So You Think You Can Dance Know What The Poor Wants?

Think again.

Let's say we provide the poor with cash money transfer, what do you think the poor would spend that money for? I bet that many of us would think that the poor would buy more basic staple food, like rice, or perhaps to pay for education fee for their kids, because, rightly so, the poor has low calorie and nutrition intake and low education status.

But suppose we found out that the money is spent for buying more cell-phone card credit, pulsa HP, what would you think?

Some, or perhaps many, of you would get mad and deem this act as unacceptable. The poor must buy more food or basic education, you insist, because it would help them out of poverty.

Let me take different view nonetheless. First, perhaps they're not as starving or badly in need for education as you think. Second, even if they indeed have low calorie intake and education status, in their calculation, ability to communicate with friends and relatives using cell-phone gives them more pleasures and utilities.

And I am OK with this. I believe that the poor knows what they're doing.

As simple as it may seems, you probably could not easily share this view -- you think you know what the poor has to do more than they do. Or even, you think the poor folks don’t know what needs to be done with that additional money.

In this interesting article, Abhijit Banerjee and Esther Duflo of MIT, with their extensive experience on poverty researches around the world suggests that such oversimplifying and paternalistic view on the poor is probably of little use. So is any well-intended poverty reduction reform based on that standpoint.

Yes, more nutrition and education would eventually lead to better productivity, hence income, and less poverty. But probably the poor has different expectation. There is one paragraph in that article that I would love to quote in full.

…We often see the world of the poor as a land of missed opportunities and wonder why they don't invest in what would really make their lives better. But the poor may well be more skeptical about supposed opportunities and the possibility of any radical change in their lives. They often behave as if they think that any change that is significant enough to be worth sacrificing for will simply take too long. This could explain why they focus on the here and now, on living their lives as pleasantly as possible and celebrating when occasion demands it… (Bold is mine)

Granted, their decision to buy more cell-phone credits, or TV set to watch infotainment, or to carry out lavish traditional and/or religious party is perfectly understandable.

Econ 101 tells you that if you want to maximize the recipient's utilities, you should not set any conditions on your money transfer -- and let them decide to buy whatever gives them higher utilities. But if the objective is to maximize your utility (as the giver), you can impose specific conditions for the recipient to get the money to make sure you get what you want – e.g you demand the poor spend the money to buy rice because it satisfies your belief that more calorie is what the poor needs.

Now a million dollar question would be which one matters more -- your utility or their utility?

Yes, the market works for the poor

In 2005, The Economist published their special reports titled "A Digital Divide." The argument was one of the main reasons for the persistence of poverty is the lack of access to market (goods, labor, or financial). Information and Communication Technology (ICT) has the potential to provide the access to market. The problem is the poor tend to have limited access to such technology. Hence, one way to help alleviating poverty is to provide greater access for the poor to ICT.

A few years ago, this idea did sound absurd. What? Internet or mobile phones for poor farmers or fishermen, while most of them still even struggle to buy food? (Even Rizal once was skeptical. Back in 2005, I asked him how ICT can help the poor. "Sell the computer, buy them rice," was his answer).

However, anecdotal evidences do show that ICT can, and does, help the poor. The Economist's this week special reports provide a series of article - one may see it as a conclusion for their 2005 reports - on how ICT, mobile phone in particular, have transformed lives in the poor world in almost a revolutionary way. It connects buyers and sellers in remote areas; helps small businesses taking orders on the spot; enables farmers to get weather forecast hence deciding whether or not to plant their crops. Amongst all, in India and Africa, mobile phones are the new financial intermediaries:

... mobile money, which allows cash to travel as quickly as a text message. Across the developing world, corner shops are where people buy vouchers to top up their calling credit. Mobile-money services allow these small retailers to act rather like bank branches. They can take your cash, and (by sending a special kind of text message) credit it to your mobile-money account. You can then transfer money (again, via text message) to other registered users, who can withdraw it by visiting their own local corner shops. You can even send money to people who are not registered users; they receive a text message with a code that can be redeemed for cash.

