Kevin Murphy's Example

Here is an interview with one of my favorite economists, Kevin Murphy.

In my opinion, that interview gives you ideas on how economists, ideally, see and think about things. First, find interesting research questions and set it right. Second, stick to positive analysis.

See, for example, the discussion on smoking and drug addiction, and contrast it with the recent discussion amongst FEUI faculties on cigarette; you will find that Murphy never mentions normative statements on the issue --e.g whether smoking is morally a bad thing.

That is the economics as we in cafe salemba know it.

HT: Marginal Revolution

Presidential Summer Reading

If you were to recommend summer reading for Indonesian presidential candidates, what are two books you want them to read?

My recommendation:
#1. Capitalism and Freedom by Milton Friedman, to help them comprehend how market economy works, even if they eventually dislike it.
#2. Catcher in the Rye by JD Salinger, to remind them how being phony can be so sickening for others.

What's yours?

Stubborn General

Apparently our friend Sunaryo, the cafe's office boy, knows economics better than him.

And Sjamsu's headache remains.

Black-haired Capitalist

As expected, presidential election campaign produces some funny lingo. This one comes from the incumbent SBY who doesn't want the economy be dominated by global as well as black-haired capitalists.

What the hell does he mean by black-haired capitalist?

He would have been in better position if he said that he denounced the capitalists who asked for government protection to prevent market competition get into their way and punish their inefficiency. But calling these crooks black-haired capitalists doesn't help --if not puts him in, alas, the same league as his opponents in term of economic literacy.

The Pourers of Cold Water and The Clueless Cheerleaders

Sometime ago, Kate the manager asked me why economists are hated. She could not reconcile this fact with her own experience getting along with the baristas in this cafe, who, albeit, in her words, little bit chauvinists, are mostly harmless.

Today she told me that she finally got the answer from her summer reading of George Stigler's Memoirs of an Unregulated Economist. (Please note, with this pick of summer reading, Kate is now officially an econ geek)

Stigler wrote:

Why it has been fashionable to abuse economists (even granting the possibility that they may deserve it)? The main reason is easily named -economists have been the premier "pourers of cold water" on proposals for social improvement, to the despair of the reformers and philanthropist who support these proposals.

Thus, it is small wonder that in the midst of elections when promises of social improvements comes cheap as politicians exploit almost anything -from neoliberalism to, well, neoliberalism -; economists are more hated. Yet, the most depressing part is that many faux economists themselves are engaged in such futile promises, and call them economics. Instead of the pourers of cold water, they are bunch of clueless cheerleaders.

Bikin pusing..

Kadang bingung mendengarkan orang dengan keunggulan ilmu tertentu berkoar-koar di bidang ilmu lain, apalagi kalau dia mengusung poster/grafik.

Itu yang terjadi watu saya melihat interview LetJen Prabowo di TV-1 beberapa waktu lalu. Beliau klaim bahwa sistem perekonomian salah karena selama ini selisih antara penerimaan ekspor dan pengeluaran impor tidak tercermin dalam akumulasi kekayaan devisa kita.

Dengan benar, beliau bilang bahwa sejak dulu akumulasi cadangan devisa kita di Bank Indonesia tidak pernah naik dari US$50 milyar sekian.. Dengan bantuan latar belakang grafik besar, beliau juga tunjukkan angka surplus ekspor terhadap impor kita yang cukup besar. Bahkan, kalau saya hitung dari angka Neraca Pembayaran BI, surplus neraca perdagangan barang (balance of trade in goods) per-tahun dari 2004-2008 sebesar US$20 milyar, US$ 17 milyar, US$29.6 milyar, US$ 32.7 milyar, dan US$ 22 milyar.

Jadi, kalau mengikuti argumen Pak Prabowo, dari tahun 2004-2008 saja, seharusnya ada peningkatan cadangan devisa sebesar paling tidak US$120 milyar !! Sementara itu. .devisa yang dipegang Bank Indonesia, kok hanya US$50 milyar???

Lebih afdhol lagi, paparan tersebut dilengkapi dengan tudingan bahwa pemerintah (dan Bank Indonesia tentunya) tidak becus mengelola perekonomian.. Lebih runyam lagi pertanyaan seperti "dikemanakan uang rakyat", "bagaimana ini kekayaan kita dikuras", "sistem ekonomi apa ini" dsb.. ikut keluar.

Rasanya perlu diakui, pertanyaan Pak Prabowo amat sangat bagus. Tetapi perlu dijelaskan bahwa urusan cadangan devisa ini tidak segampang mengurangi dua angka ekspor minus impor dan kalau kurang dari itu berarti ada maling atau dicuri orang asing

Pertama, trade balance adalah bagian dari identitas pendapatan nasional (PDB) yang tidak dapat dibaca sepotong-sepotong. Trade balance bukan berapa yang seharusnya Indonesia dapat, melainkan bagaimana pendapatan Indonesia (PDB) dialokasikan ke dalam aktivitas berbeda (expenditure allocation). Jika ingin melihat berapa yang Indonesia dapat, maka perlu konstruksi PDB lewat pendekatan pendapatan (income approach) yang sampai sekarang kita belum punya (Indonesia punya 2 versi pendekatan PDB: expenditure dan value added)

Kedua, ya tidak segampang itu bilang kalau ada selisih besar antar surplus ekspor impor dengan cadangan devisa maka negara ini penuh maling atau diperkosa asing (diperkosa koruptor dalam negeri sih mungkin)

Devisa dari surplus trade balance masih harus ditambah atau akan dipergunakan oleh aktivitas-aktivitas lainnya.

Di Neraca Pembayaran, ada komponen Neraca Jasa (service balance) dan Neraca Modal yang mempengaruhi posisi akhir perubahan devisa kita. Neraca Jasa memperlihatkan surplus/defisit transaksi jasa seperti telekomunikasi, transportasi (naik Garuda atau SQ), cargo, bayar konsultan bule, dsb. Sepanjang yang saya tahu, Neraca Jasa Indonesia selalu defisit.

Kemudia ada Neraca Modal (capital account) yang memperlihatkan selisih modal masuk/keluar dalam bentuk penanaman modal tetap (Toyota buka pabrik, SingTel beli Telkom, orang Arab bikin hotel, Indofood buka pabrik di Afrika, Djarum buka pabrik di Brazil, dsb.) dan potfolio (surat berharga). Total dari trade balance, service balance dan capital account itu adalah secara teori adalah perubahan cadangan devisa (tentunya setelah penyesuaian karena kesalahan pencatatan dsb). Kalau pakai pendekatan ini, maka secara teoretis selama 2004-2008 Indonesia mengalami peningkatan cadangan devisa sekitar US$25 milyaran, bukan US$ 120 milyaran seperti klaim LetJen Prabowo

Belum tentu ada yang salah Jenderal, cuma itung-itungan Bapak belum tuntas saja

The Library As Big As The Ritz

I am truly glad that finally UI decides to seriously build the much needed library. I'd be even happier if it turns out to be bigger in size than the Rectorate building.

But, did the UI's deputy director of corporate communication say the largest library in the world? You kid me not.