Why I'd Rather Buy Two Cups of Coffee and Muffins

Following a Facebook discussion here, Ujang and I are amazed on how our friends on the left take Naomi Klein's Shock Doctrine seriously. I can not say anything on Klein's argument since I haven't read the book. And here is why.

Imagine you have 10 bucks in your pocket. Then somehow you read Tyler Cowen's review that says

Rarely are the simplest facts, many of which complicate Ms. Klein's presentation, given their proper due. First, the reach of government has been growing in virtually every developed nation in the world, including in America, and it hardly seems that a far-reaching free market conspiracy controls much of anything in the wealthy nations. Second, Friedman and most other free market economists have consistently called for limits on state power, including the power to torture. Third, the reach of government has been shrinking in India and China, to the indisputable benefit of billions. Fourth, it is the New Deal — the greatest restriction on capitalism in 20th century America and presumably beloved by Ms. Klein — that was imposed in a time of crisis. Fifth, many of the crises of the 20th century resulted from anti-capitalistic policies, rather than from capitalism: China was falling apart because of the murderous and tyrannical policies of Chairman Mao, which then led to bottom-up demands for capitalistic reforms; New Zealand and Chile abandoned socialistic policies for freer markets because the former weren't working well and induced economic crises.

You may then say, but hey, Tyler is a conservative free-market economist. Fine, what about Dani Rodrik -- a respectable Harvard's KSG economist who is sympathetic to industrial policy and once write a book asking whether globalization has gone too far?

You may expect at least a kinder view. Instead he said that Shock Doctrine is a bad book needs to be trashed and it is very hard to understand how Klein felt good about Argentina in 2002 that just collapsed into a severe economic crisis, with a more than doubling of the share of population in extreme poverty and a 10 percent decline in GDP.

Need more evidence from the left? What about Will Hutton from The Observer, UK?

In her delusional, Manichaean world view, privatisation, free markets, private property, consumer freedom, the profit motive and economic freedom are just other terms for corporate self-enrichment, denial of voice, limitation of citizenship, inequality and, sometimes, even torture. The discredited electro-shock psychological treatment of the Fifties, we learn, informed the thought system of the free marketeers; it is guilt by association and assertion rather than proof, a weaknesses of too much of the book.

The only positive review I came across is from Stiglitz (I can see your baristas here yawn). But even he said:

Klein is not an academic and cannot be judged as one. There are many places in her book where she oversimplifies.

Enough said, it is a small wonder that I'd rather spend my 10 bucks for two cups of good coffee and muffins than Klein's book.

But then the Facebook discussion and the overwhelming praise from my comrades on the left gets me thinking that probably I should give Klein a fair chance. Maybe I can borrow the book from local public library, if they have a copy. Yet one thing for sure, it would have a very hard time to compete with other books I considered worth reading -- and I have a long list of them already.

A Too Tall Order for Politics and Democracy

Maybe it's just me but it's hard to read Yasraf Amir Piliang, our Indonesian post-modernism guru, in Bahasa Indonesia (not that I have ever read his English pieces, too). Take his latest (seemingly Baudrillardian) op-ed here.

Basically he wrote that ideally:
#1. Political communication is to disseminate ideas, knowledge, and political enlightenment.
#2. Democratization is to build an architecture for a well-informed, ethical, and aesthetic political society.
#3. Political action is to bring virtues of goodness, nobleness, uprightness, honor, enlightenment, and authenticity.

But, he thinks, thanks to the (stupid) media, what we now in Indonesia get are:
#1. Political communication as an arena for rhetoric, parodies, and virtual political seduction.
#2. Democratization as a scheme for banality, artificiality, and electronic media virtuality based on the logic of commercial, popularity and media celebrity.
#3. Political action that brings banality, shallowness, manipulation, and mass deception.

OK, I agree that in general Indonesian media and their ill-informed press corps indeed still have to do a lot of their homework. I also could not say anything about Baudrillardian (or for that matter, any philosophical) approach on current Indonesian media practices since I know next to nothing on it. But I have to say that Yasraf Amir Piliang's ideals on political communication, democratization, and political action above are probably over the top.

I'd rather set a lower but by no mean easy metric. Political process and democratization shall hold the ruling government accountable, in a sense that they can not just make a redistributive policies go unchecked. Democracy should enable a citizen not only exit, but also voice their disapproval as well as to root for certain political affiliation (loyalty).

Yes, it's Albert O. Hirschman's insight.

What Surnames Can Tell You

When you hear the word England, what crosses your mind?

Harry Potter, Prince Harry, David Beckham (meh), Spice Girls (yes), fish and chips. Maybe if you are a bit literate Jane Austen's Pride and Prejudice, and if you're exposed to social science a rigid class structured society.

The last bit is problematic. If indeed England has low social mobility, why the industrial revolution took place there after all? Capitalism, innovation, and technological progress would not flourish if there is no reward for innovators. A rigid class based structure prevents social reward goes to the capitalists or innovators.

Greg Clark of UC Davis investigates this question in a very clever way. He goes back 800 years earlier, digs the archival records, and looks at the surnames. Yes, surname, as it indicates the initial position of a family in a social structure 800 years ago, and tracing it all the way to today can illustrate how social mobility takes place.