The question is, are anecdotal evidences good evidences? Contemporary studies seem to support the idea. This study is an example. (Of course, there is always a debate on external validity, generalization, etc.)

There is a bigger picture I'd like to point out: this is an example of how market incentives work, and work for the poor. Ten years ago, mobile phones were still a luxury. But in just a decade, costs have fallen dramatically so virtually almost everyone who wants to have a cell phone can have one. Competition and market liberalization has contributed to this falling costs.

On the other hand, (poor) people in the developing world are potential consumers. The market sends this signal to the producers and network providers, who keeps innovating their products. The innovation did not stop there; came Grameen Phone, came M-PESA, and so forth.

So, don't lose faith in the market economy, yet...

Predicting poverty?

Last week I attended INDEF's mid-year evaluation on government policy, titled "Oil, Food and Poverty." One thing I particularly noted was their prediction that poverty rate will increase by around 1.3 percentage points next year. The main reason was the fuel price hike will create inflation, especially in the food, food products and transportation categories. They also predicted that inflation will rise to around 12 percent.

I've never been a big fan of economic predictions (though in my past job I had to do that). Among different indicators, I wonder if we can make a good prediction for poverty rate. Nevertheless, I wondered why they would predict poverty is to increase by 1.3 percentage points when, at the same time, they predict inflation will rise to 'only' 12 percent. In 2005, when the fuel price increased by 130 percent, inflation jumped to 18 percent, and headcount poverty rate increased by 1.8 percentage points. Now, with lower increase in both fuel price and inflation rate, they predict more or less the same magnitude of increase in poverty rate. Unless if we are facing a very difference situation between now and then, which, I think, is very hard to justify.

Their explanation in the Q&A session revealed that they didn't take the effect of BLT (cash transfer) into account. Well, perhaps because they, at least my colleague Ikhsan Modjo, one of the panelists, belong to the 'BLT is useless' school of thought. For sure, much to be done to improve BLT, and BLT is not a desirable long-term safety-net policy. However, discounting the impact of BLT in providing cushions for the poorest households is unfair.

In case you are interested, here is my comment and further elaboration on this issue.

Poverty update

The number of poor (and poverty rate) has declined, according to the latest BPS press release, based on the March 2007 SUSENAS data. Some people, the usual people, don't believe this. I believe the finding is 'within the range of acceptance.' I am happy to see that poverty declines whatsoever. But I am not too happy to see only a small decline. We haven't even returned to the 2005 level.

Those who don't believe the BPS number argued that how on earth can poverty declines when, at the same time:

• The (unconditional) cash transfer program - BLT - scheme has finished, while the proposed Conditional Cash Transfer scheme has yet to start.
• The prices of basic commodities are still high.
• The purchasing power is still low; real wages don't change and farmer's terms of trade index is decreasing.
• Job creation is slow
  

It's fine to have a different concept and definition of poverty, and the methodology for calculating it. I'd like to see them coming with their own calculation, if any. But the above points make at best weak arguments for disputing the BPS finding.

For a start, remember that the poverty numbers are the result of the 'negative' and 'positive' forces. The BLT is one of the 'positive' forces. True it finished a while ago. But that doesn't mean the impact stopped. The beneficiaries may have been able to use the cash transfer for productive activities that enabled them to have increase their consumption more than the price increase (which was reflected in the inflated poverty line).

On the other hand, true that high commodity prices is a 'negative' force. In fact, using this logic, poverty should have been much lower if had the government been able to control the price of rice. (Do you get my point?). The recent cooking oil price increase was also a problem. But I don't think that was already captured by the poverty statistics.

I don't have the real wages statistics readily available for this post. But let's say it doesn't change, or even declined. That should not be that significant in explaining poverty numbers, since most of the poor are outside the (formal) labor force. So real wage statistics are not too relevant. Farmers' terms of trade is a more relevant variable. In fact, the BPS found that farmers' ToT increases from 101 to 109 between March 2006-March 2007.

