Articles as Important as Superman Comics

For those who want to learn what was going on in the early days of current financial turmoil, the latest Journal of Economic Perspective, Vol 23, No.1, Winter, 2009 has the symposium on it. All papers look interesting and important. Also, a paper by John Taylor (the economist, the Taylor's rule; not that guy of Duran-duran), A Black Swan in the Money Market is worth to look at.

The JEP articles are for subscribers only, but thanks to google scholar, you can get some un-gated version of them. Or, you can come to our cafe, it's on the shelf next to the Rolling Stone and Superman comics.

HT: Garett Jones

Weird Definition

Economist has a funny way to describe a sophisticated person: A person who does not suffer from time-inconsistency problem. The rest, me included, is a mere naive person.

Wanted: Positive Political Analysis

Can anyone tell me what national interest means? I have been trying to translate it into a kind of operative utility function to which politician might want to maximize as suggested by our numerous political pundits in their so-called analysis of Indonesian election campaign. And it goes nowhere.

The more workable proposition is to take that politicians are self interested or partisan, that is, trying to maximize social welfare function for disproportionate benefit of particular group in society (Persson and Tabellini, 2000). With that, your positive analysis for social calculus could fly better. Of course after you carefully set up the payoff, constraints, political market structure, as well as sufficiently address the problem of time consistency in your analysis.

Otherwise, you'd end up with empty boring statement like politician must put national before individual interest to make everyone happy; or politician running for this year's election must follow the example of (fill in the name of your favorite dead politicians from 1950s) who was a genuine defender of national interest. Yadda yadda yadda.

Jamal at the Pershing

After the Java Jazz hype, let us get back to the jazz as we know it. This time, Ahmad Jamal at the Pershing, 1958.

People, here we have Surrey with the Fringe on Top and Poinciana. The latter is considered as Jamal's classic, something like Brubeck's Take Five, and here is the youtube 2005 version with Idris Muhamad at drums.

By the way, how do you think an album called Slank at the Java Jazz, 2009?

What profits are for

A coffee stall at one corner of The University of Melbourne claims to have a 'new concept of business'. They let the customers decide how the profits from their cup(s) of coffee would be distributed: to the owner, or to one of their causes (social, environment or cultural). Every time they buy coffee or snack, customers would be given a card, which they will put into one of four pigeon holes representing each purposes. At the end of every month, profits will be distributed based on the distribution of cards in each pigeon holes.

Yesterday, for the first time I bought their coffee (it tastes and smells good, and costs less than other coffees in the university and its surroundings, by the way). Then I put my card into the first pigeon hole: the owner. Yes, I want the profit from my cup to be enjoyed by the owner. My philosophy is simple. It is a small business, and if the owner can't enjoy a substantial profit, they might go out of business. Somehow, most of their customers also think so. The highest percentage of cards so far went into the 'owner' hole.

My preference may be different had it been, say, Starbucks or Dunkin Donuts. Not that I want to 'punish' them for making big profits. But those companies may have earned enough profits to keep them in business. Up to some point, a reallocation the profits may leave them as well-off as before, but it increase my utility if they sponsor an exhibition, a movie project or a concert. Off course, needless to say, that would also depend on to where or what kind of activities they will share their profits.

When Wen Sneezes

Not so long ago, you may recall, when Alan Greenspan sneezes, the world catches cold.

Last Friday, when Wen Jiabao sneezes, I wonder, who catches cold?

Envious Revivalism

I come across an interesting job market paper (download the pdf in the relevant link) on a theory of the Islamic revival by Jean-Paul Carvalho of Oxford University. He wrote that the origins of Islamic revival since 1970s in developing countries are traced to a growth reversal that failed to deliver the promise for upward mobility; and increasing inequality that hit the lower middle class.

Perhaps you may not even need economics to come up with this conclusion.

But, what makes his paper interesting from economics perspective is the use of a behavioral economics model of religion based on psychological notions of envy and unfulfilled aspiration. Here, the agents have reference-dependent preferences, contrary to Becker-Stigler approach for independent and stable preference.

