Thing Singaporean

After one meeting yesterday in Singapore, I took a cab from Boat Quay. And this conversation followed:

Me to taxi driver (TD): Hi, can you take us to Hyatt?
TD: Yes, come get in. (So we got in)
Me: We're gonna drop him (I was referring to my friend) off at Hyatt, and then you take me straight to the airport, OK?
TD: Well, no, Sir. Can't do that. I serve just "the city" now, can't go to the airport. You have to take another cab at Hyatt.
Me: You can't go to the airport? Is it a rule?
TD: Yes, it's the rule.
Me: Oh, I see. What if I ... double the pay?
TD: No, Sir. Can't do that. I will get another passenger in Hyatt. There's always a passenger. This is rush hour. (Then he was pointing at long queues waiting for taxis all along the Orchard Road). You see those long lines, Sir? This always happens. Around this time (he was pointing at the clock on the dashboard), everybody wants taxi. People should wait long to get one.
Me: (Teasing mode on) Singapore needs more taxis. Don't you think so?
TD: Oh, no, Sir. We're fine. We can handle (the demand, I suppose he meant).
Me: But ... you just pointed to me those long lines.
TD: Yes, but no need to add more taxis, Sir. Too many taxis already.
Me: Why, because that would drive down your price?
(Silent)

Singapore | Equilibrium

Footballnomics: exception #2

Q: What is 'Incemental Capital-Output Ratio' (ICOR) and what does the number explain?

A: Simply, ICOR is the ratio of investment to output. If the number is high then the economy requires a big amount of investment to produce a certain output level . Hence, high ICOR constitutes inefficiency.

An example of high ICOR is: Ghana. They produced a lot of shots on goals, but did produce any goals against Brazil. Other example: Holland in Eur0 2000 when they were defeated by Italy in the semifinal, or Manchester United's Andy Cole a few years back.

World Cup

Footballnomics: exception #1

OK, I said earlier that I don't like mixing football and economics. But this is a minor exception.

Q: What is an example of 'substitution goods'?
A: Steven Gerrard and Frank Lampard.

Q: What is the example of 'complementary goods'?
A: One of either Michael Carric or Owen Hargreaves to either one of Gerrard and Lampard.

Q: What is an example of 'non-increasing return to scale'?
A: Having: 1) a 31-year old David Beckham, and 2) Frank Lampard. OK, Beckham is truly the best crosser and deadball specialist. But he makes it up by slowing down the game. He can't pass an opponent and are often easily beaten. Virtually, most of England's threat came from the left. And Lampard -- his passings are awful, and he baloons the ball too often. And worse, he's a Chelsea player!

Q: What is an example of 'opportunity cost?'
A: By dropping Beckham and installing Aaron Lennon in the right wing, how many potential goals should England sacrifice, vs. the potential of getting more goals from the change in style.

Q: What is an example of 'sunk cost?'
A: Eriksson's decision to bring 2 half-fit, one nonprolific and one inexperienced strikers. (Now as Owen is totally injured, he's left with 3.

World Cup

Some World Cup-related pieces

As always, during the World Cup month, productivity always declines. But the manager has threatened to cut our paycheck if we don't deliver. So this is just some updates.

When I wrote this entry, Ujang is suffering a severe depression in New Haven after the Holland team had to go gome early after controversially get defeated by Portugal. I was only relieved after England unimpressingly beat Ecuador. Well, that means two thing: 1) England don't have to play against Holland in the quarter final, which may incite a cold war between Ujang and I, and 2) from now on Ujang will be at the same side as me in supporting England. The good thing is Germany and Argentina -- two of the biggest England's nemesis -- will have to eliminate each other.

So far, the only surprises in this Cup have been the advance of Socceroos Ghana advance the second round (and the Checz Republic early exit). Like England, Brazil, France and Italy have not been too impressive. Germany is surpisingly playing good attacking football, and I'm no Germany fans! The same thing with Argentina.

World Cup

Footballnomics: Is it Going to be on the Menu?

OK - it's the World Cup month. That explains why Ujang and I who are football-maniacs and can boast to have been members of the FEUI football team (not that it's something to boast about, really - we were crap!) have been too quiet. Yes, unlike some colleagues (like our European friends in Kafe Depok, for example) we don't really keen on capitalizing the World Cup fever by offering special menu on footballnomics or econofootball.

Why not? First, in an after hours discussion among the Cafe Salemba bloggers, we felt that multidisciplinary discussions are not always useful in practice. That says, economics may not be improved or better-off by using football analysis. But more importantly, football in itself has already been interesting. Much more interesting than economics. Other than vanity ,analyzing football game using economics approach will make it be boring.

Second, the aforementioned hosts will be so busy following the World Cup that they won't have time to think about all of those cute references they always seem to find. Their posts will be pretty much like this.

Third, we have to admit there's already a number of excellent blogs with footballnomics posts out there. See for examples here, here, here, or here, In short, if you really need your footballnomics fix, there are plenty out there.

