Don't Swap Horses in the Middle of the Stream

Jim Hamilton of UCSD wrote in Econbrowser:

I sometimes hear Bernanke's critics speak as if there is some kind of shallowness to his world view, as if he is somehow incapable of seeing what is obvious to those with common sense. If you want a bumper-sticker-size summary of what he's all about, here it is-- Bernanke believes strongly that a credit crunch can be devastating to regular people, and has done everything in his power to mitigate that damage. You may agree or disagree with his claim that the extraordinary steps taken under his leadership "averted the imminent collapse of the global financial system." But you must agree with two things: the global financial system did not collapse, and preventing its collapse is the reason Bernanke did what he did. If you think his motives were anything other than this, you have been sucked into a groupthink far shallower than the world view sometimes ascribed to Bernanke.

Sound apt and ring a bell? Hint: Pansus.

and

I shake my head when I look at the list of senators who say they'll vote "no." How could there possibly be an alternative whom Barbara Boxer (D-CA) and Jim DeMint (R-SC) would both prefer to Bernanke?

Ring another bell? Hint: Those lawmakers and their political parties.

Update: Even Krugman said

But — and here comes my defense of a Bernanke reappointment — any good alternative for the position would face a bruising fight in the Senate. And choosing a bad alternative would have truly dire consequences for the economy.

Again, still relevant to us

Stubborn General

Apparently our friend Sunaryo, the cafe's office boy, knows economics better than him.

And Sjamsu's headache remains.

Black-haired Capitalist

As expected, presidential election campaign produces some funny lingo. This one comes from the incumbent SBY who doesn't want the economy be dominated by global as well as black-haired capitalists.

What the hell does he mean by black-haired capitalist?

He would have been in better position if he said that he denounced the capitalists who asked for government protection to prevent market competition get into their way and punish their inefficiency. But calling these crooks black-haired capitalists doesn't help --if not puts him in, alas, the same league as his opponents in term of economic literacy.

Et Tu, Jekus?

That was Kate's reply five minutes after I emailed her this JK's posting in his Kompasiana blog --with a snobbish show-off note saying "sent from Blackberry" at the bottom of her reply.

And she is right. JK's writing is a terrible example on how one misunderstands market economy, and coming from JK, the current VP and next presidential candidate, the inability to comprehend basic economics and the economy is even more depressing.

In his opening paragraph, JK argues that liberalization would put farmers into danger. But does he really think that most of Indonesians are rice farmers? For a presidential candidate, ideally he should be more knowledgeable on what most Indonesians are actually doing for life, so, if elected, will pick the policy benefiting the majority of people.

But is he up to expectation?

Your barista, Aco, coauthored a forthcoming paper on the political economy of rice and fuel pricing. There you'll find that 75 percent of total households in Indonesia do not grow rice and 82 percent are net rice consumers. Even in rural area, 63 percent of rural households are not rice growers and total around 72 percent of rural households are net consumers of rice

What does it have something to do with liberalization? If importing rice means lower rice price, at least 75 percent of national households and 63 percent rural households will benefit from that free market policy.

What to do with the rest? My take is two things: first, if import led them to fell down below poverty line, they deserve to get across the boards anti-poverty transfer, like direct cash transfer scheme --not because they are rice growers, but because they are now poor. Second, and more importantly, do not block their access to move into more dynamic sectors in the economy. And getting rid the obstacles they face means removing anti market competition policy like inflexible labor regulations, corruption, and lack of infrastructure.

In the second paragraph, JK thinks that in the international trade the developing countries are victimized as price takers, while the developed countries reap most benefits as price makers. Really?

Last year, as all of you know, there was a steep increase of the world's price of (primary) commodities produced by developing countries --like food and agriculture products. It would not have been the case if the developed countries, as the major consumers, could set or make the price as JK thinks.

But maybe JK is right, the current international trade of agriculture product is not fair because the developed countries as producers, and the competitors of developing countries, deliberately distort the market by applying high subsidy and trade barriers --in other words, violating free market principles. By that, here, what we want is, well, free trade so that we can sell our products and fairly compete in their markets too.