For the same reason, job creation should not be a significant factor in explaining the change in poverty rate for the past one year. Nevertheless, actually the open unemployment rate also declined by February 2007 (although we need to reduce it more). Of course, the same 'camp' doesn't believe in the unemployment statistics either.

But hey, what can I say?

Updates.

1. I forgot to mention about the consumption-smoothing mechanism among the poor, which was very likely helped by the BLT, Raskin and School Operational Support (BOS) schemes.
2. Average medium-quality rice price increased by 20% from March 2006-March 2007, compared to 33% in the previous period (Bulog website)
3. Only 15% of working-age poor individuals are wage workers (SUSENAS 2006).
4. Average real wage for all workers increased by 4.7% from November 2005-August 2006 (SAKERNAS 2005, 2006).
5. Average daily wage of labour-farmer declined but only slightly by 0.2% from March 2006-March 2007. (BPS press release).
6. Household-head unemployment rate is the lowest at the bottom expenditure deciles, suggesting the "unemployment as luxury" hypothesis.

The visible hand(set)

Will information and communication technology help the poor? It is tempting to say ‘yes’ to the question. The ‘how’ part is more difficult to explain. Studies on this issue tend to be macroeconomic (an x percent increase of phones or internet per capita is associated with a y percent of income per capita, or the likes).

Others are anecdotal evidence, although doesn’t mean that they are flawed. In a seminar, C.K. Prahalad of the Ross Business School, University of Michigan, mentioned that internet-literate wheat farmers in India examine the world price fluctuation through the Chicago Board of Trade website before deciding how much they should sell to the market. (Our fellow Rizal once said, “How internet helps the poor? Sell the computer, buy them food!)

A forthcoming paper by Robert Jensen (was my advisor at Harvard, now at Brown) provides a deeper analysis. The paper will be published in the Quarterly Journal of Economics next August. A review of the paper is available in the Economist. His work showed that the penetration of mobile phone had increased the average profit of fishermen in Kerala, South India.

At any given day, Kerala’s fishermen have to make a difficult choice: to sell their catch at the local market, or to go to another market along the coast. Whatever the decision is, you need to hope that your fellow fishermen go to the other market so that you would face fewer competitors. This is a one-off decision. Once you come to a certain market, it is almost impossible to move even if the market is full. You need fuel and time to travel. As the result, in a certain market there are plenty of fish that are thrown away (you can not keep the fish). In another market fifteen kilometers away, however, some buyers have to leave the market empty-handed.

This was the situation before 1997. Starting in 1997, mobile phones were available in Kerala. With mobile phones, fishermen were able to call around to find the best price, or to decide to which market they should go while they were still at sea (within 20-25 km from the coast).

The paper was more than just anecdotal. The gradual introduction of mobile phones provided a pseudo-randomization. So the author can divide the population into ‘treatments’ (the early birds) and ‘controls’ (the late comers). The result was very interesting. Once coverage became available in a region, fishermen who ventured beyond their home markets jumped from zero to 35%. The number of excess supply (wasted fish) or excess demand (unlucky buyers) went down to almost zero. Price disparities among markets fell in a typical ‘law of one price’ movement. And, more importantly, fishermen’s profits rose by 8%, and consumer price fell by 4%, on average.

This study provides more insights than that. It shows that the market, when it works, helps the poor instead of exploiting them. True, sometimes the market doesn’t work. The introduction of (information) technology makes the market work. And, beautifully, it was the profit-maximizing mobile phone companies who eventually helped the poor. Not the government, nor charity organizations.

Capitalism is good (even for the poor)!

Loan sharks (rentenir; tengkulak; lintah darat) are always portrayed as the enemy of the society. As the name portrays, they are fierce predators of the poor farmers or traders. In Indonesian they are called lintah darat (leeches) because they live by sucking other people's blood.

