Envious Revivalism

I come across an interesting job market paper (download the pdf in the relevant link) on a theory of the Islamic revival by Jean-Paul Carvalho of Oxford University. He wrote that the origins of Islamic revival since 1970s in developing countries are traced to a growth reversal that failed to deliver the promise for upward mobility; and increasing inequality that hit the lower middle class.

Perhaps you may not even need economics to come up with this conclusion.

But, what makes his paper interesting from economics perspective is the use of a behavioral economics model of religion based on psychological notions of envy and unfulfilled aspiration. Here, the agents have reference-dependent preferences, contrary to Becker-Stigler approach for independent and stable preference.

Math aside, the paper gives interesting survey on Islamic revivalism. Now, regardless your economics knowledge, do you think envy and unfulfilled aspiration motives explain what has been going on in Indonesia?

Hajj pilgrim and randomized experiments

Randomized experiments seems to keep moving the frontier. From micro credit to deworming to teacher's absenteeism to corruption. Recently, a study on the impact of hajj pilgrim and tolerance behavior was conducted using the method, by Kennedy School's Ashim Khwaja and his colleagues.

This is how they did the randomization (in which I am interested more):

For the study, three economists interviewed 1,600 Pakistanis, half of whom had been on the hajj in 2006 and half of whom had applied for visas to go but were rejected. Respondents answered 200 questions in face-to-face interviews that lasted hours. The interviews took place five to eight months after the pilgrims came home.

And this is the result:

Muslims who undertake the hajj "return with more positive views towards people from other countries," are more likely to say "that people of different religions are equal," and are twice as likely as other religious Muslims to condemn Osama bin Laden, the study found.

Looks like economists can now have job opportunities in the Ministry of Religion...

Religionomics, update

A revision to the utility function, accommodating Yudo's critics. And here's an alternative framework, using simple game-theoretical approach. May God bless you all, if He does exist.

The economics of religious decision

Here is my first attempt to develop an economic model for religion and religious decision. Still far from finished, I only tried to construct the foundations.

This is the background. Several times I was asked these questions: "Do you believe in God?" or "Why do you perform rituals? Doesn't it contradict the rationality arguments?"

My typical answer to the first one is, "I believe for a certain probability that God (and afterlife) exists." For the second one, I usually replied, "In case God does exist, I need to hedge my risk by allocating some time for performing rituals."

A follow-up questions will, usually be, "There are different choices of religion. Will all or some of them provide you a good hedging mechanism (or return on investment), or only one of them will? If more than one do, then why don't you shop around different religions? If there is only one 'correct' religion, then how do you know that your choice is the correct one?"

Well, for sure, I never believe in any monopoly, including monopoly of truth. Hence, I believe that there are many pathways for salvation. However, switching cost is high that it will not be optimal for me to switch to, or shop around, different options.

The bottom line is, yes, religious decision is a rational one.

The cost for having religous preference

During our term in the U.S., my wife and I once had lunch in the student cafeteria of Brandeis University in Waltham, Mass – some 40 minutes from our place in Cambridge. It was an 'all-you-can-eat' type of café; you can take everything for a flat charge.

Being a Jewish institution, the café served kosher meals. According to the Jewish rule, the kosher and non-kosher food must not be processed together. Not only that, the cutleries must also be separately treated. So they divide the café into the kosher and non-kosher sections. The cutleries are provided in two different colors. I forget what they are, but I think blue for the non-kosher, and green for the kosher section. Although no separator for the two sections, you can not buy your meals from one section and eat it in the other one. Same thing applies for the cutleries. And after you finish, you must bring your cutleries to different return trays. (Maybe the green ones will go to heaven, and the blue go to hell?)

As the kosher food is the closest one to halal food, and I was in the mood for being a good Muslim at that day, I chose the kosher ones. Then, I found out that the kosher food costs about a dollar more than the non-kosher one. It was my fault, anyhow, as I did not read the price list before.

I started to wonder, why should it cost more? I guess because processing kosher food adds to your production cost. You need to manually slaughter the animal, means additional procedures to process the food. You may also have to pay to have the food examined by some kind of religious council, another extra cost.

More interestingly, what makes someone – anyone – pay more for kosher-but-not-necessarily-more-delicious meals? The extra dollar may serves as the 'premium' for... well, being religious. Perhaps this is similar to insurance premium. You are willing to pay more to get some degree of certainty to your expected wealth. For the believers, the extra dollar, maybe, is your ‘post-life’ insurance.

Another way to see this is ‘consumer discrimination.’ Consider the term discrimination in its generic meaning: ‘being selective over a product that is made only by certain people or using certain procedure.’ Milton Friedman and Gary Becker once said that if you are being discriminative, the market will punish you by limiting your choice, so you’ll have to pay more. However, as long as:

1. you are willing to take that price
2. nobody forces you to take that price
3. you don’t force anybody to take that same price
4. you don’t force anybody to pay that price for you
5. you don’t prohibit other people to take other choices (with different price)
6. the price you pay is the result of voluntary actions (and exchanges)

then it does not make any problems. Violation to any of the above conditions is coercion, hence unjustifiable (see this posting).

Note that the price for your religious preference does not need to be explicit. Sometimes the price is your ‘search cost’ (you must travel a bit far to find halal meat). Sometimes it is has no monetary value, but in terms of depletion of your social capital (love this term!). Think about your being exclusive, having to reject dinner invitation, or having to refrain from enjoying delicious meal in a party.

