Tuesday, November 25, 2008
The deputy governor of course defends his silly idea. Quoted by The Jakarta Post today (25/11/2008), he says "How can people say it won't be effective when we haven't even run the program yet?". Yes, Mr. Deputy. How can people say eating dirt is not good when they haven't even tasted it?
Mr. Deputy also doesn't care with kids' rights: "I heard that some also said that the new regulation was against children's rights. Well, just look at the positive side. Getting up early will make children fresher than before". You're damn right, Pak. In fact, adults need that too. So why not force the lazy civil servants to start at 5am?
Prijanto, you're unbelievable.
Monday, November 24, 2008
My friend -- that dumbfounded psychologist in Australia -- and I were chatting about the sanitation project. We talked about the background and objectives of the study, and how the intervention will (or is expected) to work. After exchanging several lines, he raised an important point. Here's an excerpt of the conversation.
DP: "Do you know what makes the villagers don't build their own toilets?Moral of the story: in most cases, if we're running a development project, the constraints for what activities to do or what information to look for have already been set. Although sometimes we can play around with the constraints, or piggyback with an existing project, to do other activities or look for other information. I'll tell you in other posts.
AP: "They said they don't have money. But looks that it's not the case as they can afford to buy cellphones, and some of the houses have ceramic floors or permanent walls. So looks like cultural aspects or lack of information matter."
DP: "Does the project try to find out what is the main reason for not having toilets?"
AP: "No -- the intervention aims to create or trigger demand for proper sanitation."
DP: "But how do you know that intervention works if you don't find out the real reason first?"
AP: "I'll tell you what. This is a development project, not a pure academic research... If you know what I mean, or try to read between the lines..."
DP: "Ah yes, got it... I should have thought more pragmatically...."
We are indeed the world largest CPO exporter, but the price of Indonesian CPO has been dictated by Rotterdam spot market and Kuala Lumpur future market.and he concluded
Last, as second largest CPO producer after Malaysia, Indonesia should be taking important role in the searching and making of product's price, not dictated by others.Well, of course the equilibrium price is determined by not only supply (where Indonesia belongs to), but also demand (the rest of the world whose growth has been slumped). And how are you gonna "take a role" in making up the price? Reducing the CPO production, or setting up a cartel with Malaysia? It might not work either, since, perhaps, there are numerous substitute for CPO. I don't know.
By the way, does anyone know how much does the palm cooking oil price in Jakarta cost lately? Palm cooking oil consumer may not be happy, if you cut the CPO production.
Now which one is which?
Friday, November 21, 2008
They enjoy working with complex things using a lot of concepts and imaginative models of reality. Since they are not very good at seeing and understanding the needs of other people, they might come across as arrogant, impatient and insensitive to people that need some time to understand what they are talking about.
Ah, psychologists are amazing!
Thursday, November 20, 2008
We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports.This is surely a good policy. But the problem is whether the governments are effectively able to do that against own domestic political pressure? While they might not raise the tariff, which is a blatant WTO violation, it seems that the more subtle subsidies and bailouts are now gaining popularity --which is just another kind of protectionism. The US, for instance, now debated on whether or not to save those inefficient Detroit's big boys.
Wednesday, November 19, 2008
I'm a driver. My monthly pay is Rp 650,000. On top of that I get Rp 30,000 per day, "day" being defined as 7am to 7pm. Finally for each additional hour beyond that the boss pays me Rp 5,000. Occasionally, if I work at weekend, the daily rate becomes Rp 50,000 and hourly rate Rp 7,500. Don't ask me why this sounds so complicated. Ask the boss. What I know is that on average I get paid about Rp 1.5 million. I think that's because almost everyday my boss takes off late from office -- extra hourly pay for me.
Recently my boss offered me a raise. He asked me to choose between a Rp 100,000 raise on the monthly pay and Rp 5,000 raise on the daily pay. Any advice?
Complicated Driver @ Ciganjur
Dear Complicated Driver,
Mathematically they are the same. Both will end up a Rp 100,000 additional per month, assuming your boss works 5 days a week and stays home or drives himself on weekends. But if your boss is a workaholic and frequently asks you to drive him on weekends, than take the second offer. In contrast, you would take the first offer if the boss travels abroad frequently. Finally, if your boss' working behavior is quite random, definitely you should take the monthly based adjustment.
p/s I think I understand why he made it that complicated. Just ask yourself: do you like to shirk or not?
