Doesn't matter you're really capable or not. As long as you can talk with confidence, the media will grant you a celebrity label on your chin -- even though you are cheap talking. Some get really spoiled. They think they have achieved everything, while in fact they are rotting themselves. We agree, no matter how busy we are with projects, pursuing academic achievement should never stop. Otherwise, we're entering that red zone. One way to avoid this, we figure, is to maintain professional network with international academia.

First mover advantage vs "Burn the ship" strategies

I offered my rationale and strategy for voting: "... Before you vote for a particular party, let your friends (and enemies, if you have some) know that you will. Make sure you reveal your preference...".

Aria Novianto, on the other hand, offers a "first mover advantage" theory: "...In the bargaining game first mover has a huge advantage. Especially in short (one) period game. First, you set your terms, what you really want out of the candidates. Offer your support to your first choice candidates, their only options being to accept or reject your terms. If it's still early in the game, they know you have the option to offer it to others.... know this is too simplistic, but in general first mover has an upper hand....".

It appears, we are looking at voter's behavior from different perspectives. Aria limits other peoples' options, make them accept his terms, because that's the better choice they have left with. Mine is, to limit my options, in order to increase my commitment, while trying to persuade others. The latter follows "burn the ship" strategy of General Tariq bin Ziyad in the war of Gibraltar.

This guy loves Rubin and hates Mankiw

I wrote once, Krugman likes Rubin. Here's more by Paul himself.

"...it's pretty clear what John Kerry's economic philosophy will be. He's surrounding himself with advisers closely tied to Bill Clinton, and even more closely tied to Robert Rubin, the legendary former Treasury secretary. In office, we can surmise, Mr. Kerry would follow a Rubinesque strategy of bringing long-term budget deficits under control through a mixture of tax increases for upper-income families and spending restraint. No doubt he would move slowly on deficit reduction as long as the economy remained weak, but his advisers would tell him, as Mr. Rubin told Mr. Clinton, that responsible long-run budget policies are good in the short run, too, because they help keep interest rates low...".

And, he really hates Mankiw: "...George Bush has, of course, tried to be the anti-Clinton in all things. His advisers rejected Rubinomics and hearkened back to Reaganomics, insisting that long-run tax cuts, never mind the effect on the budget deficit, are the key to growth. For three years, they've had nothing but red ink to show for their efforts. Now they've had one good but not great month...."

Romer on tragedies of the commons

Attended a talk by Stanford's Paul Romer on the tragedies of the environmental and intellectual commons. He argues that assigning property rights to environmental commons has been proven effective in many cases. However, when it comes to "intellectual commons", property rights system has to deal with way more complex an issue. He uses downloadable music as an example. It's very hard to impose property rights or royalty system in that particular market. Napster has pirated, been sued, reborn again with supposedly legal face. iTunes is more legally careful. But still, you can't stop all the illegal downloadings. How to solve this? Romer (and I agree) points out that the big chunk of rents go to the record label companies. They are the ones who inflate the price of ideas (read: music). [I am told by a friend once that Dave Matthews has solution to this: leave record companies, do life concerts].

Another good point from Romer's talk. He said, the Who's guitarist Pete Townsend was the founder of feedback (this is a technique in twisting sound in guitaring). What if Townsend assumed a monopoly rights to it? Meaning, everybody who wanted to use feedback technique has to play royalty to Townsend? Then we would never heard of Jimi Hendrix improvisation.

But I have a small problem with Romer's matrix. He graphs a matrix of commons against property rights. In the first column are environmental commons, and second intellectual (he used "ideas"). Listed in order of strength in property rights protection imposition in the first columns are land (100% protection), fresh water (about in the middle), and common pastures and fish in the ocean (both are 0%). In the ideas column, list include recorded music (100%), pharmaceuticals and "cross-docking" [like what WalMart does] (about in the middle), and PCR (polymerized chain reaction -- I have no idea what this is) and oral rehydration therapy (both are 0%). Look closely. In fact Romer mixes up between private goods and public goods. Land is 100%. Sure, because it is (in almost all cases) very close to being a private good (of course "assigning property rights" is trivial. You don't even assign it! It is earned). And recorded music, being more complex, is a quasi-public good: it's nonrivalrous, but it's excludable (trust me). He should have been more clear on this.

Update: My friend Basanta Dhungana has additional observation from the Romer talk yesterday. Basanta summed up: "...[Romer] opined that knowledge that generates knowledge (knowledge spill over) should not be regulated with full property right. Assigning full intellectual property right precludes other to innovate further. Therefore, government should invest on such knowledge based innovation..."

Econ: Toughest after CS, Phys, and Math?

Craig Newmark, guest blogger of Marginal Revolution writes on graduate study in economics. Interesting. Among all: "... of 28 graduate fields, economics ranks fourth-toughest (below computer science, physics, and math)...". Craig quotes this from an article by Roessler in econphd.net. The article also has tables of GRE score comparisons and econ depts rankings.

Cap-and-trade not good for mercury?

So one of my committe members asked me in my defense day. Why so bother with PCB pollution? Those heavy metals stay at the bottom of the lake. How should that be a concern for homeowners? As I noted in some footnotes, these pollutants may cause cancer and other defects. I should have really moved them from footnotes to the text. Today Krugman writes about policy on mercury, one of the PCB substances. He goes further as to assess the recent policy administered by the goverment, the cap-and-trade policy. He points out that C&T is only good for light pollutants. But it would be wrong to use it to control heavy metals. As for mercury case, polluters would rationally buy the permits and... we're waiting for the next Chernobyl.