And on his remark that the price 1 kg of cocoa is far below the price of 1 kg of Silverqueen, what should I say? You just don't make one kg Silverqueen with one kg cocoa. You need to put some milk and mix it with other ingredients. Then you want to wrap them in in a nice package, advertise and distribute them to stores.

Still, you can not write your price tag as high as you want, if you still want somebody to buy your products. You need to consider the price of Ghirardeli, Toblerone, Lindt, Cap Jago, Haribo, Trebor, licorice, etc --all are your products' direct competitors -- as well as its indirect substitutes.

If you let market to work, your price reflects only normal profit, or some temporary supernormal profit that is always subject to natural creative destruction. It is not fair if you get government protection or commit in unlawful acts against your competitor. But you can not blame market mechanism for these faults, because what is unfair is the government discriminative anti-market protection.

Bottom line: it is rather unintelligent to support the argument for fairness by comparing cocoa's price to Silverqueen's and asserting an upside-down argument blaming market mechanism for the anti-market outcome.

On Faithless Neoliberals

Following the Boediono-Neolib controversy, I think the problem is not so much that some people dislike neoliberalism. It is perfectly OK if you disagree with something, but it'd be better if you have clear idea on what you disagree with is about.

In my old posting, quoting Stanley Fish, you can find the broad definition of neoliberalism (at least from the perspective of its critics) that I won't repeat here. Problem of definition aside, the real catch is that --also from Stanley Fish, quoting Boas and Gans-Morse of UC Berkeley in his subsequent Times' column --, its force is more rhetorical (Boediono, you accursed neoliberal) than analytic.

In the last debacle on neoliberal here in Indonesia, I think the problem is even more depressing: some people attach moral or religious value on neoliberalism. It is akin to say that because you are neoliberal, your faith is questionable.

In Boediono case, you can confirm this by reading the weird flip-flop statement from Tifatul Sembiring who said that Boediono is not a neoliberal because during his time as Coordinating Minister of the Economy, shariah economy was developed and he passed the Law on Shariah Economy.

While Homer Simpson would say "D'oh!", Econ 101 students would say: the opposite of neoliberalism is socialism.

I am fine if you are socialist. I will disagree with you, and sometime ridicule you, but I will never question your faith based on your socialist viewpoint - unless you kidnap, torture, and kill others.

A Friendly Reminder

When I wrote the previous posting on neoliberalism, I could not relate why one commenter asked about Boediono and his religious attitude.

Only after I read Faisal Basri's take on Boediono that I become aware of the Boediono-Neoliberalism controversy, that the commenter might think I was talking about, which I wasn't.

Kate apparently gets really annoyed with that controversy, and all baristas here know too well that hell has no fury like Kate scorned.

Just wait what she's gonna say. Stay tune.

Added: My take on the commenter's question remains the same, nevertheless.

Statesmanship as Fiction

With all of my due respect to Magnis-Suseno, Syafii Maarif, and Satjipto Rahardjo, please stop hoping and asking for politician to be statesman. The latter is just a fiction. Not because they do not exist (maybe there are few of them), but because it doesn't help in analyzing the politics and its social impact. We will too easily slip into pointing out any failure of politics in providing higher social benefit to the lack of statesman quality in politicians.

Wanted: Positive Political Analysis

Can anyone tell me what national interest means? I have been trying to translate it into a kind of operative utility function to which politician might want to maximize as suggested by our numerous political pundits in their so-called analysis of Indonesian election campaign. And it goes nowhere.

The more workable proposition is to take that politicians are self interested or partisan, that is, trying to maximize social welfare function for disproportionate benefit of particular group in society (Persson and Tabellini, 2000). With that, your positive analysis for social calculus could fly better. Of course after you carefully set up the payoff, constraints, political market structure, as well as sufficiently address the problem of time consistency in your analysis.

Otherwise, you'd end up with empty boring statement like politician must put national before individual interest to make everyone happy; or politician running for this year's election must follow the example of (fill in the name of your favorite dead politicians from 1950s) who was a genuine defender of national interest. Yadda yadda yadda.

Overheard on Facebook: Why (many) Economists Prefer Obama

Apparently triggered by The Economist's recent survey:

Guy 1: Huh? Pro-market economists now prefer Obama, the Democrat? Whatever happened to the Republican bias? Ah. Maybe the magazine's assertion is true: Bush has ruined everything. Even its market ideology.