Tuesday, November 18, 2008
I'm a working mother with two naughty boys (2 and 1 year old). We hire two babysitters to take care of them (one for each). Recently our helper took off for mudik and never came back. So I have decided to extend the tasks of the nannies to include washing and ironing the boys' clothes -- of course with a good additional monthly pay. I've heard that economists always suggest division of labor. Any advice? Thanks. Busy Mother @ Depok.
Dear Busy Mother @ Depok,
Assign Nanny A for washing and Nanny B for ironing. Then reverse that on monthly basis. If only one nanny do both washing and ironing, the other one would have no incentive to limit the number of clothes coming into the laundry basket. Suppose for example that both tasks fall to Nanny A, Boy 1's babysitter. Because Nanny A would know full well how inconvenient washing and ironing are, she would be very concious that her boy doesn't play with too much dirt. That way, the number of dirty clothes can be minimized. But that's not the case of Nanny B. Imagine this. Every time Boy 2 spits on his cloth, no matter how small, Nanny B will just take it off, throw it into the basket then get a new, clean one. Worse yet, she would have less incentive to teach Boy 2 about living clean. Now, if you give her responsibility to iron the dry clothes, she would think twice. After all, she wants less clothes to iron later in the evening. Kate.
Then, one morning, your local government contact called you:
How are you? Been a while since the last time we talked. By the way, sorry to inform you, but we have decided to give treatment to village X. I know, initially it was a control village. But we thought that the village is in a desperate need to get treatment. So, in fact, we have already started treating village X.And this was not the first time you received that kind of surprise phone call. And out there, many still believe that a big donor like the Bank is a kind of super institution that is able to dictate governments here and there to get what it wants.
Note: anyway, in randomized trial, there are ways to deal with this; you can choose to apply the Intention to Treat analysis, or the Treatment of the Treated.
Monday, November 17, 2008
"...once told young economists that a good place to have ideas was in front of the shaving mirror. Krugman has a beard. Imagine, quipped Dixit, how much he could have achieved if he shaved!..".My good place to think about good ideas is under the shower's overhead nozzle. And you will know that you lead toward right direction for your ideas when you start to use shampoo to wash your body without even realize it.
Sunday, November 16, 2008
several have talked grandly of a sequel to the 1944 Bretton Woods conference, which created the post-war system of fixed exchange rates and established the International Monetary Fund and World Bank. That is nonsense. The original Bretton Woods lasted three weeks and was preceded by more than two years of technical preparation. Today’s crisis may be the gravest since the Depression, but global finance will not be remade in a five-hour powwow hosted by a lame-duck president after less preparation than many corporate board meetings.The meeting turned out to have just a little beef, especially when it comes into the ambitious plan for a new global financial architecture. But was it really a waste for Indonesia to join the group?
Maybe not. We have two concerns regarding the current crisis: to maintain sensible balance of payment (and exchange rate) and to secure financial sources for the state budget --you know, to fund basic infrastructure, pay salaries, and poverty reduction related actions. The former might not be solved by, predictably, the inability of the meeting to agree on above new global financial structure, but there is an opportunity to ease the latter. And here is how.
It is now widely argued by key policy makers and some prominent economists that a world fiscal stimulus (tax cutting or more government spending) and, some say, higher liquidity through lower interest rate are needed to boost the otherwise slowing world economy. But we don't have the money to do so, because the market sources for state budget financing, the government bonds, is now becoming very expensive. We need different sources.
If Indonesia went alone in asking this to the developed countries, it is likely that we'd meet with no response for two reasons: we're too small (yes, contrary to some of you believe, we're a small open economy) and those big boys don't have lots of money either. The best option available is to join forces, mainly with developing countries, to tap the money -by the way, China and Saudi Arabia now has the money - and to elevate the bargaining position before those big boys to give more money to either bilateral scheme or multilateral agencies like the IMF and the World Bank. At the same time, it'd be also the right time to ask IMF to be less strict on their conditionalities, the sources of domestic discontent and political unpopularity in many countries, including Indonesia.
Of course, it is now more international politics than economics.
Dominique Strauss-Kahn, managing director of the International Monetary Fund, said coordinated stimulus amounting to at least 2% of global gross domestic product is required. That should provide a similar boost of 2% of GDP, if it's correctly coordinated, he said.Stimulus, you said? If truly so, where is
Saturday, November 15, 2008
Friday, November 14, 2008
The data supports the sentiments such as "SMEs are important to our economy as they create most of the employment" kind of thing. I agree. Now look at the average wages they paid to the workers. Here is the question: if we keep increasing the minimum wages, and enforce it, who are to win and who are to lose?
