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