The Bright Side of Possibly Lower Turnout

So you think that this year's election would see lower turnout. Is it a bad sign?

Imagine you find yourself on the election day, which also happens to be an official public holiday in Indonesia. You have option of either going to vote or doing something else, like spending time at the zoo, reading the Watchmen, listening to Efek Rumah Kaca, or even just a simple good lazy afternoon nap. What would you do?

The catch is here: That something-else becomes more precious as your wage rate goes up. If your wage rate is higher, you have to sacrifice more money for not working and just reading Anna Karenina.

So on April 9, when you are forced not to work and decide to have these something-else, instead of going to the voting booth like what you did five years ago; it may mean that your wage rate are actually higher than five years ago. (And political complainer literate like you, or pundits in the media, should be happy to know it)

Who would vote then? The ones who are less ignorant to politics and the ones with lower wage rate --who hope election to bring better wage. The former would devote more time and the latter have better incentive to learn relevant information on politicial party and politicians. As a result, a better election quality.

Transfer Is Not Social Cost

I can not believe that Yudi Latif, in today's Kompas Analisis Politik, doesn't get the social cost-benefit analysis of general election right (and presumably, the Kompas editor, too).

We know the benefit of general election is to have better government and public services provision. But apparently it takes a bit of more time to understand its cost.

Yudi thinks the political ads spending is social cost. It is not. The same goes for the spending of political consultancy, polling, printing banners, free T-shirt, and even money politics. They are all transfers. The money does not go out of the economy --or GNP, as Yudi said. It just has the ownership shift from politicians to advertising company, political consultant, T-shirt maker, and potential voters.

Does it mean general election doesn't have social cost? No. When you involve in and spend resources for general election-related activities, alternatively you can work on something more productive --perhaps by staying in academics. Your time and energy to otherwise produce good lecture is the social cost.

The overall election's social cost can be higher or lower than the benefit, but you'd better be clear on this. Particularly when you relate this to someone's argument that democracy is more suitable to the nation with economic surplus than one with deficit (whatever it may mean).

Maybe, but surely not because of such cost-benefit analysis.

Fuel subsidy IS a subsidy!

Thanks to a newly published working paper by Cut Dian Agustina, Javier Granado, Tim Bulman, Wolfgang Fengler and M. Ikhsan, I can support my earlier argument that -- contrary to this and this opinions ignoring the concept of opportunity cost -- fuel subsidy is a subsidy. Read my full comment here.

My points are: 1) if you don't consider opportunity cost a cost, then you don't consider opportunity revenue as important either; 2) in the current oil prices, fuel subsidy is no longer just an opportunity cost -- it is already an accounting cost!

Sorry, Mr. Kwik, with all due respect, you are wrong (again).

A Lot of Corn

From McKenzie's Why Pop Corn Costs So Much at the Movies?

What is the basic problem with the corn and ethanol subsidies? To fill up an SUV with ethanol, it takes 450 pounds of corn, which contains enough calorie to feed a poor person for a year.

Four hundred and fifty pounds equals to 204 kilograms. And that's a lot of corn.

And about the book, it's an interesting reading that tells you how messing up the market price may lead to disastrous (unintended) impact. Recommended additional reading list for students of undergraduate's Microeconomics Theory (a.k.a price theory).

Opportunity cost, again

An example of how someone misunderstood the concept of opportunity cost (and proud of it). The article was inspired by an older article by a famous Indonesian economist/politician/former minister. Arya Gaduh has pointed out where the logic went wrong. Teguh Dartanto provided some useful data and calculations.

I feel it's still relevant to raise the issue once again and to remind people about the difference between accounting and opportunity costs.