Here's how I read them. First, (A) and (B) show a strong association between real minimum wages and overall (average) employee wages. The relation was most obvious between 1999-2003. This shows that minimum wage has become an arena of collective bargaining. Wage negotiation happens not in the private sphere (within company) but in the public sphere (policy). This indicates an institutional failure in the labor market: bipartite negotiation. Since 2003, real minimum wage has been relatively stagnant, so has the overall wages.
Second, (B) and (C) can be divided into three periods. Prior to the crisis (1998), all went well in the sense that wage was growing, and so was formal sector employment. From 1999-2003, when wages was increasing rapidly, share formal sector employment declined significantly. After 2003, wages has been relatively stagnant. It is no coincidence that formal sector employment started to expand.
Note: 1) you won't see the relations as significant if you just simply take one point of time and compare it to another (say, 1999 vs. 2008). 2) a colleague of mine did an econometric estimation and confirmed that every 10% increase in average regional minimum wages is associated with 1 percentage point decline in the share of formal sector employment a year later.
Third, I didn't put it on the picture -- but apparently there is an obvious relations between wages and unemployment. Our friend Suahasil Nazara and his co-author Iyanatul Islam might be right (like Card and Krueger). But I second Prof. Aris Ananta that unemployment rate may not be the best labor market indicator, as it doesn't tell much about job quality and welfare. In such case, formal sector employment should be a better indicator.
Now the question is who wins and who loses if the minimum wage is increased?
But just curious. Whatever happened to the "It Is Time For Young Generation" campaign by Sukardi Rinakit and his friends? Is suddenly the Sultan now younger than Rizal Mallarangeng, Fadjrul Rachman, Zulkifliemansyah, or Sukardi himself? Where is Indra Piliang by the way?
Wednesday, November 12, 2008
A friend commented on the status:
"[Maybe it means] a signal [of a] distortion in the water market? ;)"(I noted the wink symbol so I know he was joking).
Here's my reply:
Nah, nothing to do with market or distortion. It was just a stupid mistake to forget switching on the jet pump, so the air went into the pipes and prevented the water from flowing.Note: This post is dedicated to non-Facebookers. Rizal is one of them.
In short, it was physics, not economics. The problem is I was trained in the latter, not former, subject.
Monday, November 10, 2008
I have just the opposite view. I always support death penalty, for its deterrence and disincentive effects. But I would make exception this time for those Bali bombers. Their goal is to die as martyr. So don't kill them, 'cause that would mean giving them what they want. Instead, torture them to the maximum level, but sufficient to keep them alive. Cut their fingers one by one. Chop their ears. And so on. But just don't kill them. Do this again and again. Invite the media.
Ah I guess I'm too late now. They have got their victory already.
Update: This is my post on similar issue at Diskusi Ekonomi sometime ago.
Friday, November 07, 2008
After being scolded by the baristas for doing a crappy job, the Manager dug up her emails to recover the yet-to-be-posted article submitted by one of our favorite guest hosts, Roby. You see, Roby complained that his submission about “toilets and culture” was never posted here on the Café with nary an acknowledgment from the management, which shows just constipated (sorry, can’t help it) our “review” process is (hint: it involves email forwarding and little else).Why Culture Matters
The Manager finally found the said submission, originally received by the Café in December 2007. The only problem is, instead of “toilets and culture” the post was more about “table manners and culture”. There may be confusion between things that are going in one end and going out the other end, that’s understandable (happens to the Manager all the time). In any case, the post is indeed very relevant to A.P.’s toilet contribution. So here it is, without further ado, an excellent rejoinder.
- Kate, the remorseful Manager
It is common to put culture and the concept of economic man in a diametrical term. Taking the risk of oversimplification, the debate can be summarized as follow. The cultural argument argues that people behaviors are largely determined by cultural scripts, not by rational cost-benefit calculations. On the other hand, economic argument insists that individual decisions are independent of cultural factors.
Here I would like to argue that the picture of economic men is still plausible in cultural analysis and culture is a necessary prerequisite for rational calculations.
The key here is to see culture as a toolbox. That is as a set of tools that are accessible for solving problems. People face problems in their daily lives and use whatever they have in their toolboxes to solve the problems. Once they have picked a tool, they can use it in a highly rational way. This rational calculation, however, is only possible when a person has chosen a tool.
For example, imagine a group of people who use their hands when they are eating and another group who use utensils. Now because of health concern, we want to make those who use their hands to switch to use spoons and forks. Economists tend to jump to the conclusion that the whole problem can be solved by finding the right incentive. As they soon found out, however, the former group did not switch even though they completely understood the health benefit of using spoons and forks.