As for myself, actually I kinda regretted my decision to go to that kosher section. I don’t think that extra dollar guaranteed me a place in heaven. But after all, nobody forced me to do that anyway…

Side story. By the way, my wife was a bit annoyed by having to pay more. As a non-Muslim, she did not have to bother eating kosher or halal food anyway. In other words, she experienced a negative externality from my religious preference-of-the-day. However, we can settle this issue internally and domestically. Like Aco said, the intervention from government is not needed, nor from anyone or anything.

Should 'halal' certificate be compulsory?

According to some reports, the Majelis Ulama Indonesia (MUI; Indonesian Council of Ulema') is considering to issue fatwa regarding some products which halal status is in doubt. Its chair also thinks that the current law on consumer food (sic?) to be amended to make the halal certificate compulsory, not optional.

There are two issues here - first is the fatwa. I am not a theologist. But from what I know, according to the Sunni tradition, fatwas are non-binding. Therefore, I will respect such fatwa just as guiding principles. But whether or not I would consume the products listed in the fatwa, if it were to be issued, that would be my personal discretion.

Second, the more problematic one, is the proposal for a compulsory halal certificate. Let's for a while forget the halal part of the phrase, and focus on the certificate. Why do we need certificates or labels on any products? Sure, the answer is to protect the consumers by providing necessary information. License for chefs means we can be assured that our meals in the restaurant are made by Certificate on airline safety helps the consumers distinguish which airlines has met the certain standard. Certificate on genuine software product helps consumers know that a software is pirated. Green certificate helps consumers who are aware on environmental degradation avoid furnitures assembled using illegal logs.

(At least that works theory. In pratice it may nor work as expected. Similarly, the consumers may not care. But that's another issue. On the other hand, Aco may have different opinion - price is enough to create the necessary certificate).

But certification can (and will) also increase production cost. On the darker side, it can (and will) create the room for rent-seeking activities. Also, instead of giving protection for certification may in fact be the protection device for uncompetitive producers. Think about local producers who screamed that the second hand electronic goods imported from China are illegal, hence they need to be certified.

Now, back to the laptop... I mean, the halal certificate. What use of such certificate? Well, to protect the Muslim consumers (to be precise: those who care) from consuming non-halal food. Fine. It works so far, in the sense that it helps the consumers who care, it does not matter for those who don't, the cost is not significant for producers. And it is not compulsory, meaning that if you want to target Muslim customers, you'd want to invest on such label. If you don't, or you don't think your customers don't care, then you can skip the process.

However, making the certificate complusory is problematic. It won't matter for big producers (like Indofood). But it will matter for small and medium producers because they should bear additional costs for getting the certificate, while the benefit for the may not be significant. As this guy argues, SMEs in small, remote cities will be mostly hit as they may need to 'invite' the MUI officials, provide transports and accommodation etc.

Hence, can we find a way to be religious (if one wants to) without sacrificing efficiency? There is one thing: don't make such certificate compulsory, and leave the religious way of life as a personal choice. We don't need the state to nanny us. In Australia, the Islamic Council periodically issues a list of products that may be consummable by Muslims. The list includes some toothpaste, marshmallow, baking powder, and the addresses of butchers selling halal meat. And it works.

Show some respect, please!

A banner in my neighborhood asked people to “respect those who are fasting” ("hormatilah orang yang berpuasa"). I tried to think, what is ‘respecting those who are fasting’? In my childhood, I was taught that it simply means not eating or drinking in front of people who fast. Perhaps if I someone who fasts sees me enjoying my meals, he or she will get tempted to break the fast.

But then, refraining yourself from eating and drinking (and smoking and having sexual relationship) during the day is the essence of fasting, isn’t it? Giving up one’s utility from eating and drinking is and individual choice. Then, respecting those who fast is a matter of respecting property rights and personal choice. When it’s a personal choice, no one is justified to force them to eat or drink during the day (or tease them or humiliate them).

Similarly, it’s an individual choice not to fast. And the non-fasting people also have the rights to remain eating, smoking or drinking. No one is justified to ask them to stop, in the name of ‘respecting the fast.’ And during the night, whether one was fasting in the day or not, one has the right to spend the night in café or pubs. The café or restaurant owners have the right to do keep their business open at any time. Nobody has any justifications to prevent anyone to go to restaurants at any time. Nobody possesses the right to force restaurants, pubs or cafes to close at any time. (Unless, of course, if the pubs create noise that prevent one from sleeping.)

The rights to perform fasting as a religious duty include the rights to tell others that it is already time to start fasting when they are OK to be told (or when they asked you to do so). Similarly, people have also the rights to remain sleeping and not being disturbed by ‘wake up calls’ from masjids or minutemen. Hence, in my opinion, those shouting ‘sahur… sahur…’ using megaphone from masjids are abusing own’s right, and violating other’s property rights. The solution is simple: use alarm clock, telephone, or if it necessary, put a sign in front of your house that you want to be waken up.

Another obvious thing, whether fasting or not, we do have the rights for a ‘petasan’ (explosives)-free environment. If we ever need the government during this Ramadhan month, it is to regulate petasan and noise from masjids. Not closing down business or night lives.

Back to the banner in my neighborhood. Usually, a banner is a signal of something. What does it possibly mean?

One, those who fast felt that they are not respected enough. Two, those who don’t fast have given enough respect, but those who do ask to be more respected. Three, it signals a kind of threat: respect us, or else…


Religion | Ramadhan

Iman vs incentive

I still wait for the forwarded newspaper report. But just heard a story from a colleague that an official of Bank Indonesia's sharia division recently appealed that the customers of sharia banks should remain 'loyal,' and not to move their funds to the conventional banks. This appeal was made after the interest rate (of the conventional banking system) rose, following the increase of inflation, making it more INTERESTing to save in the conventional banks.

'Iman' is one thing. But at the end, it's the incentives that matter, no...?