Saturday, February 27, 2010

There Are Many (Much) Better Reasons to Hate Economics

Emmanuel Subangun wrote in Kompas 2/27/10 op-ed:
As recognized by anyone who ever attended university and had economics course, economics suffers from two plagues. First, to support the claim of economics as a science, the limitation has to be clear. In economics lingo, economics has to be separated from other social facts -- boldly called as, from Latin, ceteris paribus. From this point, economic model is born and, alas, all economic policies are based on models generated this way. The second plague, economics(sic!) is not willing to be registered as social science, so that (sic!) it self-regards as a star (science) that has best understanding on social issues. This creates a superiority complex.

Those who ever took econ courses (and elementary research methodology) seriously would understand that ceteris paribus doesn't mean a separation from the so-called economic and social facts. Ceteris paribus (or all else being held constant) means that when you try to explain the effect of a change of variable, you assume that other variables are constant.

Let me repeat this clearly: This has nothing to do with separating the facts, let alone between economic and non-economic facts.

It is about how to tell the effect of, say, proper Econ 101 education, on ability to write a well-informed op-ed. In your observation, you can not really tell it if you do not hold other variables (e.g overall educational level, writing skills, exposures to relevant readings, political bias, the number of economist friends, etc) constant.

Moreover, who said that economists do not consider non-economic facts in their analysis ? Mr. Subangun probably needs to read a whole series on non-economic factors in economics at the diskusiekonomi blog.

On his second claim that economics refused to be categorized as a social science, well, it surely has different methodology than, say, sociology, but it is a social science. Suppose it weren't a social science, does it mean that now we have social sciences, natural sciences, and economics?

Then Mr. Subangun also thinks that Boediono and SMI represent scientific economics, while Pansus common sense. The former fails to convince the latter, hence political communication dysfunction.

Common sense makes you think that the sun revolves around the earth.

Beside, Pansus does not use common sense, but play ill-informed politics. They just either, like Mr. Subangun, don't get the economics right, or, worse yet, for whatever reason, refuse to take well-founded economic arguments for bailout.

Additional flaw: From the quote, Mr. Subangun argues that economists want to separate non economic social facts; but at the same time he suggests that they claim to have best understanding on social issues. Alas, this argument is a contradictio in terminis.

Thursday, February 25, 2010

Happy Birthday, Village Vanguard

Yesterday, the Village Vanguard had its 75th anniversary.

To celebrate, Cafe Salemba plays some memorable live recordings from that mecca of jazz. Here is the line-up and you can listen to the youtube link we put on the song's title:

1. Sonny Rollins' Old Devil Moon, from the album A Night at the Village Vanguard, 1957
2. Bill Evans' Alice in Wonderland, from Sunday at the Village Vanguard, 1961
3. John Coltrane's Spiritual from Live! at Village Vanguard, 1961
4. Brad Mehldau's Monk's Dream from The Art of the Trio 2, Live at the Village Vanguard, 1997 (sorry, no youtube link found)

Enjoy and please don't spill the coffee over the last AER you just read.

Thursday, February 18, 2010

Why I'd Rather Buy Two Cups of Coffee and Muffins

Following a Facebook discussion here, Ujang and I are amazed on how our friends on the left take Naomi Klein's Shock Doctrine seriously. I can not say anything on Klein's argument since I haven't read the book. And here is why.

Imagine you have 10 bucks in your pocket. Then somehow you read Tyler Cowen's review that says
Rarely are the simplest facts, many of which complicate Ms. Klein's presentation, given their proper due. First, the reach of government has been growing in virtually every developed nation in the world, including in America, and it hardly seems that a far-reaching free market conspiracy controls much of anything in the wealthy nations. Second, Friedman and most other free market economists have consistently called for limits on state power, including the power to torture. Third, the reach of government has been shrinking in India and China, to the indisputable benefit of billions. Fourth, it is the New Deal — the greatest restriction on capitalism in 20th century America and presumably beloved by Ms. Klein — that was imposed in a time of crisis. Fifth, many of the crises of the 20th century resulted from anti-capitalistic policies, rather than from capitalism: China was falling apart because of the murderous and tyrannical policies of Chairman Mao, which then led to bottom-up demands for capitalistic reforms; New Zealand and Chile abandoned socialistic policies for freer markets because the former weren't working well and induced economic crises.
You may then say, but hey, Tyler is a conservative free-market economist. Fine, what about Dani Rodrik -- a respectable Harvard's KSG economist who is sympathetic to industrial policy and once write a book asking whether globalization has gone too far?

