Ekonomi dan Politik di Indonesia

... is a new blog hosted by one of your barristas, along with Dede -- another economist from the Salemba School. The blog talks about Indonesian political economy issues. Its main target is Indonesian audience, so yes, it is in Bahasa Indonesia.

Holden Caulfield's Antithesis

For your weekend, here is a good reading from NYT Magazine,a tale of three elite high school students struggling for elite colleges' scholarships. Personally, despite admirable competition spirit of those young minds (and their parents), I found the story daunting and somewhat scary. I mean, man, look at those credentials (not only in academic, but also high level French, cross country captain, flutist, novel writings, etc), the goal they set up, the way they made up their application, they don't seem like normal high school students I know.

And unlike Holden Caulfield of Catcher in The Rye, they don't quit.

Yet, one finale of the drama is the following:

It was her mother, who had logged in Maria’s PIN at various top schools that day, knowing her daughter wouldn’t have easy access to a computer as she interviewed. It was the Thursday that so many students across the country were on tenterhooks, waiting to hear from many of the Ivies, but that had slipped to the back of Maria’s mind. “You got into Princeton!” her mother told her. “And Columbia and the University of Chicago!”

Maria was tired. She was hungry. She didn’t feel like talking about college. It was one of those moments when it was hard to imagine that she would actually “ever enjoy the product of all my work.” She told her mother she’d call her back and hung up the phone.

If only they knew.

ps: Instead of Manager's (stupid) self-made quote on learning economics on the right sidebar, this is my line, "You can not learn economics without good coffee."

My own stupid analysis: Jakarta's Car Free Day

Sutiyoso's car free day is stupid. And it is bad for the environment, too.

So, the outgoing Jakarta's governor Sutiyoso who seems to think he is an environmentalist, again endorses a silly event that takes place today (Saturday). It is called Jakarta Car Free Day; it seems to be proposed by some environmental groups. The policy is to ban cars in Jalan Sudirman and Jalan Thamrin, the two most important streets in the heart of metro Jakarta. The idea is to be friendly to the environment. The event, I heard, is to be repeated every month. And in every event, they will hold activities like happy biking or things like that. They said this is in solidarity with the "same global movement", World Car Free Day.

I bet in most countries/cities that adopt this event the traffic management and public transportation facility is better than Jakarta. If not, things can be very nasty.

Just like Jakarta today. As of now, I have no idea what is going on in Thamrin and Sudirman, but Gatot Subroto, Slipi, Casablanca, and many other streets in the neighborhood are in total jam. I just came back from Senayan to Shangri-La and it took me one hour travel time. This is probably 'normal' in Jakarta's weekdays. But not in Saturday.

It turns out, people do not halt their activities because of the car-free day (who wants?). They just try to find ways around Sudirman and Thamrin to get to their destination or come back home. I think the numbers of cars not used in respect to the car-free day is negligible, compared to cars trying to make detours around the two main streets.

As I said, this resulted in annoying and tiring traffic jam in almost all streets adjacent to Sudirman and Thamrin. Furthermore -- and let me ask this to the environmentalists who campaign for this event -- which one pollutes more: a heavy traffic jam where cars run 3 kms/hour around car-free (but not bus-free) Sudirman/Thamrin or usual Saturdays in Jakarta when traffic is usually not as bad as weekdays?

Really, even the greens need to understand the power of incentives.

Econbloggers

Actually, I lost track on how many high-profile professors of economics are blogging. In addition to the links on this blog, I know some others: Brad DeLong, Deirdre McCloskey, George Borjas.

Dani Rodrik asked the audience: "who is the economist you would most want to see blogging?" That was after Shanta Devarajan of the World Bank and Princeton's Paul Krugman join the club.

I haven't made my comment to the post, but I'd certainly agree with two names: MIT's Daron Acemoglu and NYU's Bill Easterly. Robert Barro would also be great.

Doing business indicators -- why matters?

dHani, a frequent visitor and commenter of the Café sent me this piece. The email subject reads "my own stupid analysis". So I read it, and I thought, why not sharing this with you all. I, however, won't give her the right to use my "my own stupid analysis" subject -- that one is reserved for my analysis. - Manager

Doing Business Indicators - Why Matters?

by dHani

Sometime around the third week of September, IFC will have a global launch of Doing Business 2008, at exactly 00.00 Greenwich Time. At around the same time, you all can access the result from this website. About the same day, LPEM will report their findings on “Monitoring Investment Climate Indonesia 2007” in the so called ‘Investor Forum Indonesia”.