Are they really bad? As usual, we economists do not have the moral judgements. We are more interested in why they exist. Well, simply they exist because there is an excess demand of capital. There are poor village enterpreneurs with high needs of capital to start up or expand their small businesses. However, for many reasons, they can not borrow from the banks. Perhaps because they do not have anything to serve as collateral. Perhaps because the scale of their businesess is too small for the banks to make a significant margin out of it. Perhaps because there are no banks around.

Loan sharks fill this gap. They offer accessible loan with small or no collateral. In some ways, they contribue to making the local economic wheel rolling. True, when the debtors fail to pay, loan sharks turn into true sharks. But the fact that they do exist and continue to exist means the demand for their 'service' is still high. (Remember also that by lending their money, loan sharks are also subject to risk and opportunity cost of money.)

Moral of the story: what the poor enterpeneurs need is access to capital. Not that they don't know how to do business. They do - but they just don't have the necessary capital.

Not that they need to be helped in paying the interests. Remember, many of them are able to repay the loan sharks' exorbitant interests. A study by LPEM-FEUI (thanks to my colleague Syarif Syahrial) showed that microfinance activities in Kuningan, West Sumba and East Sumba had no problem with unpaid loans even though they charged higher interest rate compared to the market price.

This explains why Adi Sasono's initiative when he was the Minister of Cooperatives and Small-scaled Enterprises during the Habibie administration (1998-99) failed. Assuming that SMEs were hurt by high interest rate, the government offered a subsidized interest rate for SMEs, at 13% compared with then market interest rate of 40-50%.

But people responds to incentives. Many new SMEs were established. But the motive was to be able to borrow at 13%, put it in the bank, then got the 30%+ interest margin. Who wants to do real business at that time, when the economy and security was very uncertain?

So, developing financial market and institution that reaches the poor is one important way to alleviate poverty. Since financial market is the backbone of modern capitalism, we can conclude that capitalism is good for the poor. At least, we can't conclude it is bad for the poor.

Rural finance

Money or rice? Money or diamond?

Consider a poor family. The father works as a peasant in his uncle's paddy land, for a sack of rice every week. He still has to make money by working as tukang becak. ¹ The money is barely enough to buy fish or vegetable, not to mention schooling or even decent clothing for the children and their mother.

According to BPS (Office of Statistics), the family is eligible for raskin. ² That is, the father can buy 20 kgs of rice at price sixty percent lower than the market price every month. Sounds good.

But probably not too good. Remember, this family gets rice from someone (the father's uncle). So they don't need rice from the raskin program. What does the family need? I don't know, you might not know, and for sure the government doesn't know. It's probably medicine, books, kid's toys, we don't know. It's the family members who know for sure what they need.

Assuming they need medicine. They don't have enough money, but now, thanks to the raskin program, they have more than enough of rice. What would they do? Sell the surplus and use the money to buy medicine.

Now if the government wants to help the family, is it better to give it rice or ... money? Bear in mind, converting the rice into money might require transaction costs (looking for buyer, bargaining, etc). If the family gets the money, not the rice, they can avoid the costs and they can save time (imagine if the medicine is of urgency).

The government does have another program that gives away money -- hard cash. It is called the "BLT" (bantuan langsung tunai -- direct cash transfer). I was skeptical to this idea, but I heard the problems have been reduced, albeit gradually. ³ So if I had to choose between the two: money or rice, it would be the former.

You might think now that I'm a welfare statist. No, I'm just trying to compare the effectiveness of two welfare programs. Any such program should be temporary, if really needed. I raised the idea above in a meeting with officials from BPK (Supreme Audit Agency) who were requested by the Ministry of Finance to audit Bulog's (State Logistics Agency) performance. Raskin was a well-intentioned program. However, it's been a playground for corruption.

Now, let's think about another situation -- this time without the government. There are two lovers. The guy wants to impress the girl. Conventional wisdom tells him: buy her diamond. But is it better to give her ... money? So she is free to choose whatever she wants to buy: diamond, fancy car, Bottega Veneta, ...