The problem here is that the first group does not consider spoons and forks as eating tools. For them, eating using spoons and forks is as absurd as, say, eating bugs. They just don't do that - despite the fact that bugs have nutritional values. Therefore, persuasion, bargaining, socialization and inspiration can be as much useful as incentive.
If we see culture as tools, then the rational calculation only applicable to available tools. We cannot perform cost-benefit analysis on the tools that are not part of ones' toolbox. Therefore rationality is local instead of global. It is in this sense culture matters for economic analysis. On the other hand, cultural analysis would benefit by applying rational choice to understand behavior in a given context.
Thursday, November 06, 2008
I have been traveling recently to some places, mainly to East Java, for a rural sanitation project in eight kabupatens. I visited some villages, and in many villages I found that only 1 every 9 or 10 households that have in-house toilets. They do most of their business in the river or bushes. Of course, it is easy to think the relations between open defecation, health problems, human capital, and productivity. We may also hypothesize that poverty is the reason why they don't have in-house toilets.
However, most of them have brick or concrete houses, sometimes with ceramic floors. And almost every household have at least one cell phone. So cost (supply) can not be the constraint -- demand looks to be a bigger problem. This may be due to 'culture-related' sanitation behavior, lack of awareness, or whatever reason. The point is, if you just simply build public toilets or subsidize people to build one in their house, such intervention may not work. People will just go back to the river or bushes.
This is where I agree to our friends Tirta (and Roby, among others), that psychology and understanding the nature of social interaction is important. In fact, the project in which I am involved aims to create demand for proper sanitation. What we do is, open community meeting, we ask the villagers to: 1) draw their local map, 2) ask them to identify which houses have toilets, and where do the rest go for defecating, 3) invite them to do some mental exercise in counting how much faeces they are producing in a day, week, month and in a year. After that, we ask them who wants to build toilets equipped with septic tank.
If 1-3 don't work, we then ask them to go to the spots where the villagers do their usual business. If this also don't work, the strategy is to take real, fresh, faeces in front of them then discuss the possible transmission of virus and bacteria to human's body. (Well, if this also doesn't work, then, from the perspective of the project, we're in a deep shit...).
Of course, this efforts may or may not work. Despite all the campaigns, maybe only a few people want to build toilets in the end. Even though many people build their own toilets, their health situation may not improve. This is why we are doing an impact evaluation (in fact, I am involved in the evaluation side of the project, not the shitty activities one). After collecting the baseline data, in a few months up to a two-year period, we will be collecting some data on the health status. Then we will compare the data in the 'treated' and 'control' villages. We'll see the result in 18 months...
Theoretically, you can buy iPod in Fifth Avenue Apple Store or the one in Ratu Plaza Jakarta at the same price. Say, if it is 149 USD in Manhattan, it would be current IDR per USD exchange rate times 149 in Ratu Plaza to bag the same iPod nano.
In economic jargon, it is called the law of one price, assuming a free flow of goods and arbitrage. But it doesn't always hold.
According to an iPod nano index issued by Australia's Commonwealth Bank, if you buy it in Ratu Plaza and pay its IDR price tag, you actually pay 10 dollar lower than buying it in Manhattan with its USD price. Why? because probably in the last month, we saw a weakening IDR nominal exchange rate.
If Indonesian product is now relatively cheaper due to currency depreciation, export might go up, yes? Maybe not, because the other half of the story, the world's income that determines world demand plunged due to crisis.
Back to iPod, based on my experience with the Apple vendor, and for that matter any electronic gadget vendors in Mangga Dua, Roxy, and Glodok, they will quickly adjust their IDR price. Many effectively pegs their price to USD. As a result you end up paying the same price.
HT: Marginal Revolution
Disclaimer: This is not a signaling attempt that I am a Mac person --therefore cool-- as Kate the Manager once accused me.
Wednesday, November 05, 2008
Thank you for your letter. It is so sweet I've been crying all night long. Not that I'm the weak little girl here. But because it, your letter, depresses me. I've been trying to concentrate on my thesis. Damn, if only I knew it could be this tough, I wouldn't have majored in economics. I blame that on the barristas here. Yes, those five disillusioned, irresponsible econ chauvinists: Aco, Ujang, Sjamsu, Ape, and Rizal. They're the ones who made fall me in love with economics. Frankly at first I thought economics was bullshit. I hated economists, they behave like they know everything. But as I started hanging out in this Café, I often overheard them guys talking. And boy, it's interesting. I realized economics is not just about growth, inflation, and employment. It is about why people do what they do. So there I was. When there was an opening, I immediately applied. And I became the manager of the café. The pay is pretty, but it's not the only thing I factored in. I loved the environment too. One thing led to another, I even applied to an economics school.