Guy 2: Or... possibly because McCain's more likely be supported by more "established" economists, which also are less likely to respond to surveys...

Guy 1: Possibly. But if it's true then I want to know why "established" economists and their younger peers would have such different views. In any case this "survey" is probably as (un)scientific as the list of 500+ economists endorsing McCain's economic plan. But this comes with pretty graphs.

Guy 3: Is it because *established* economists think responding to surveys is irrational? (LOL)

Guy 2 to Guy 1: One possible hypothesis is if establishedness is correlated with age, there may be greater homophily with McCain amongst nonrespondents.

Guy 2 to Guy 3: Opportunity costs for established economists in responding to surveys may be higher. (But this can go both ways).

Guy 4: Or maybe, just maybe, many that responded was reflecting politics over economics. Many sane economists are liberal (in classical terms, i.e. libertarians). And many of classical liberals/libertarians oppose war. Obama opposes Bush's wars, esp Iraq. McCain is going to continue it.

Guy 1: That's a very plausible explanation. The survey merely reflects which candidate the respondents will vote for, all things considered. The war is one thing, the general notion that the administration and the social conservative wing of the GOP are at odds with science (e.g. intelligent design vs evolution) is another thing.

Guy 4: Or, (while i'm speculating, haha), NBER is in MA. MA is a blue state (LOL) Yes, of course the NBER economists come from different places, but being housed in MA, they're exposed disproportionally in favor of Democrat Party's campaign, I guess (speaking of imperfect information)... i'm talking about what the survey calls "unaffiliated economists" (those not identifying themselves as democrat or republican)... Again i'm speculating (LOL)

Guy 5: Or.. (nonsense talking)... those who responded are inspired, young-mid aged economists who are keen to see capitalism to have market self-discipline, not market orgy/gang-bang of capitalists. While established economists are like dead men walking (they're as old as Friedman) and had enough of those parties in the mid 80s - late 90s

In Defense of Eko Patrio

Saiful Mujani of LSI and Freedom Institute worried that the comedian Eko Patrio might win over the economist Didiek Rachbini for a legislative seat. He wrote in a column in Tempo weekly:

In this case, the skill to make people laugh is electorally more valuable than the Professor's economics expertise. The problem is that Eko, in comparison to Didiek, maybe way more familiar to the voters in general. Although Didiek is more competent for legislation, voters do not know him and his competency. Voter's cognitive and behavior, or political market, determine the politician's political fate.

He also proposes more regulation on the law on general election to include competency, expertise background, and integrity requirement for lawmaker candidates in order to fix the current political market.

I am no political scientist. But I think Saiful made a wrong comparison here. The game is not about less competent Eko against more competent Didiek Rachbini. For voters, it is about Eko (and his celebrities friends) against those hundreds of unfamiliar, (more) incompetent and yet corrupt politicians that now occupy Senayan --to whom many voters share the disgust.

I'd say perhaps the current political market works. It drives the unfamiliar and incompetent politicians out. And arguably they might be less corrupt than the existing politicians for a good reason: the cost of getting caught is very high for them, that is, not only the five-years political career, but also their lucrative lifetime celebrity career. As public figures, they are also subject to more closer public scrutiny --think of those bloody annoying gossip shows.

Voters might be rationally ignorant, but maybe not that stupid. And on the idea that the celebrities candidacy breaks the party's internal reward mechanism for their 'real' politicians, you should ask those party leaders (themselves the 'real' politicians) why on earth they recruit Eko and friends on the first place --if they think they will be out-voted.

And trust me, Eko will not easily win because his opponents, the current 'real' politicians, are equally, if not more, funny in their own way.

Who Wants Über Politicians?

I share the frustration against our politicians fueled by series of their blatant scandals exposed by the media. But I don't share the tendency of many of the politically literate who long for messianic political leaders and look back in dead politicians like Hatta, Natsir, or Tan Malaka (If you deem the illiterates hoping a messiah to lead the country, the ratu-adil, a wishful-thinking, just don't repeat the mistakes.)

Virtuous as they personally were, it's not the most important thing we need now.

It's not a bunch of good men of learning, high minded politicians, that we need, but a mechanism and infrastructure in which those politicians --the ordinary rational human being -- must align their behavior with what most people want them to be.