¹ Rickshaw driver.
² Stands for "beras untuk orang miskin" (rice for the poor) Government's rice subsidy program started in 1998. The initial name was OPK (operasi pasar khusus, special market operation).
³ From conversation with Sudarno Sumarto of SMERU.

raskin | BLT | corruption | Free Choice

ID-ing Everybody

I share Ujang's concern that ID-ing the people is a tricky thing. It is a matter of political, feasibility, as well as ethical concerns. I don't know much about international ethics of statitistics or Indonesian law on statistics. Ujang's account is then very helpful to me.

Come to think of it, the administrative-purpose rationale is in fact what I had in mind. A single ID number would likely to help cut a lot of inefficiency. And it should be able to lend itself as the basis for targeting a public policy. This is where ethical concern amplifies. We don't want a Big Brother watching everything we do. But we want to have administrative procedures efficient. The solution should lie within the two objectives: there's a tradeoff. And that cries for a careful rule of conduct.

ID-ing the Poor

Although I agree that we do need a single identification number (or a SSN-type of ID) for administrative purposes, I would be very cautious in advocating the use of this type ID for any other purposes. In fact I think we need to make a clear distinction between creating ID for administrative purposes and collecting data for policy or research purposes.

The privacy concerns with linking a national ID to any sorts of individual or household data are well justified. There is no quicker way to undermine the credibility of a data collecting agency such as BPS than to ask them to make a transparent list of individuals and households with all of their characteristics. The agency and its activities will immediately be politicized by the government, political parties, researchers, media, businesses and very soon the public will stop answering any questionnaires. Mayling Oey Gardiner wrote an excellent column on this in Kompas which I wished more people have discussed. She said,

“…Patut disayangkan bahwa di kalangan pemerintah pun berkehendak mengetahui rincian orang miskin dengan nama, alamat yang rinci, keterangan tempat tinggal dan aset yang dimiliki… Ada dua hal yang patut disayangkan dari usaha ini. Pertama, pemerintah dengan sadar memberi tugas pada BPS agar melanggar kode etik statistik internasional. Kedua, daftar orang miskin yang akan dihasilkan oleh BPS, bagaimanapun canggihnya, hanya akan memuat nama dan alamat orang yang pada waktu pencacahan dinyatakan miskin…”

If BPS or any other agencies decide to link these IDs with data gathered from individual or household surveys, not only would they run the risk of violating international ethics on statistics, they might also violate the Indonesian law on statistics.

For our practical purposes as academic researchers, having these types of data will put us under enormous responsibility and may immediately jeopardize our chance to actually be allowed to do any research (or get any research funding). While rules governing research on human subjects varies between countries and between institutions, almost all of them include strong requirement to respect and protect the rights of the subjects, including the rights for privacy and to withdraw from the research.

So clearly there will always be a trade off between knowing with certainty who the poor are and respecting the rights of the human subjects, and in my view the latter should trump the former. Besides, isn't this the sort of challenge that econometricians and economists strive for?

Aside: There are several well known micro data sets that allow one to match individuals' administrative records with the records from individual or household surveys. Some well known examples in the US are the Survey of Income and Program Participation (SIPP), and HRS (Health and Retirement Survey). Numerous safeguards are usually in place to protect the confidentiality of the respondents. The restrictions include: who are the researchers, what research questions can be asked, what can be published, at what level the data can be merged, what information should be parsed out from the data before they are used, and so forth. In some cases, noises are even added to the data as extra protection.

Dazed and Confused

Not only are there some confused politicians in Jakarta, there also seem to be a lot of dazed citizens elsewhere. Well, maybe not a lot, but I am sure I am not the only one dazed by the extent to which the government has fumbled the ball in its handling of the cash transfer program. I am also at loss trying to understand how an economic team who were so skillful in explaining the intricacies of the economics of oil subsidy could come up with a cash transfer program so flawed.