Then things changed. Apparently I put too much faith in the ceteris paribus dogma, I wasn't all prepared when the fun barristas started to cut their time in the café. I knew they did that because they were involved in many other but also useful things. At the same time I started to write my thesis -- "skripsi" as they call it here. So I too have less time. (Frankly as I desperately needed advice for my thesis only to find all the barristas were busy, I considered quitting. But I changed my mind. This café is still the most fun place for me, even though them barristas can be nasty). Good that the café is still alive though, albeit less frequent happenings. But we -- the barristas, the guest mixers, and me, will all come back safe and sound. I, for one, am still the lesbian cute manager who will resume playing music soonish. Aco will have to resume his Econ101, otherwise we keep cutting his paycheck. Ujang will post again from somewhere rural. Sjamsu has promised to come back in-between his gigs (I hate it when he spends more time with his band playing Queen or whatever somewhere and less time playing here. But I think it's because I have been too skewed to jazz (well actually to hip-hop too recently). OK, I'll play some rock. And yes, we've got Pasha for music too). Ape will report more on his noble fight against poverty. So far Rizal has been very loyal (although I know it's because he's stressed out with his exams there).
Finally let me tell you about my thesis I have been mentioning above. I'm working on the economics of Facebook (another reason I spend more time there than here). I'm interested in how people signal each other through that thing. My hypotheses are firstly, Facebook will provide a way to market to discipline so-called observers. Before, we have seen observers or commentators or op-ed writers (or "pengamat" as they call it here) talk so much bullshit without reservation. Now you can criticize them immediately via Facebook network. They will get aware and conscious. (Blogs to some extent fail to deliver that service). Sooner or later the writers will realize this. They will seek balance between revealing much at the Facebook at the cost of exposing themselves to direct check by "friends" and the enjoyment of "social-networking" (sorry Aco, you don't like this term, I know) at the cost of having to be really careful in saying or writing things somewhere else. The easiest control for this is arguably the size of your network. In other words there is an optimum level of network size (i.e. the number of friends you have in the Facebook) so as to leave you in a comfort zone. I'm interested to find where that level lies, given types of people, and not just op-ed writers.
Secondly, Spence signaling theory is alive and well. Add to that the revealed preference principle: trust what you see, not what you hear; trust what people do, not what they say. It is very interesting to see how people try to make others believe what they are. Hence, the urge to get into the middle, to appeal to the majority. Or to be exclusive, for whatever reason. Many people tone down their otherwise strong ideology so as to get more friends from "the other side". Some do just the opposite so as to be perceived as a sexy eclectic and hence getting more friends from "the same side". Some put their academic titles so explicitly, their first names are professor or doctor. Some buy Blackberry and can't wait to let people know when they download Facebook-for-Blackberry. Some keep reporting their status with different cities to reveal their big fly mileage. Some students use that to make fun of their teachers and professors (some are so excited they sound silly). Some are just so cool.
So that's it, T/S. I've been busy. And pardon me that I don't care with the current crisis. Maybe the barristas do. But thank you, I'm nostalgic too. Buy me drink?
Kate Salemba (see, the damn Facebook has forced me to reveal my identity)
Tuesday, November 04, 2008
I believe that demand for economics classes will rise, as it often does in economically troubled times. Some of this will be "shaman demand" rather than "knowledge demand." The consulting incomes of finance economists will fall and fewer talented people will go into finance. Speaking fees will fall since fewer economists will give talks at hedge funds. The relative status of macroeconomists will rise and the relative status of microeconomists will fall. Economists will gain in fame and lose in income. What do you think?Now, if the crisis happened in Indonesia, how does it have something to do with the profession? This is what I thought:
The demand for economics classes will remain low, or stay the same, and I think "knowledge demand" is always thin in the country. But speaking and consulting fees will go up (yes), and the fame too. Or if you do not yet get your economics degree, at least the crisis will make you more popular in cocktail conversations.
I think in Indonesia the Sadli law --named after economist M. Sadli-- holds. It goes: regardless of many deafening political rhetorics in the media, when crisis happens, demand for sensible economists and economic policymaking and technocracy is up. But when the economy runs well, the populists and populist agenda are more likey to