Unlikely Opposition

Is it theoretically feasible to expect opposition parties arise in the current Indonesian politics?

I do not think so. It likely does not pay for the parties to become opposition if voters preferences are clustered in the median of most important issues. And, in policy making, cycling is prevalent.

RIP: Rose Director Friedman

I was reading The Great Contraction, 1929-1933, by Milton Friedman and Anna Schwartz when Kate emailed and asked me to write a short obituary for Rose Director Friedman.

Rose was the half of the Friedmans, with whom Milton Friedman shared and voiced opinion on issues unrelated to price theory and monetary economics (Overtveldt, 2007). The two were the strong supporters for voucher system in education; voluntary army; profit under fair competition as firm's social responsibility; and negative income tax (or direct transfer for the poor). In short, individual freedom.

May she rest in peace.

Rendra and The Students

There is something between Rendra and the university students.

In my undergraduate days, I learnt development economics from Todaro's Economic Development and Rendra's Potret Pembangunan Dalam Puisi. Todaro's provided me with methodology and numbers in analyzing development; but it was from Rendra's that I learnt how poverty, unemployment, inequality, and corrupt institutions really mean to people's life.

And the power of hope. Sajak Joki Tobing Untuk Widuri, for example.

But I had to wait until one cold raining evening of another long day in 1998 in Depok to see before my eyes the most subversive poet that Indonesia has ever had read his poems.

He was still officially banned from the University, a state university as it is, because he was considered enemy of the state --so much for the power of poetry and the irony of dictatorship guarded by thousands of soldiers and terror. But somehow friends at KMUI were able to smuggle him in to stage before hundreds of students on one of Suharto last days.

There, Rendra read his own Sajak Kenalan Lamamu. It was astounding beyond words. Magical. And on those days, bloody relevant --as if it confirmed that what we did those days were indeed worth doing.

I thank Rendra for that. Hat off.

Taxing the Wrong Stuff

I am amused by the idea of taxing junk food as reported by The Economist. Here is the logic of its supporters: junk food causes obesity. Obesity causes diseases. In state-sponsored health care system, the cost of curing these diseases has also to be shared by non-obese taxpayers. Thus, as the existing junk food consumption doesn't reflect true social cost, tax on junk-food shall be imposed.

This is nonsense. The Economist itself says that:

More important, junk food is not itself the source of the externality—the medical costs that arise from obesity. Unlike smoking, or excessive gambling and drinking, eating junk food does not directly impair the well-being of anyone else. And because obesity is determined by lack of exercise as well as calorie intake, its ultimate relationship with health costs is more tenuous than that of, say, smoking. It is possible to eat a lot of fatty food, exercise frequently and not generate any externalities. A more direct, though controversial, approach would simply be to tax people on the basis of their weight.

Double Whopper, anyone?

What To Do Against Big Boys

OK, I haven't had time to have coffee at the legendary murkycoffee at Clarendon and now they had closed the cafe down and moved to near Chinatown. But this op-ed by its former owner Nick Cho, is worth to ponder.

But if Starbucks brings one of these new concepts to Washington, I'll be among the first in line. To me, Starbucks is only a problem if the quality of their coffee gets worse, and this new spinoff might help it get better. (If they want to compete with the likes of Victrola and other great third-wave coffee bars, it's going to have to get a lot better.)

I hope the coffee wars help nudge the caliber of all coffee upward. Just because you're not a corporate behemoth doesn't mean you serve delicious brew. The dirty little secret of most independent coffee shops is that they don't know how or don't care to serve high-quality coffee. They believe that furnishing their shops with comfy chairs and knowing the names of their customers' dogs is all that matters.

Bottom line: competition is good. And if you have the right taste of (real) espresso, burger as good as Ray's Hell Burger, or rigorous research methodology; you shouldn't worry about Starbucks, McD, or any "imperialist" field of science.

Interpreting Election (and Democracy)

To political pundits in the newspaper and politically literates commenting on general election, this quote might be useful:

Thus, even if the emergence of states is better explained as cooperative efforts undertaken to benefit all members of the community rather than as a power move by one group in society to exploit the rest, it is now clear that the use of the majority rule to make collective decisions must transform the state at least in part into redistributive state.

