Facebook Solution

On a recent visit to my favorite secondhand bookstore here, I bought a small book with nice cover titled On Rumors, by Cass Sunstein. I like this short book while discussing its first two subtitles -- how falsehood spread and why we believe them-- (answer: informational and confirmatory cascade and group polarization) ; but not so much on the third -- what can be done.

It's a small wonder nonetheless, knowing that Sunstein, along with Thaler, is the leading figure in paternalistic libertarianism. He goes that to prevent falsehood to spread, we need to create a "chilling effect" against rumors through law.

But actually I like what he describes as (overly) optimistic market-for-ideas solution when he write:

"Perhaps the Facebook generation and its successors will treat a wide range of rumors, including negative and vicious ones, with bemusement or a yawn."

This is spot-on.

Government Failure #379

I fail to understand why the Ministry of Communication and Information forbids inter network free SMS -- the name of the Ministry already sounds like an Orwellian bad dream, by the way.

They think it violates fair competition because the benefit goes to large providers as consumers switch to them and use more minutes calls for more free SMS.In other words, they blame the big providers because they are, well, big.

D'oh

Let's do it at home then ... just call it "study"

Bekasi municipality will have new regulation for students soon. According to The Jakarta Post (Bekasi students face mandatory study times, May 4), the government will require students to be home from 7pm to 9pm studying, either alone or with classmates. They will be barred from going to malls or entertainment centers. No TV or videogames allowed too, during the 7-9pm study time.

Poor students. Isn't 7pm-9pm the best time to hang out, to forget about schoolstuffs? Well, if the nanny government finds an effective way to implement this, you students would just need to be smarter. Bring fun to home. Tell them you have a study group. No TV or videogames? Easy. Use internet. Tell them you have to use softwares on the computer.

Interestingly, The Post said that Bekasi was inspired by Yogyakarta that implemented this in 2003, successfully. Really? I wonder how they enforced it. Hansip at home every evening? Raids at malls and movie theaters? Not even allowed to accompany parents to wedding parties?

Rock Nationalization

Usually, the word nationalization is associated with Hugo Chavez or Evo Morales. But now Gordon Brown has joined the club. The UK government nationalizes the ailing Northern Rock--the UK bank that hit badly by current US sub prime mortgage crisis.

Add this action to the already signed US economic stimulus package, it got me thinking (and confused) on the way developed countries government handles financial and banking crisis

This is my simple math: nationalization plus "business as usual" equals moral hazard, because you just put too little stick -and perhaps too much carrot--into the equation.

Why don't they just learn from our experience, albeit developing country, with the messy BLBI, bank re capitalization, BPPN and all those government bail-out plan that have just led to a slow and mediocre impact on banking performance?

(HT: Marginal Revolution)

Earmarking for What?

Suppose you think that the rising cooking oil (domestic) price badly hurts the domestic consumers. You want the government to impose an export tax on that commodity to prevent producers to sell it abroad, where price is higher; and maintain domestic supply with lower price.

From that export tax scheme, the government now gets more money. You want them to look even more noble, by earmarking the money to a program called "cooking oil for poor", that is, selling the cooking oil to the poor at low subsidized price. Does it sound like a good idea?

Alas, not always.

You may think that the program is prone to corruption or implies high cost. Who can guarantee that the cooking oil would not be resold at market price? And what about administering the logistic and disbursement mechanism?

Even if you are sure that there would be no corruption and administrative cost is zero, still it might not be a right idea in a more fundamental way. How come, you may ask.

Here's why. Government has to allocate the tax money to the most socially beneficial activity. Our "cooking oil for poor" program is not always that kind of activity. If, say, building an irrigation system gives us a higher social benefit, the money must go there.

The purpose of taxation is to correct the price (or more precisely the difference between marginal social benefit and marginal private cost). The use of tax income money, however, is an act of government's consumption or investment. With the money, government must carefully pick activity with highest social return.

Unless you just want to look populist.

What CSR?

Here is from The Jakarta Post daily, 21 July, 2007.

The House of Representatives finally passed the controversial corporations' bill into law at a plenary meeting here Friday making Corporate Social Responsibility (CSR) mandatory for almost all companies outside the financial sector.

Article 74 of the law provides that a company that operates in any business field related to natural resources is required to institute social and environmental responsibility programs, and that sanctions will be imposed on non-compliant firms

What are CSR(s)? My take:
1. Making profit
2. Pay taxes to the government, and/or abide by the government regulation

Then you, our valuable cafe visitor, may ask:
1. Who will take care of social and environmental damage (read: negative externalities)? The government.
3. How? By imposing the right tax and regulation to minimize negative externalities.
4. Is there anything 'social' in making profit? Yes, you can make profit if you are competitive and efficient. And both lead to greater social welfare.

In defense of Kate Moss

Or, if you like, change that title to "In defense of Roy Marten". Roy and Kate are victims of society's misunderstanding of individual rights to self-destruction. And yes, governments' pathetic paternalism, as usual.

You know that caffeine is not very good for your health. Yet you drink coffee (or pops). Maybe because it tastes good. Imagine if based on "caffeine is not good for your health" the government bans the caffeine consumption. Suddenly drinking coffee is illegal. Cafés are closed. Would you like that? I guess no.

Now, think about cocaine. It too is deemed dangerous. But why is cocaine illegal and caffeine is not? After all, they both are "not good for your health". Yet, the decision to illegalize cocaine is based on that "scientific finding"; but caffeine escapes the verdict. If Law is to be consistent, drinking coffee should not be allowed. Or for that matter, everything that is "not good for your health" should be banned: cigarrette, late night work, road crossing, etc.

This problem is pervasive. So how about a simple solution.

You should not be punished if you hurt your own self. You should be punished if you hurt somebody else. I don't care if Roy is rotten by sabu-sabu, or Kate by amphetamine. But I care when Roy or Kate or any drunkard hurt me or my friend or my kid or anybody else. So, if somebody is proven by the court to have hurt somebody else -- regardless of whatever he or she ate -- he or she must be punished.

The solution sound simple but it has broader implication. For example: seatbelt regulation. Obligating the use of seatbelt when driving car is foolish. Every driver should be free to use or not to use sealtbelt. After all, he or she is the one who will get hurt when accident happens. (Think about this, too: when you use seatbelt, you tend to drive faster or, worse yet, reckless).

Some would say: but we have to prevent bad things while we can. Well, who can judge intention?

Kate Moss | Roy Marten | caffeine |
cocaine | Law and Econ

The tragedy of moral policing

Read a news about a funny but sad story in Tangerang, Banten. Once again, this just shows what's going to happen when you give the state too many power over morality.

Can't help to agree with the chair of the National Committee against Women Violence, "when the state wants to become the moral police over its citizens, who will be the first victims? Women and poor people!" And this is also why among the biggest rejection to the proposed legislation about pornograpgy comes from various women groups.