You may expect at least a kinder view. Instead he said that Shock Doctrine is a bad book needs to be trashed and it is very hard to understand how Klein felt good about Argentina in 2002 that just collapsed into a severe economic crisis, with a more than doubling of the share of population in extreme poverty and a 10 percent decline in GDP.

Need more evidence from the left? What about Will Hutton from The Observer, UK?
In her delusional, Manichaean world view, privatisation, free markets, private property, consumer freedom, the profit motive and economic freedom are just other terms for corporate self-enrichment, denial of voice, limitation of citizenship, inequality and, sometimes, even torture. The discredited electro-shock psychological treatment of the Fifties, we learn, informed the thought system of the free marketeers; it is guilt by association and assertion rather than proof, a weaknesses of too much of the book.
The only positive review I came across is from Stiglitz (I can see your baristas here yawn). But even he said:
Klein is not an academic and cannot be judged as one. There are many places in her book where she oversimplifies.
Enough said, it is a small wonder that I'd rather spend my 10 bucks for two cups of good coffee and muffins than Klein's book.

But then the Facebook discussion and the overwhelming praise from my comrades on the left gets me thinking that probably I should give Klein a fair chance. Maybe I can borrow the book from local public library, if they have a copy. Yet one thing for sure, it would have a very hard time to compete with other books I considered worth reading -- and I have a long list of them already.

Tuesday, February 16, 2010

A Too Tall Order for Politics and Democracy

Maybe it's just me but it's hard to read Yasraf Amir Piliang, our Indonesian post-modernism guru, in Bahasa Indonesia (not that I have ever read his English pieces, too). Take his latest (seemingly Baudrillardian) op-ed here.

Basically he wrote that ideally:
#1. Political communication is to disseminate ideas, knowledge, and political enlightenment.
#2. Democratization is to build an architecture for a well-informed, ethical, and aesthetic political society.
#3. Political action is to bring virtues of goodness, nobleness, uprightness, honor, enlightenment, and authenticity.

But, he thinks, thanks to the (stupid) media, what we now in Indonesia get are:
#1. Political communication as an arena for rhetoric, parodies, and virtual political seduction.
#2. Democratization as a scheme for banality, artificiality, and electronic media virtuality based on the logic of commercial, popularity and media celebrity.
#3. Political action that brings banality, shallowness, manipulation, and mass deception.

OK, I agree that in general Indonesian media and their ill-informed press corps indeed still have to do a lot of their homework. I also could not say anything about Baudrillardian (or for that matter, any philosophical) approach on current Indonesian media practices since I know next to nothing on it. But I have to say that Yasraf Amir Piliang's ideals on political communication, democratization, and political action above are probably over the top.

I'd rather set a lower but by no mean easy metric. Political process and democratization shall hold the ruling government accountable, in a sense that they can not just make a redistributive policies go unchecked. Democracy should enable a citizen not only exit, but also voice their disapproval as well as to root for certain political affiliation (loyalty).

Yes, it's Albert O. Hirschman's insight.

Thursday, February 04, 2010

What Surnames Can Tell You

When you hear the word England, what crosses your mind?

Harry Potter, Prince Harry, David Beckham (meh), Spice Girls (yes), fish and chips. Maybe if you are a bit literate Jane Austen's Pride and Prejudice, and if you're exposed to social science a rigid class structured society.

The last bit is problematic. If indeed England has low social mobility, why the industrial revolution took place there after all? Capitalism, innovation, and technological progress would not flourish if there is no reward for innovators. A rigid class based structure prevents social reward goes to the capitalists or innovators.

Greg Clark of UC Davis investigates this question in a very clever way. He goes back 800 years earlier, digs the archival records, and looks at the surnames. Yes, surname, as it indicates the initial position of a family in a social structure 800 years ago, and tracing it all the way to today can illustrate how social mobility takes place.

Clark finds:
England, all the way from the heart of the Middle Ages in 1200 to 2009, is a society without persistent social classes, at least among the descendants of the medieval population. It was a world of complete social mobility, with no permanent over-class and under-class, a world of complete equal opportunity.
This work shows that economic history is a vibrant subject. Contrary to common belief, they have a very creative way to look at historical record and come up with often times striking new finding out of old stories. Greg Clark is one good example, Avner Greif of Stanford is the other.

Our own economic historian is the respectable Prof. Thee Kian Wie, and you know what, having attended his seminar, I can say that Greg Clark resembles young Thee Kian Wie -including his remarkable humility.