The politicians, anywhere in the world, are the utility maximizer, subject to certain constraints; and by that, conduct cost-benefit analysis for any of their action, including asking money to pass a draft of law. It'd be more reasonable to analyze them with that rule of the game (using standard constrained utility maximization tools or game theory, if necessary) than expecting the über politicians to come as we never know what exactly made these special creatures.

And that is why we need our Anti-Corruption Squad, that works diligently to fix the disincentive to cheat; minimum government intervention in business to reduce chances to reap illegal benefit of power abuse; and any other marginal step to set the incentive right that leave very small option for politicians beside serving the majority's want.

As long as we are able to do it, albeit marginal and gradual, I remain optimistic that things would get better --even without Hatta, Natsir, or any other dead persons.

Addendum: I love to think that KPK is now cleverly setting new focal points by picking certain cases with strong elements of drama, involving action-espionage, celebrity-related, and flagrant hypocrisy (religious man from religious party can do no corruption), to knock people's head and spread the message that corruption is now a serious crime and somebody might go after you.

The Worst Pick-up Line Ever is

"I hate to sound derivative, but I'd love to lie tangent to your curves."

Warning: apply strictly to the economist only --those dismal scientists.

The line also refers to Greg Mankiw's op-ed that basically says populism likely collides with the standard economics arguments (that includes legalizing marijuana, by the way).

Why? Not because supply and demand is too "complex." It is just not very emotionally satisfying.

Which Rice Price is Which

I am confused.

Some months ago, when the domestic rice price was high --due to shortage--, and the international price low, we didn't want to import because, some said, it would hurt the rice farmers, eventhough when majority net consumers would love to have lower imported rice price.

Now, when the domestic price is low --due to harvest season--, and the international price high, we don't want to export because, some says, it would be good to have large domestic reserve to protect the rice consumers, eventhough at the cost of, well, the rice farmers who may gain for that high international price.

So which one is which --defending the rice farmers or consumers? I am scratching my head.

Meanwhile, if BPS said that in January 2008, in 11 regions the farmer's term of trade increases while the other 11 otherwise, but nationally it goes up by 0.04 percent, can we say that the farmer's purchasing power decline, as that headline's subtitle suggest? Note, too, it was on January when the harvest didn't come yet.

On why the rice price persists high despite harvest time, it's the demand-supply mechanism. The article itself says that the demand increases significantly in Batam, Bangka, Pontianak, and Pekanbaru. Can you guess why? Yes, because international price and demand is high, exporting rice is profitable, and in those area, it is likely easier to sell the rice out. The law of one price, the economist friend would tell you.

If you really want to help rice farmers, what you should do is not to pile up national reserves, but get them more access to international market to outdo the middlemen that you keep blaming on the disparity between consumer and producer rice price. Or in other words, make the rice middlemen services market competitive and let the rice farmers enjoy the high international rice --if you really want to defend them, of course.

Make up your mind, sire

How to win an election with less money, or how to have efficient money politics

Welcome to the country where (vulgar) money politics is a common norm. Can you win a (local) election without money to buy votes? Very unlikely.

So money matters, but can you win the game if you have less money than your opponent? You might think it can't be. Money speaks and more money speaks louder.

But perhaps you can still make it.

Suppose your opponent has paid IDR 50,000 for each possible voters, and with the money you have, you can only pay IDR 10,000. My strategy would be to declare that I will give that IDR 10,000 to the voters, not now, but only after I win the election.

The rational voters will take IDR 50,000 from my rival, but vote for me. Why? Because it increases their probability to get additional IDR 10,000 from me --the amount that I will disburse only when I get elected.

But maybe things won't be that easy, my opponent might know my trick. If so, he/she will think that IDR 50,000 is too high and go for, say, IDR 15,000 --he/she is still richer than me, remember?

Let the game repeats. At the end of the day, we have the most efficient money bribe rate, do we?

The Police can't win, can they?

I don’t generally like Budhiarto Shambazy’s Politika column in Kompas. I think he is a good writer when he writes about Led Zeppelin, Pink Floyd or anything related to classic rock. I think he is not a good political writer. And his jokes, when he attempt to do so, are garing at best. But his last column was an exception. I like, and agree with what he wrote.

