What To Do Against Big Boys

OK, I haven't had time to have coffee at the legendary murkycoffee at Clarendon and now they had closed the cafe down and moved to near Chinatown. But this op-ed by its former owner Nick Cho, is worth to ponder.

But if Starbucks brings one of these new concepts to Washington, I'll be among the first in line. To me, Starbucks is only a problem if the quality of their coffee gets worse, and this new spinoff might help it get better. (If they want to compete with the likes of Victrola and other great third-wave coffee bars, it's going to have to get a lot better.)

I hope the coffee wars help nudge the caliber of all coffee upward. Just because you're not a corporate behemoth doesn't mean you serve delicious brew. The dirty little secret of most independent coffee shops is that they don't know how or don't care to serve high-quality coffee. They believe that furnishing their shops with comfy chairs and knowing the names of their customers' dogs is all that matters.

Bottom line: competition is good. And if you have the right taste of (real) espresso, burger as good as Ray's Hell Burger, or rigorous research methodology; you shouldn't worry about Starbucks, McD, or any "imperialist" field of science.

Interpreting Election (and Democracy)

To political pundits in the newspaper and politically literates commenting on general election, this quote might be useful:

Thus, even if the emergence of states is better explained as cooperative efforts undertaken to benefit all members of the community rather than as a power move by one group in society to exploit the rest, it is now clear that the use of the majority rule to make collective decisions must transform the state at least in part into redistributive state.

--Mueller, 2003, after discussing the positive properties on majority rule and redistribution (see Riker, 1962 and Tullock, 1959)

In other words, stop using the term (and believing in) national interest in explaining the political parties and politician behavior in general election. It is unavoidable that election is the game on who gets the larger cake out of public policy (and taxpayer's money)

Waiting for a Keynes-like Macroeconomist

The Economist published an interesting article on the crisis of macroeconomics. If you happen taking, have had taken, or are about to take the subject, you may want to read that article too.

My personal take on that piece is this: one of the reasons on why I find macroeconomics fascinating is precisely the fact that the subject is still very much evolving. This is the branch of economics where the fight between schools of thought is still kicking, alive, and relevant, particularly after the recent crisis. And it's is a good sign, unless you just want things that already well-settled a.k.a boring.

True, as The Economist states, that for many economists the Great Moderation period from mid 80s to just before current crisis means the end of debates in macroeconomics as the business cycle was then tamed. But I was, and am, not convinced. Ten years ago, the Asia Crisis in 1998 got me thinking that there should be a new way to see the macro economy where economic activities and markets are now much more internationally linked at much speedier pace. I was expecting a new approach out of then the debates between market fundamentalists and panic approach on Asia crisis. Alas it never was.

Up to now, when it comes into macro, I can not really make up my mind and pick between (new) Keynesian or neoclassical school. Both are equally theoretically plausible and empirically defendable. I also am not fully convinced whether micro-foundation of macroeconomics is really the only way to progress, or more pragmatic positive methodology a-la Friedman and Keynes might be more useful.

But make no mistake, I very much enjoy every bit of this my state of not-knowing. It keeps me thinking and rethinking my position. It is good that the crisis of the subject forces macroeconomists back to the drawing board. Hopefully a Keynes-like figure would emerge and come up with a macroeconomics we never knew before.

And to those aspiring macroeconomists, I do not think the current state of macroeconomics should discourage you. If anything, this is the best time to study macroeconomics and join the game. Perhaps you are the Keynes-like we are waiting for.

Banality of Serial Bombings

The latest bombing incidence in Jakarta made me think to reread some economic literature on (rational) suicide bomber, --there are some out there--, but somehow I don't feel like doing it. The serial bombings is still always a disgusting and damned act, but it is now becoming banal, in a sense that it is no longer a surprise, fails to spread excessive fear, and somehow beats the dead horse.

So let the police does their CSI homework, may they identify and capture those bastards as they did in the previous incidents, and life goes on. To show that we are not easy to be scared off, the cafe still to play some jazz. Here are three Miles Davis' albums in a row: Kind of Blue, Sketches of Spain, and Miles Davis Live at Carnegie Hall.

Keep jazzin', folks.

A book of un-common sense, soon to be on the shelf at the cafe of un-common sense

So about more than a year ago, Gary Becker called to Cafe Salemba. He said he liked the cafe and had been very much inspired by it. "And, your tagline: a cafe of un-common sense, I love it!" he added.

Of course I'm lying. It's the other way around: we have been inspired by Becker and the likes: Stigler, Levitt, Friedman (Milton and David, not so much Tom), and of course Cafe Hayek.

I just couldn't help fantasizing the scene of Becker calling me, as I came across his new book with Posner: Uncommon Sense. Recommended.

HBS, Hilarious B-school

Do you know how the HBS students made the school pay for the BMW they rode to school? Or the difference between Sloan, Kellogg, Wharton, and HBS?

I did not until I read this book, Ahead of the Curve: Two Years at Harvard Business School.

To give you some idea, it's written by Philip D Broughton, an Englishman, former Paris correspondence for British The Daily Telegraph, holder of undergraduate degree in Classics from Oxford, who decided to give up journalism for MBA at HBS even without knowing how to run Excel on the first day of the School. In short, a page-turner hilarious account with strong hint of typical Englishmen wits and dark humor on life at one of world's most prestigious B-Schools.

Recommended for summer reading and for those who contemplate to take B-school or live business and corporate life.

Cultural Explanation Gone Nowhere

In 1977, Mochtar Lubis thought that Indonesians are hypocritical, unaccountable, feudalistic, superstitious, artistic (sic!), and some other bad traits.

In 2009, Rhenald Kasali thinks that Indonesians suffer from ten negative "economic culture" (whatever it may mean). He believes that Indonesians love to: bypass (regulations), engage in conflict, be suspicious to each other, insult each other, be photographed (sic!), mobilize mass violent acts, be shameless, be populist, set unnecessary (bureaucratic) procedures, and procrastinate.

My take: I am not convinced at all -if not to say that I don't buy it- for the following reasons.

First, so far I do not see neat working definition for each of those adjectives they used.

Second, I do not see systematic empirical efforts and findings to justify those assertions --let alone considering they take the nation's population as their unit of analysis.

Third, compared to what (nations at what period)?

Good Scot

My favorite Bagehot of The Economist asked which Scots are Good Scots; and gave three options: Andy Murray, Susan Boyle, or Gordon Brown.

That's easy. All of them. But still the best Scot so far is Bond, James Bond.

How to Read Interest Rate Paid by The Poor

You may often hear this as argument against informal moneylenders to the poor: they charge exorbitant annual interest rate. For example, IDR 2500 a week for IDR 100K loan means 261 percent annualized interest rate.

But that's not quite accurate.

One of the lessons from the diaries is that interest paid on very short-duration loans is more sensibly understood as a fee than as annualized interest. When researchers annualize all interest rates, they maybe following standard accounting practices, but distorting the real picture.

--Portfolios of the Poor by Collins, Morduch, Rutherford, Ruthven, p.22

What is the real picture? For instance, paying that interest, --no, fee--, will enable a poor to buy new cloth for his/her kid to celebrate Eid festival. A very rational motive. And perhaps, thinking at annual base is a luxury for the poor.