--Mueller, 2003, after discussing the positive properties on majority rule and redistribution (see Riker, 1962 and Tullock, 1959)

In other words, stop using the term (and believing in) national interest in explaining the political parties and politician behavior in general election. It is unavoidable that election is the game on who gets the larger cake out of public policy (and taxpayer's money)

Waiting for a Keynes-like Macroeconomist

The Economist published an interesting article on the crisis of macroeconomics. If you happen taking, have had taken, or are about to take the subject, you may want to read that article too.

My personal take on that piece is this: one of the reasons on why I find macroeconomics fascinating is precisely the fact that the subject is still very much evolving. This is the branch of economics where the fight between schools of thought is still kicking, alive, and relevant, particularly after the recent crisis. And it's is a good sign, unless you just want things that already well-settled a.k.a boring.

True, as The Economist states, that for many economists the Great Moderation period from mid 80s to just before current crisis means the end of debates in macroeconomics as the business cycle was then tamed. But I was, and am, not convinced. Ten years ago, the Asia Crisis in 1998 got me thinking that there should be a new way to see the macro economy where economic activities and markets are now much more internationally linked at much speedier pace. I was expecting a new approach out of then the debates between market fundamentalists and panic approach on Asia crisis. Alas it never was.

Up to now, when it comes into macro, I can not really make up my mind and pick between (new) Keynesian or neoclassical school. Both are equally theoretically plausible and empirically defendable. I also am not fully convinced whether micro-foundation of macroeconomics is really the only way to progress, or more pragmatic positive methodology a-la Friedman and Keynes might be more useful.

But make no mistake, I very much enjoy every bit of this my state of not-knowing. It keeps me thinking and rethinking my position. It is good that the crisis of the subject forces macroeconomists back to the drawing board. Hopefully a Keynes-like figure would emerge and come up with a macroeconomics we never knew before.

And to those aspiring macroeconomists, I do not think the current state of macroeconomics should discourage you. If anything, this is the best time to study macroeconomics and join the game. Perhaps you are the Keynes-like we are waiting for.

Banality of Serial Bombings

The latest bombing incidence in Jakarta made me think to reread some economic literature on (rational) suicide bomber, --there are some out there--, but somehow I don't feel like doing it. The serial bombings is still always a disgusting and damned act, but it is now becoming banal, in a sense that it is no longer a surprise, fails to spread excessive fear, and somehow beats the dead horse.

So let the police does their CSI homework, may they identify and capture those bastards as they did in the previous incidents, and life goes on. To show that we are not easy to be scared off, the cafe still to play some jazz. Here are three Miles Davis' albums in a row: Kind of Blue, Sketches of Spain, and Miles Davis Live at Carnegie Hall.

Keep jazzin', folks.

A book of un-common sense, soon to be on the shelf at the cafe of un-common sense

So about more than a year ago, Gary Becker called to Cafe Salemba. He said he liked the cafe and had been very much inspired by it. "And, your tagline: a cafe of un-common sense, I love it!" he added.

Of course I'm lying. It's the other way around: we have been inspired by Becker and the likes: Stigler, Levitt, Friedman (Milton and David, not so much Tom), and of course Cafe Hayek.

I just couldn't help fantasizing the scene of Becker calling me, as I came across his new book with Posner: Uncommon Sense. Recommended.

HBS, Hilarious B-school

Do you know how the HBS students made the school pay for the BMW they rode to school? Or the difference between Sloan, Kellogg, Wharton, and HBS?

I did not until I read this book, Ahead of the Curve: Two Years at Harvard Business School.

To give you some idea, it's written by Philip D Broughton, an Englishman, former Paris correspondence for British The Daily Telegraph, holder of undergraduate degree in Classics from Oxford, who decided to give up journalism for MBA at HBS even without knowing how to run Excel on the first day of the School. In short, a page-turner hilarious account with strong hint of typical Englishmen wits and dark humor on life at one of world's most prestigious B-Schools.

Recommended for summer reading and for those who contemplate to take B-school or live business and corporate life.