The questions then, what’s with all the effort? People are getting frenzy over investment climate. Just a recap, Indonesia was ranked at 135 over 175 countries surveyed (or judged?) by IFC. We are far worse than Vietnam (104), slightly better than Mozambique (140).

There have been so many efforts and initiative put to resolve this matter, some now ask the importance of improving Doing Business indicator. According to a famous Indonesian economist (he-who-shall-not-be-named), Malaysia who ranked much better last year only gained 20% contribution from Investment to their GDP, while Indonesia scored 24%. His hypothesis is thus investment climate might not have anything to do with investment, especially with FDI, foreign direct investment. It is just "business as usual". And even if Investment Climate did matter, Employing Workers (Labor) contributes much bigger problem than Starting Business or Dealing with License, for instance. Businesses complain because that’s what they do, they’re professional complainers. Again, it is business as usual. FDI showed a decline trend everywhere in the world except China, India and Vietnam, they say. It is a global trend, nothing to do with Investment Climate.

Well, here’s what I think. “Doing Business” is not meant for foreign investment. It’s not even for large-size businesses. Doing Business actually deals with SME, small and medium enterprises (and I also mean the micro ones -- the assumption used by the surveys is limited liability with not more than 50 domestic workers, owned by at most 5 domestic shareholders). Investment climate i n Indonesia does not have anything to do with foreign investment which mostly done their business in large scale and scope. Doing Business is for SME.

Question is then, why do we need to focus on SME? Aco often points out to me that dealing with the smallies (it’s not English, I know, but I use it) is tricky. You don’t want the small vendors grow in number larger and larger, because it's just not a characteristic of what a developed country is, if you want to become one . Further, it is not easy to deal with them, because they are mostly informal. They are, well, the smallies. Here’s the Catch-22; they’re informal because they cannot afford to be formal. They cannot contribute more because they are mostly in the form of sole ownership rather than limited liabilities. They become small because they cannot ask for credit because they are informal. That’s why dealing with business indicator matters.

Starting Business and Dealing with business licenses in Indonesia is complicated, costly and takes an enormous resource. Most of our SMEs choose to become informal, simply because they cannot afford to be formal entities. How much contribution if we can fix this, you might ask. Well, I’m not really sure. I might have to turn this into a doctoral thesis. But, let me show you something, there are many medium and small-scale businesses in Indonesia. They outnumber the large ones.

OK, I’ll just stop here. Otherwise, this will become my proposal.

Your Days Are Numbered

At first, I was being intrigued by a pile of Ayn Rand's Atlas Shrugged on the text book shelf for Econ undergrad here. Still I was reluctant to read it. The book is so thick and I have so little time outside the courses.

But then I learn from New York Times that Alan Greenspan, whose latest book everyone in econ blogsphere are talking about, is also Ms. Rand's big fan. So I changed my mind: perhaps it is worth to reading the philosophy that has shaped the mighty Alan Greenspan's view, the legend of US monetary policy.

Here I am now reading the book in my spare time at snail pace despite the delight of Ms. Rand's storytelling. One of the warm glows comes from my finding of a tagline that I kept remembering from a good German film, The Edukator, that I can't find its source anywhere. It says, "Die Fetten Jahre sind vorbei", or "Your Days of Plenty Are Numbered".

I thought it was quoted from a leftist book since in the film the words were to express an anti-capitalist sentiment. What I got from Ms. Rand's otherwise capitalist manifesto is a dialogue between an old chief clerk, Pop Harper, and Eddie Willers,

"You're ready for the junk file, old pal. Your days are numbered."

Not a precise quote, but I think it says similar thing. Or do you have any better source?

And do you know whose days are numbered?

RIP: Joe Zawinul

Joe Zawinul dies at 75. To honor Joe, we play again Pharaoh's Dance, Birdland, and Cucumber Slumber.

May Joe have good time with Miles -- wherever.