Math aside, the paper gives interesting survey on Islamic revivalism. Now, regardless your economics knowledge, do you think envy and unfulfilled aspiration motives explain what has been going on in Indonesia?

Fish on Neoliberalism in the University

Stanley Fish opines in the NYT on why neoliberalism is hated:

The objection (which I am reporting, not making) is that in the passage from a state in which actions are guided by an overarching notion of the public good to a state in which individual entrepreneurs “freely” pursue their private goods, values like morality, justice, fairness, empathy, nobility and love are either abandoned or redefined in market terms.

Short-term transactions-for-profit replace long-term planning designed to produce a more just and equitable society. Everyone is always running around doing and acquiring things, but the things done and acquired provide only momentary and empty pleasures (shopping, trophy houses, designer clothing and jewelry), which in the end amount to nothing. Neoliberalism, David Harvey explains, delivers a “world of pseudo-satisfactions that is superficially exciting but hollow at its core.” (”A Brief History of Neoliberalism.”)

This logic, according to the critics of neoliberalism, somehow is embedded into universities and narrows their function as merely instrumental, commercial, and practical. And because the universities are privatized (under neoliberalism agenda, they accuse), their faculty members becomes more and more in favor to professionalism over social responsibility and taking position in controversial issues.

Fish makes his own defense on its effect on academic freedom issue and you better read his excellent essay yourself.

My two cents is, in Indonesia, it's the other way around. The state universities are underfunded, partly because they can not freely adjust tuition fee to its actual cost. As a result, most faculty members, who are underpaid, could not develop their professionalism. Facing this problem, they end up taking too much social responsibility (in non academic-related jobs) and making up sloppy position in controversial issue (and funny commentaries) without, alas, adequate scientific professionalism.

I shall add that the university's social responsibility is to provide high quality higher education and academic research, which, in case you don't realize it, is quite costly. This higher education itself, if done properly and professionally, would have huge social impact.

OK, I know what's in your mind. Some of your baristas here are perhaps guilty as charged, too.

That we admit we blog too much.

Minister of Protectionism

Do you know what kind of vision that our Minister of Research and Technology has in mind? I'll give you one. It is called "M16 produces 16M". The former refers to a type of killing machine, the latter market for 16 million (of what? IDR, USD, people? I don't know).

And he wrote in today's Kompas op-ed:

With this fighting spirit, we will see more main weaponry system tools, electronic communication devices, tactical and war vehicles, speed patrol ships, war ships, surveillance airplanes, cargo planes, organic weapons for military and police, armored vehicles, defense and security infrastructure; than imported product."

I kid you not.

Mr. Minister, I'd rather to have inexpensive imported non military stuff any given day, than seeing more of our own made inefficient killing machines around. Does he ever think that import and globalization means you can get cheap product in global market (including even those weapons), in exchange to your competitive export?

That the Minister of Research and Technology turns out just a plain protectionist is disheartening. His job is to make our product technologically competitive in global market, not asking for protection. It's a lame excuse, Minister.

50 Years Monk at Town Hall

Cafe Salemba celebrates 50th anniversary of The Thelonius Monk Orchestra at Town Hall. That is why you hear some Monk pieces at our place while sipping your espresso and musing about the Dow Jones below 7K index.

Here for you: Little Rootie Tootie and Friday the 13th.

Coffee Article of the Day

As your barista, I have tried to provide some timely, popular, yet pretty sensible articles that may help you to get some ideas on what is going on in now troubling US financial market --so that you have some good starts at any cocktail conversation. As interesting as they may look, those are media report or blog's posting. For education purpose (hell, yeah), you need to consult peer-reviewed journal article, that usually takes more time to publish.

As the time goes, now some articles are there. I found one by Brunnermeier of Princeton, in JEP (forthcoming). Don't yawn. Contrary to what you usually get in an economic journal (those Greek alphabets, in case you are not familiar with econ journals), this one is highly readable.

(HT: Håring and Storbeck)