Economists and public policy makers usually pride themselves on understanding the unintended consequences of human actions (and government policies). While arguing their case to lift the oil subsidy, the government and even SBY himself showed that they do have this expertise. In months leading to the fuel price hike, they succesfully pointed out the numerous unintended consequences of distorting the market to the general public (e.g, who were enjoying the subsidy, why the subsidy encourages smuggling, what the environment impacts are, etc.). Although their case was solid, convincing the public was not an easy task, so they should be applauded for the efforts.

Yet following the price hike, and within weeks of implementing the cash transfer program that were meant to cushion the impact for the poor, we have seen some of the unintended but entirely foreseeable consequences the program. For example, there were households that split in order to be able to receive more than one transfer payment. News reports told stories of households hiding their motorcyles to be eligible for the transfer. Now, news reports are just that, until we have a systematic way to evaluate the program objectively, we won’t know how widespread the problem is, so I won’t even think of chalking this up as evidence of failure of the program. [Aside: This being 2005, a program evaluation mechanism should have been designed even before the program takes place. Dare we hope?]

However, the apparent absence of any mechanism in the program that could minimize these “second order” effects, and even worse, the refusal of the government to even admit that they should at least have anticipated these effects, is astounding. Cases of mis-targeting or misidentifying the poor are inevitable in any cash transfer programs, but over time the problems may get worse as households and individuals adjust their behavior to meet the criteria. Anyone who understands how oil subsidy would distort the market and create unintended incentives should also be able to anticipate that a cash transfer program would create incentives for people to make themselves eligible.

Perhaps a best summary about how the program was flawed can be represented by a statement of a BPS official who lamented that some households were not being honest in answering BPS or RT’s officials' questions. Herein lies the problem. For a program of this scale, to hinge too much on people’s honesty is just a lazy way to pass down the responsibility from the policy makers down to BPS officials, RT officials, and ultimately the poor households. And that is simply dishonest.

Beyond cash transfer

As an aside of Aco and Sjamsu's discussion on cash transfer below, I argued in Kompas a few months ago that the whole debate on fuel subsidy vs. direct subsidy just reminds us on one thing: we don't have a systematic policy to protect the poor. In the artictle, I argued that we must shift our debate from the pros and cons of cash subsidy to providing mechanisms for the poor in managing risk. Hence, the issue is "risk management for the poor."

Note: the Kompas article is in Indonesian. A working paper version (in English) can be downloaded here.

Cash Transfer

While co-host Sjamsu likes the idea of the current cash transfer program in Indonesia, I have some reservation. I agree with giving people money, not in-kind assistance. But I'm a little reluctant to call what the government is doing now as compensation (or, more precisely, "compensating variation"). Here's my take in Jakarta Post -- but, please read the uncut version, as the newspaper has left some important points in the editing so as to fit the space. Among other things got cut by the Editor is my position that cutting oil subsidy, pursuing efficiency, mobilizing other sources of fund, and combating rent-seeking activities are complements, not substitutes. Also, in the end of the original writing I skecth some examples of cash transfer programs that have been known as successful.

Addendum: Reading Sjamsu's comment (below), it appears, we're not in disagreement. We both agree with with the idea of cash-giving (as opposed to in-kinds). I am skeptical to the implementation. It seems, Sjamsu does, too.

confused politicians

Media Indonesia on-line 4 Nov '05 reported that Amien Rais and Soetardjo (both are high profile politicians) thought that direct cash transfer would not educate the poor, have caused horizontal tension, and wrong. They also concluded that fuel price increase have worsen people's misery and therefore, in the name of the people, government should: (i) stop the cash transfer programme and (ii) bring fuel prices to the original level.

What they observe about peoples' misery may be right. In a short-term, except oil companies, who gains from higher fuel price anyway. But they are wrong about the long-term economic effect of fuel price increase . They are confusing the idea of direct cash transfer with results from its practical implementation.

There are solid reasons to increase fuel price which I will not bother to elaborate further (please visit Aco's other blog site on this issue). My point here is that resources are stuck in the short term and therefore price will only adjust upward causing temporary inflation. But forcing to bring the oil price to originial level will be more disastrous as deficit would soar, attack on currency would gone wild, and would certainly kill any debate on alternative energy (let alone conserving energy).