Fourth, the Manager keeps reminding us that when we did talk about footballnomics (examples are here and here), the responses were okay. But when we talked about life's other distractions such as food, raunch, polygynous marriages, and of course stupid economic policies, the responses were much better.

So, there you go. The Cafe will be a place for those seeking reprieve from the suffocating fever that is the World Cup. Sick of the World Cup? Come to the Cafe! Some of you will probably say this is just a clever ploy to bring in more female readership. We categorically deny the accusation.

Note:
1. Ujang contributed to this post. In fact, he was the one reminding me that we were once players -- crappy players, so we chose to become economists instead.
2. It's football, not soccer. That is a political statement.

Footballnomics

From the Manager

Hi,

Nu-soul, anyone?

A frequent visitor sent us an album of Maliq & D'Essentials. And it's not bad at all. In fact, we're convinced that this relatively new group can help motivate good music in Indonesia. Try their "Sampai Kapan" and "The One". They're quite fun.

If you're moved by Maliq & D'Essentials, we've got Braxton Brothers next in the palylist. Listen to their bass-sax dialogue in "Do What You Feel".

Happy soul-ing.

Money or rice? Money or diamond?

Consider a poor family. The father works as a peasant in his uncle's paddy land, for a sack of rice every week. He still has to make money by working as tukang becak. ¹ The money is barely enough to buy fish or vegetable, not to mention schooling or even decent clothing for the children and their mother.

According to BPS (Office of Statistics), the family is eligible for raskin. ² That is, the father can buy 20 kgs of rice at price sixty percent lower than the market price every month. Sounds good.

But probably not too good. Remember, this family gets rice from someone (the father's uncle). So they don't need rice from the raskin program. What does the family need? I don't know, you might not know, and for sure the government doesn't know. It's probably medicine, books, kid's toys, we don't know. It's the family members who know for sure what they need.

Assuming they need medicine. They don't have enough money, but now, thanks to the raskin program, they have more than enough of rice. What would they do? Sell the surplus and use the money to buy medicine.

Now if the government wants to help the family, is it better to give it rice or ... money? Bear in mind, converting the rice into money might require transaction costs (looking for buyer, bargaining, etc). If the family gets the money, not the rice, they can avoid the costs and they can save time (imagine if the medicine is of urgency).

The government does have another program that gives away money -- hard cash. It is called the "BLT" (bantuan langsung tunai -- direct cash transfer). I was skeptical to this idea, but I heard the problems have been reduced, albeit gradually. ³ So if I had to choose between the two: money or rice, it would be the former.

You might think now that I'm a welfare statist. No, I'm just trying to compare the effectiveness of two welfare programs. Any such program should be temporary, if really needed. I raised the idea above in a meeting with officials from BPK (Supreme Audit Agency) who were requested by the Ministry of Finance to audit Bulog's (State Logistics Agency) performance. Raskin was a well-intentioned program. However, it's been a playground for corruption.

Now, let's think about another situation -- this time without the government. There are two lovers. The guy wants to impress the girl. Conventional wisdom tells him: buy her diamond. But is it better to give her ... money? So she is free to choose whatever she wants to buy: diamond, fancy car, Bottega Veneta, ...

¹ Rickshaw driver.
² Stands for "beras untuk orang miskin" (rice for the poor) Government's rice subsidy program started in 1998. The initial name was OPK (operasi pasar khusus, special market operation).
³ From conversation with Sudarno Sumarto of SMERU.

raskin | BLT | corruption | Free Choice

In defense of Kate Moss

Or, if you like, change that title to "In defense of Roy Marten". Roy and Kate are victims of society's misunderstanding of individual rights to self-destruction. And yes, governments' pathetic paternalism, as usual.

You know that caffeine is not very good for your health. Yet you drink coffee (or pops). Maybe because it tastes good. Imagine if based on "caffeine is not good for your health" the government bans the caffeine consumption. Suddenly drinking coffee is illegal. Cafés are closed. Would you like that? I guess no.

Now, think about cocaine. It too is deemed dangerous. But why is cocaine illegal and caffeine is not? After all, they both are "not good for your health". Yet, the decision to illegalize cocaine is based on that "scientific finding"; but caffeine escapes the verdict. If Law is to be consistent, drinking coffee should not be allowed. Or for that matter, everything that is "not good for your health" should be banned: cigarrette, late night work, road crossing, etc.

This problem is pervasive. So how about a simple solution.

You should not be punished if you hurt your own self. You should be punished if you hurt somebody else. I don't care if Roy is rotten by sabu-sabu, or Kate by amphetamine. But I care when Roy or Kate or any drunkard hurt me or my friend or my kid or anybody else. So, if somebody is proven by the court to have hurt somebody else -- regardless of whatever he or she ate -- he or she must be punished.