Yes, I think there is something wrong in our society. Despite their success in arresting some members of terrorist network led by Abu Dujana, the Police have yet to win the support from the public. (No, not the Sting/Summers/Copeland trio). Many people – and the politicians make matter worse – are still reluctant to praise the Police’s achievement. Some of them even view the Police as the villain, and Abu Dujana as the hero.

I made an elaborated personal comment on this issue here (read also Tirta's comment on the entry; unfortunately all is in Indonesian). I’ll just make some points related to the issue of strategy in the game theoretical setting (courtesy to a colleague of mine, a former journalist turn media analyst).

First, the Police should understand that they are playing against two players: the terrorists themselves, and the public. So far, they focus more on the first player, but less on the latter. A good media strategy is definitely needed. In fact, they have made a poor move when they show how Abu Dujana and companies were chained hand-to-feet, guarded by face-covered soldiers. The image created to the public was ‘Guantanamo.’

Second, other reason why the Police can't win the public appreciation for the terrorists is because the politicians still entertain the idea that the war on terrorist is the war on Islam. Changing the equlibrium requires changing the people mindset. That means our leaders and politicians need to send a message that draws a clear boundary between ‘Islam’ and ‘Muslim terrorist.’

However, political calculation still shows that this is not a dominant strategy. Any position that puts ‘Islam’ and ‘terrorism’ in the same line will be dominated since it would end up in losing supports from their Muslim constituents.

Aside: an article in the Economist wrote, in a similar framework, how the Bush administration is also facing the problem on how to win both the war on terror and public/international support. Seems that they lost in both arena.

Who Loses in Amien-SBY Feud?

Mudslinging. Brouhaha. Handbags. Love story? Cheap comedy? Whatever you want to call it, the spectacle we were treated with last week is dissected by MT in his third dispatch for us. - Manager

Who Loses in Amien-SBY Feud?

by MT

We all know how it ends. After more than two weeks of a high-profile mudslinging, the ending could not be more baffling. It took only less than 15 minutes for one presidential candidate (who later won the top position) to subdue another, less fortunate, presidential candidate (who came third in the race) and all came to an abrupt end. After all, Amien Rais is not known as a consistent politician. The most glaring example of his being a flip-flop is when he backed down from leading a massive rally at the Merdeka square on the eve of Soeharto’s resignation. It was Lt. Gen. Prabowo Subijanto, who threatened another Tiananmen, if Amien pressed ahead.

Now another general managed to outdo him. Amien’s supporters will definitely say in unison that his capitulating to Yudhoyono was for the sake of the political stability. But, what could have inspired Amien to say that a ploy was in the work to unseat Yudhoyono by taking advantage of his feud with Yudhoyono. (Later when the dust finally settled we know that Yudhoyono took the prospect of another drawn-out mudslinging seriously. Andi Mallarangeng told us again yesterday, echoing Amien that the prospect of third party taking advantages from Yudhoyono-Amien feud to create instability is serious).

Until Friday last week, when Yudhoyono made his carefully-staged speech to counter Amien’s allegation (at the State palace under the majestic Banyan tree with the afternoon sun on the backdrop—I like the setting, as if it was a stately function and to conceal the brewing tension) Amien was still gaining the upper hand. If he pressed ahead and came up with evidence, he could put the President into trouble. (Whether or not Wolfowitz offered money to him and Yudhoyono at least two people, he said it was Bambang Sudibyo and Christianto Wibisono could serve as witnesses). The fact that Yudhoyono offered to have a meeting and proposed a truce is proof that if Amein went further he could put him in dire strait.

The likelihood of an impeachment on Yudhoyono may be small, but the first brick has been laid by Amien on the road to it. What Yudhoyono offered in the meeting is anybody’s guess (later I got this yet-to-be-confirmed information and will likely be difficult to confirm that a huge financial deal was involved and a certain minister help arranged it), but all the commotion, in spite of the ending, has worked in favor of Amien. He is now back in the political limelight and it was a telling evidence that Yudhoyono’s plan (not always of his own making) does not always succeed as he wished. It may have worked on Yusril –and a plot against men around Megawati is in the work—but it failed on Amien. And it is also a good thing that in spite of his executive power, the President is just one of players in Jakarta politics, one who has to haggle and bargain his way to survival. Negotiation, however uninspired, is the order of the day.