On cash transfer programme, my first take on this is that it is a pure compensation program, not an education program. It is based on a simple static economic reasoning (see ca$h and carry) to address adverse income shocks. The real wage decreases after price increase and one would not able to consume the same amount of goods from the same amount of working hours. Thus cash transfer compensates for the drop in income i.e. negative income effect as economist would say.

Second, compensation program through cash transfer does not solve poverty. The key link between compensation program and poverty alleviation lies with the ability of the program to gear poor people's incentive to break out from of poverty by improving their: education, work, and health. Many countries have done the so called conditional cash transfer (Mexico, Brazil). Their cash transfer are conditioned upon poor household taking action to participate in education or work programme. For example, cash support is given if poor household: sends kids too school; perform healthy life-style; or do wage earning work.

Thus real challenges for us and our often confused politicians are to (i) fix the implementation of the current cash transfer and (ii) come up with bright ideas on conditional cash transfer.

ca$h and carry

The act of compensating Indonesian poor family from their slashed fuel subsidy is currently taking the hot seat in the arena of public debate. The idea of giving cash money in helping out poor family may not jive well with the average person’s sense. Average person would often think that this cash compensation is useless or stupid. Some would go as far as to question the logic of compensating individual and what does that have anything to do with helping the poor.

First, average view is relative and affected by any person lack of knowledge. Second, more importantly, the rationale behind the act of compensating is often forgettable. Almost every individual has some experience on taking compensation from certain grief. When we were a child, our parents would compensate us with toys, ice cream, a ride around town, and even cash, from their ill promises. You also often have to compensate you spouse for your negligence toward her/him.

Compensation is meant to reduce loss or heal wounds. The compensated individual should be offset from his/her undesirable misfortune, or at least, endure les s suffering. This is the basic for thinking about the economics of compensation.

Poverty is not an easy subject. People like Amartya Sen of Harvard University got a Nobel prize for defining and sharpening the idea about being poor. However, the idea of injecting cash to compensate a poor person's income should not be difficult to grasp. We all have needs and most of them are measurable in monetary terms. Therefore, giving cash is one way to compensate misfortune individuals in helping them to achieve their needs. A child will be happy to forgive their parents forgotten promise in exchange of a new toy car. A stranded airline passenger will be less pissed after receiving a free long-distance call and meal vouchers. Finally, a poor person can maintain his consumption bundle even at a higher price level after receiving cash.

Most poor Indonesian family spend most of their money on food, particularly rice. Increase in fuel price will also have an indirect effect through increase in the price of food and other goods. Therefore, a cash transfer for the poor can help alleviate suffering from inability to fulfill their needs.

Simple eh..

Empathy for the poor?

A recent thread in the maling list of "FEUI lecturers" discussed about how to create students' empathy for the poor. A senior professor talked about his initiative to bring his students on 'Development Economic' course to Bantar Gebang, Jakarta's garbage dumspter which is also a resident of some poor family with a very miserable living standard. He talked about how his students spend some hours there, played with the kids, and watched the people live from garbage. Some fellow lecturers thought about institutionalizing such initiative and integrating it into the curricula.

While I applauded the senior professor's initiative, I have some reserves on the idea of regular student 'field trip' to Bantar Gebang or any other student area. OK, they spend some hours there, play with the kids, watching the people eat from garbage, and what after that? OK, perhaps go home with some empathy after that. But what about the benefit for the poor?

Surely, an image of UI students regularly visiting Bantar Gebang (or any other slum areas) each year makes me a bit worried rather than proud. The poor will at best get some 'empathy.' But will empathy lift them up from poverty? Moreover, does somone consider the possibility that they would get sick of having students visiting for their field trip purpose?

Meaiwhule the students get their grade for that, which they will use it to compete in the job market. Getting relatively high salary and opportunity -- talking about education creating inequality?