The solution sound simple but it has broader implication. For example: seatbelt regulation. Obligating the use of seatbelt when driving car is foolish. Every driver should be free to use or not to use sealtbelt. After all, he or she is the one who will get hurt when accident happens. (Think about this, too: when you use seatbelt, you tend to drive faster or, worse yet, reckless).

Some would say: but we have to prevent bad things while we can. Well, who can judge intention?

Kate Moss | Roy Marten | caffeine |
cocaine | Law and Econ

Prof. X needn’t have to die, not that way...

Charles Xavier is disappointing. So are Magneto, Wolverine, Storm, and all those fighting each other in the X-Men: The Last Stand. The problem is, both sides – X-Men and Magneto’s Men are forcing what they want on others. This is against human (I bet mutant, too) nature.

Here’s a simple solution to the problem in The Last Stand:

Worthington Industries should be allowed to develop any medical technology (if it thinks it is profitable), including the cure to treat genetic mutation . What the government can do is just to make sure that the medicine has all the information for the consumers. For example: “This medicine is to convert any mutant into human. It is not reversible. Take it at your own risk”. What the government should not do is to force mutants to become human. What X-Men (and all other mutants for that matter) can do is not to take the cure if they are happy with what they are now (like Angel), or take it if they are not (like Rogue).

I know for sure, my solution wouldn’t make a good movie.

X-Men | Free Choice

Hi from the Manager

Hi,

Is everybody hooked up in front of TV watching soccer already? While the Café is now open 24 hours to accomodate that, even our hosts are not so easy to distract, especially football soccer freaks like Ujang and Ape (don't get Ape started with football vs. soccer).

I was going to full-feature Ahmad Jamal. But considering the soccer fever, I think an amplified beat will be useful (albeit a little fusion). It's Casiopea, folks!

Allow me for a personal digression. Casiopea caught my ears when I was twelve. That was when drummer Akira Jimbo joined the group. From then on, I was addicted to Jimbo-Sakurai beat (Tetsuo Sakurai was the bassist). Then I was stunned and sad when I heard the band broke up. Jimbo and Sakurai left Casiopea and formed Jimsaku. Immediately I followed the new band. And it wasn't as great.

Lately I heard Jimbo is back to Casiopea. But it's never as good as then. So let's just enjoy their good days. Two albums in particular: Down Upbeat and Eyes of the Mind.

Goaaall!

From the Manager

Hi,

How is everybody? I failed to deliver our playlist last weekend. The Café was on fire. That silly sado-masochistic debate on coffee, latte and gender had made me busy. Long story short, I cut Rizal and Aco's paycheck this month for the problem they triggered .

OK, let's get back to normal life. A friend suggested "Sax in the City". Interpreting The Beatles' Norwegian Wood? That sounds interesting.

Happy swinging.

Is Bakwan Giffen?

Ujang has been provoking us to construct an index that can beat Big Mac Index. Many suggestions are noted. Coconut, latte, bread, maid, so forth. I’m not going to suggest another one now, but I’m interested in the common characteristic of all those goods mentioned. They are normal (which is necessary, should you create an index).

By normal good, we mean, when your income increases, your demand for it also increases. Of course, the term “normal” is an operative word: a lot of goods are like that. Or, put it another way, there are exceptions. Back in my college years, I used to eat in cheap warteg not because it tasted really good, but because I couldn’t afford fancier restaurants. I still ate at cheap, typical warteg when I already had my first job: with my salary, mall restaurant was still a luxury. Then I got a raise. Suddenly I could afford “more expensive” meals. My demand for warteg decreased.

In economics, we call the good that resembles my warteg story (demand decreases when income increases) inferior good. (No, we don’t have “superior good” – economists are lousy in picking up terms). There are some goods that are inferior. But among inferior goods some say there is yet another distinct species. It’s called "Giffen good".

Giffen good is an inferior good that is demanded more when its price increases. This is against the Law of Demand (when price of a good increases, the demand for it decreases) and that is why it is called (Giffen) paradox (after Robert Giffen, an English economist who observed this phenomenon in Irish potato consumption back in early 19^th century).

Note that I just said “some say”. That's because I never really buy this idea of Giffen paradox. I probably will buy more warteg meal when its nominal price increase (that is, the money I pay for it). But take a further look, it’s not the same meal anymore. It’s now served in cleaner plates, packed in a fancier wrap, or fried in fresher oil, so forth. For this different, better quality meal, I am willing to pay more.

That’s why I usually don’t spend too much time explaining Giffen paradox in my microeconomics classes. But many teachers, especially those only rely on Samuelson or Lipsey seem to think Giffen paradox is important (and they put it in exam). I beg to differ. Law of Demand prevails.

Do you know any good that is Giffen?

For students: If you are interested in studying this subject (maybe a skripsi with intriguing title like: Is Bakwan Giffen?), here’s how you would do it.

Econ 101 | bakwan | warteg | Giffen