See also Aco's three-part post about a game played by hypothetical but eerily similar characters. - Manager

Tale of Two Presidents

In his first dispatch from Istana Negara/Cikeas, MT writes about the somewhat comical behind the scene reactions of (now former) cabinet members during the highly anticipated non-event otherwise known as the cabinet reshuffling. In his second post as a guest blogger for the Cafe, MT writes about some similarities between SBY and Soeharto (they just keep coming, don't they) which include SBY's ability to make people cringe, instead of laugh, with his jokes. - Manager

Tale of Two Presidents
by MT

Days before former president Soeharto resigned -I think its around November 1997- Cornell’s Ben Anderson gave a not-so-famous interview about Soeharto’s intention to resign (in high Javanese language as Lengser Keprabon, Madheg Pandhito for whatever that means). Anderson talked at length about the hypocrisy of Soeharto and how alluded much to Javanese olden day epic (Babad) to justify his action. But that I don’t want to talk about.

In one part Anderson spoke about his coldness (he could order the killing of thousands of people, borrowing Capote’s words in cold blood), in spite of (or may be because) his being Javanese. Anderson said that when Soeharto resorts to cruelness it is not something from his nature, but something that has been calculated, it is part of his strategy. He is an extremely cautious, suspecting and never acts spontaneously. One demeanor that rings true to me more
than ever watching Soeharto’s pictures and news footage was that when he tried to be friendly and warm, we barely feels the warmth he exudes. And if he is being warm and friendly, Anderson said that we have to be very cautious about what he hid behind the smile. (well, he is indeed a Javanese par excellence that way).

Much has been said that Yudhoyono have the potential to follow Soeharto’s footprints. Hey, he’s a Javanese, an army general (albeit U.S. educated and holds Ph.D in economics), married also to a Javanese woman, and much as stoic as Soeharto. And the most worrying sign that is however difficult to corroborate is Yudhoyono’s dalliance with Javanese mysticism (very Soeharto-like indeed). The most famous being his fixation with figure nine. The combination of his date of birth is nine so he does almost anything based on that number (well, not always) but the most famous example is that he broke several big news when the date strikes nine. One other thing that could show his Javanese mind set is his penchant for looking for guidance from the other side. In several occasion he made a visit to both his father’s and father in law (the famous general Sarwo Edhi Wibowo) ’s tomb before making important announcement. Well, of course there is nothing wrong about visiting your parent’s grave, but it’s the timing.

But if you think that this country is at risk of being led by another cruel and humorless general, think again. However dour he might be, Yudhoyono is at the very least an amiable person to go by. In fact, he likes jokes too, however dry. OK, he might be pale in comparison with Abdurrahman “Gus Dur” Wahid in this joke affairs. In out-of-palace functions, Yudhoyono frequently tells us jokes.

The day when he was about to break the news that a cabinet shake-up would take place in the early May – in the now famous durian plantation in Bogor – he cracked a joke about nutmeg and durian. He told us that during a visit to East Nusa Tenggara he inspected a nutmeg plantation when he stumbled upon a pile of that spice. And as he inspected the pile, he told us, one of fresh nutmeg fruit fell upon his head and he said “this is not fair, a fruit this useful only has a tiny size” and he strolled ahead.

Later in durian field, he discovered a pile of durian skin and while he observed it, a durian fell close to him. To us he said, “God the merciful, if only nutmeg is as big as durian then I would be dead when it fell upon me,” he said to a confused laughter among the audience. It’s not a funny joke (I read this joke in some obscure jokes book before and we all know that durian doesn’t grow in East NusaTenggara) but at least he tried.

Flat world? Hold on

I'm not a huge fan of Tom Friedman. Yes, I was amused by his Lexus and the Olive Tree, but after attending his talk one day in the University of Illinois, I decided I don't like him too much. But everybody is talking about his recent The World is Flat. So, I grabbed one in Changi, as my in-flight reading to and from Cambodia.