My own stupid analysis: when ease sounds yucky

Good God I’m not a police officer (in Indonesia). ‘Cause if I were one, at some point in my career I would have been called a “kompol”. That is an abbrev for Komisaris Polisi or police commissioner (it was “mayor”, Indonesian for “major”, back in the era before the police wanted to be different from its army and navy competitors). It sounds like “ngompol”, an Indonesian slang for an act of “unintentional pee”. You know, as in “Honey, wake up, he ngompol again” – said a woman to her husband as their baby wets the bed in the middle of the night (conversation back in the days when diapers were not as good).

No, it’s not just the police, of course. I’m sure you have heard tastipikor, setwapres, jampidsus, musrembang, or back then, sesdalopbang (google-up yourself, I've made my point). I don’t know if it’s just me, but dikdasmen (pendidikan dasar dan menengah – basic and mid-level education) reminds me of basement and budpar (budaya dan pariwisata – culture and tourism) really sounds like a thunder.

Bank Indonesia is the winner. They have this campaign against counterfeit money with a rupiah identification method called “3D”: dilihat, diraba, diterawang (looked, touched, held-up-to-the-light). It is really funny, because they used the prefixes as the basis for the abbrev – not the words themselves! (lihat, raba, terawang – to look, to touch, to hold up to the light). Maybe it is because LRT doesn’t sound catchy enough. Or maybe they got it from marketing class somewhere. Well, in either case, I guess they could have come up easily with 10D, then – should they want.

Them in Hollywood are equally ridiculous: Brangelina.

Wonder now. Why is it SBY rather than Susbamyo? JK rather than Juskal?

Is this yet another market-gone-wild thing? Because I thought you can’t even force something that sounds too funny. So, I guess it’s a matter of time, kompol will die out. Wanna bet?

Shoot, I still prefer the SMS way.

iPhone Die-hard's Non-sense

Sometimes people are just very funny.

Imagine this. Yesterday you bought chicken meat in your usual street vendor --you know, the mighty tukang sayur--, for, say, IDR 10,000. This morning, you find out that he sells similar chicken to your neighbor for IDR 4,000. Would you be enraged and ask him to pay the difference?

You might get a bit annoyed, but unless you are insane, you wouldn't ask for compensation. Moreover, you can not blame the tukang sayur for discriminating the price. He never forces you to buy his chicken meat, doesn't he?

Sounds terribly simple? Well, tell that to these outraged Apple buyers upon finding that Steve Jobs has reduced the iPhone price by USD 200 after two months of first sale.

My own stupid analysis: Indonesian rap music

Indonesian rap is annoying and stupid.

I know this might irritate some people and it shows my own ignorance. But, I can't stand it -- I was once told by economists here that there's nothing you could do with other people's taste; well I don't care. . . I just happened to be in a long ride with this damn bus, and all I could hear was that continuing weird noise called Indonesian rap.

I said "weird" and "noise" because of the following.

Rap music, I gather, is a part of hip-hop culture that uses rhyme and rhythm spitted mostly in a very fast beat. I'm no phonologist or morphologist, but I believe human tongue (and mouth) has its limit when it comes to spitting words quickly. It is then easier to spit one-syllable words than two-syllable words. English (and I believe African, too) words are dominated by one-syllables. At least for words you want to rap with. Fine, two-syllables are also used. But not much. Try this (from Usher feat Ludacris and Lil Jon):

I'm (1) in (1) the (1) club (1) with (1) my (1) homies (2), tryna (2) get (1) a (1) lil (1) V-I (2),
keep (1) it (1) down (1) on (1) the (1) low (1) key (1),
cause (1) you (1) know (1) how (1) it (1) feels (1).
I (1) said (1) shorty (2) she (1) was (1) checkin (2) up (1) on (1) me (1),
from (1) the (1) game (1) she (1) was (1) spittin (2) my (1) ear ( 2 or 1.5) you'd (1) think (1) that (1) she (1) knew (1) me (1).
So (1) we (1) decided (3 or 2.5) to (1) chill (1).

See, there are only 5 two-syllables and 1 three-syllable (even so, you can spit "decided" as "decid'd" -- so it sounds like a 2.5 only; like "ear" to "e'r", a 1.5). The rest are one-syllables. Imagine if this is to be adapted in Indonesian (forget about rhyme for now):

Aku (2) dalam (2) klab (1) dengan (2) teman-teman (4),
coba (2) dapatkan (3) sedikit (3) kesenangan (4!)
Jangan (2) berisik (3), kar'na (2) kau (1.5) tau (2) aku (2) s'dang (2) asik (2)....