It's not too bad. But I think Friedman is far too excited, he sounds like a little boy who just discovered a new toy. We all know that globalization is rolling and no one can stop it (bite me!). But calling a mere reduction in transaction costs which is so natural, given harsh and healthy competition, as "flattening of the world" is too bombastic.

And misleading, too.

The whole idea of trade is a state of differences. I don't trade with you if there's nothing different between us. I'm interested in you because you have something I don't. Vice verse. Hence, the trade. We both gain from trade, and trade occurs because we are different. But Friedman, while I think he understand the gains from free trade adage, uses his journalistic way of telling: bombastic title, repeated as a mantra throughout the book. I don't think he realizes how bad the world is when it is ... well, "flat". It's alright had he made it clear that what he meant by "flat" was nothing else than "cost redux": in transportation, in communication, you name it. But he failed to do that. He confuses between costs' race to the bottom and the leveling of playing fields between economic actors.

Of course, Ed Leamer should point out the book's weakness far better than me (hat tip to Parinduri). I haven't read the review, though.

As I said, however, Friedman is a great teller. The book is nonetheless entertaining. For example, I still like his description of communism and capitalism (I think I have heard it somewhere, but anyway): "Communism is a system to make people equally poor and capitalism is a system to make people unequally rich". Indeed.

ps. Speaking of communism, the great author, Pramoedya Ananta Toer passed away on Sunday. To me, he is the best Indonesian author ever. Rest in peace, Pak Pram. Here's an account from BBC.
pps. Also left us is Harvard economist John Kenneth Galbraith. He's not my favourite economist, but he surely has stamped his name in the field, though not via academic journal papers, but more via his long time role as a "celebrity economist", as described by Paul Krugman. Or as Sisyphus, as Brad DeLong described him.

Globalization

JK's business nonsense

Vice President Jusuf Kalla likes to pride himself of being a businessman. But his statement over Sampoerna's decision to withdraw from some investment projects shows he thinks like a lousy businessman. The Jakarta Post yesterday (the link was not permanent; it's lost now) reported,

Vice President Jusuf Kalla criticized the Sampoerna family ... for the uncertainty it had allegedly caused in the local economy after withdrawing from several investment projects sponsored by the government... "The Sampoerna family is not showing consistency... I think the family should make up its mind"...

Why does he think he has the right to somebody else's investment decision?

Speaking about uncertainty, it's the government who should be warned. They've been silent on the exact plan of electricity rate hike. It's creating uncertainty leading to inflation expectation. And unlike Sampoerna, it's our money they're using.

Central Bank to protect local employment

BI, the Central Bank, sets the new regulation that limits the number of foreign employees in foreign-owned lenders to provide jobs for local workers and encourage them to increases their credit to domestic firms (see this Jakarta Post link, non-permanent).

The limitation of the number of foreign employees is not new as Indonesian WTO-GATS specific commitments, on the general condition for banking sub-sector, states that:

1. With respect to the presence of natural persons no economic needs test will apply. A non Indonesian employe a manager or as technical expert shall have at least two Indonesian under studies during his/her term.
2. In addition to the Horizontal Measures, temporary entry will be granted to technical expert(s)/advisor(s) of branch office of the foreign bank and joint venture bank for no longer than 3(three) months per person for any given year.

Apology for you who are not familiar with the terms, it is confusing indeed. It basically says that foreign employment is restricted in banking sector.

But I fail to understand the reasons given by the BI Governor, that is to help with the situation 12 millions Indonesian unemployment, let alone with the idea of to encourage the foreign bank increasing their credit to domestic firm. The unemployment figure is unlikely affected by this policy; and can anybody help me on the second?

I can understand if it is to facilitate technology and expertise transfer in banking industry --although it is a very problematic argument, too. Yet, those expertise transfer should be gained through competition, not protection. Beside, I do not see any point for those foreign bank to hire expats --you know they are expensive--; unless they find that Indonesian bankers are really incompetent.

Are they? OK suppose they are; then let them compete with their foreign counterpart to get those millions dollar salary. And do we really want our money being managed by incompetent persons-- even if they are our fellow countrymen?

Moreover, why bothers that the foreign banks lends less than the domestic one? Surely any bank has its own risk calculation. And if those foreign banks miss the boom of the expanding local economy by channeling less credit, it is their fault. Otherwise, it is the domestic banks that is doomed.