.... and so on

Look how many twos and threes (and even fours) we got, just in the beginning! Now try visualize a rapper wannabe who raps with Indonesian words like that. Either he or she can be damn good with extremely fast tongue (Iwa K was fast!) or you would experience a torture.

Not that there's anything wrong with Indonesian words. They just don't go with rap, trust me. You may as well end up funny: you move your hip and wave your hands up and down. But your phonetic tools can't follow.

Even in singing, efficiency matters -- as the economist would say.

Weird iPhone

I can tell that iPhone is indeed a damn cool gadget. But to take it home with you, and use it, you need to subscribe to AT&T for a 2 years plan. Until now, it can't work on other network.

This is actually a weird arrangement, that is, limiting your users coverage, but it turns out that:

...Apple gets $3 a month for every existing AT&T subscriber who has bought an iPhone and $11 a month for every new customer. That looks like about $150 per user for Apple, on top of the margin on the phone itself. So although Apple can make money selling iPhones to anyone, the company gets considerably more if it drives those users to AT&T. Which is what it is doing...(from John Naughton of the Guardian website)

I dislike the idea for a personal motive: AT&T's is not the cheapest plan. But I can not blame Apple to sign the contract with them. Apple has the right to do so.

So does the consumer to unlock the machine and use cheaper network, I must say.

But, alas, AT&T lawyer seems ready to bring you to the court, preventing that unlocking business. The law, so far, doesn't say anything yet on this matter. But if the law rules against unlocking iPhone, as Naughton wrote in that column, the law is an ass.

By the way, unlocking iPhone would not be a problem in Mangga Dua, would it? Has anyone tried it?

It's non-party time!

A few weeks ago Aco, in exegesis, was ranting about 'independent candidate.' I agree with him on one thing: the term 'independent candidate' is oxymoronic. But I am less pessimistic with the idea of allowing a candidate to run without having to be nominated by political parties. Let's call her or him non-party candidate.

Aco wrote:

Whoever you are, you can't run a populace alone. You would need support, cheer, organization, funding and all that. And that my friend, is called, 'party'.

To begin with, modern democracy is representative democracy. Political parties are, supposedly, the bridge between the people (constituents) with representatives. A simple way (well, not too simple perhaps) to explain the situation is using the principal-agent setting. Parties act on behalf of their constituents, who have a set of objectives. But parties have also their own objectives to maximize. To align both sets of objectives, a certain incentive-punishment mechanism needs to be developed, which we call 'election.'

Another way to look at the role of parties is to draw an analogy with real estate agents. Like realtors, parties help minimizing the search cost for a candidate, as well as help marketing a candidate to the potential buyers.

However, in any principal-agent settings there are potential drawbacks. Due to a broken incentive structure, agent may not maximize principal's objectives. In a worse situation, agent may fully ignore the principal. Of course, we can fire sack or realtors, company executives or football managers. That can happen if the market of realtors, executives or managers is competitive enough.

What if it is not? What if parties become, or establish, a cartel-like political structure? Like any cartels, political cartel extracts consumer's (voter's) surplus and limiting choices by creating a barriers to entry for newcomers (or for new ideas). What can be done? In any economic textbook, the solutions for cartels are: a) issue regulation that dissolves cartels; b) create competitive pressure, by promoting domestic competition and/or free trade.

This is the situation in which, I shall argue, independent non-party candidate can be a solution (note that I am not claiming it is the solution). Yes, it may work, it may not. There are theories to justify either. Nevertheless, we can do empirical research on it: just compare regions (provinces or districts) where non-party candidates won, versus whose winners are traditional, party candidates. First, of course we need to define the dependent variables. It can be economic growth, corruption, speed in poverty reduction, some health or education measures, and so on. If we have enough data set, we can do a regression, controlling for region fixed effects.

Yes, there may be endogeneity. The economic, social and political situation in a region may lead to independent candidate winning (or losing, or even not bothering to run) the election. But there are some empirical strategies can be considered, like what Benjamin Jones and Ben Oken did in their forthcoming paper on leadership and economic growth (by way of Dani Rodrik).

As my concluding note: let's not making this independent non-party candidate a big fuss. Just make it possible, let the market (voters) decide whether they should trust them, or retain the hope for political parties. I believe, in the end people would choose party candidates. See the fate of non-party candidates in established democracies everywhere.

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