Clark finds:

England, all the way from the heart of the Middle Ages in 1200 to 2009, is a society without persistent social classes, at least among the descendants of the medieval population. It was a world of complete social mobility, with no permanent over-class and under-class, a world of complete equal opportunity.

This work shows that economic history is a vibrant subject. Contrary to common belief, they have a very creative way to look at historical record and come up with often times striking new finding out of old stories. Greg Clark is one good example, Avner Greif of Stanford is the other.

Our own economic historian is the respectable Prof. Thee Kian Wie, and you know what, having attended his seminar, I can say that Greg Clark resembles young Thee Kian Wie -including his remarkable humility.

RIP: JD Salinger

I read Catcher in the Rye rather too late. Of all places, it was Fopp records store in Sidney Street, Cambridge, England, that I bought that small red book from. And for the rest of that night, I feverishly followed Holden Caulfield's life, ignoring even the charm of English pub in that alluring ancient college town.

Since then, cliche as it may sound, Catcher in the Rye set my standard and becomes the best book I've ever read. I even always had it on my desk back in Salemba, along with Che Guevara poster. I recall Aco, then my office roommate, in the midst of a deadline for a research report on rice liberalization, grudged as he had to try really hard not to reread that book upon seeing it between my messy piles of stuff.

I am never sure why I really like Holden Caulfield, but maybe somehow I can relate what he felt to be a young man in an uncertain world where (almost) everything seem very wrong. A rite of passage before you end up living as economist, barista, et cetera, and see some things not that wrong after all, and now you remember that time with smile or grin.

Today the man who introduced us to the life and angst of Holden Caulfield passed away. Salute and rest in peace, JD Salinger.

Sunaryo The Faux Editor

Our cafe's office boy, Sunaryo Sunaryoto, has had lots of spare time yesterday (Yes, Kate was not around). So, while enjoying his daily somay intake, he idly edited page four, the Opini section, of Kompas daily. This time, he did the last section of Professor Liek Wilardjo's op-ed, Etika Penyelamatan Century, Kompas, 1/26/10. He gave his editing on the paper's hard copy, as follows (in Bahasa Indonesia)*

Normatif?

Dengan asumsi KSSK Pansus berpegang pada etika normatif, secara aksiologis dengan ukuran kualitas dan nilai-nilai kebaikan, tentu KSSK Pansus berusaha menghadirkan kebaikan tertinggi (summum bonum). Kalau lebih deontologis dengan ukuran ketaatan pada aturan , komite ini menunaikan apa yang diyakini sebagai kewajibannya dan tunduk pada imperatif kategoris yang diyakininya standar moral tertinggi yang ingin dicapai. Apakah summum bonum atau imperatif kategori Apa bentuk kebaikan tertinggi dan standar yang ingin dicapai itu, yang tahu hanya Sri Mulyani Bambang Soesatyo dan Boediono Gayus Lumbun (dan Tuhan Fahri Hamzah) yang tahu

Kalau mereka seperti Immanuel Kant, mereka melakukan ”kehendak baiknya” secara otonom dengan menempatkan manusia bukan sebagai sekadar alat. Tekanannya terletak pada niatnya, tidak pada konsekuensinya. Namun, mereka tidak boleh cuci tangan ala Pontius Pilatus. Mereka harus mempertanggungjawabkan keputusan dan menerima risikonya kalau salah. Cendekiawan Setiap orang memang harus begitu.

Lain halnya kalau KSSK Pansus memeluk antinomianisme menganggap dirinya berada di luar hukum. Dalam hal ini, KSSK Pansus memasuki proses pengambilan keputusan itu tanpa bekal norma moral apa pun. Keputusannya ad hoc, impromptu, dan ditentukan oleh apa yang dirasakan dan dipikirkannya ”di situ dan pada saat itu juga”. Ini bisa terjadi kalau KSSK Pansus mengidap gnostisisme, yakni paham yang penganutnya mendaku memiliki adi nurani (superconscience). Mereka merasa (sok paling) tahu apa yang harus dilakukan.

Konon ketika Miranda Goeltom pendukung Pansus diberi tahu bahwa Burhanuddin Abdullah dan Anwar Nasution cafesalemba mencela keputusan KSSK sidang-sidang Pansus, ia mereka mengatakan bahwa kedua tokoh barista-barista culun itu sudah berada ”di luar” tidak mengerti politik dan tidak dapat merasakan apa yang dirasakan ”orang-orang dalam” rakyat kebanyakan. Kemungkinan adanya Einfuehlung empati terhadap orang lain yang notabene berpengalaman di dunia perbankan tidak tidur di kelas pengantar ekonomi dinafikan. Suasana menghadapi krisis yang sudah di depan mata (imminent crisis) akibat gagalnya penyelamatan Century dianggap unik dan merupakan momen eksistensial yang menentukan kelangsungan hidup rakyat. Orang lain yang belajar ekonomi tidak berhak menjadi ”hakim kursi malas” yang memvonis dari posisi yang aman. Kalau benar begitu, anarkisme mewarnai keputusan penyelamatan Century sidang-sidang Pansus.

L Wilardjo Sunaryo Sunaryoto

Guru Besar Fisika Universitas Kristen Satya Wacana Office Boy, Cafesalemba

*Naryo reedited the old version on my fb notes.

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

Good News

Andi Suruji of Kompas, today in his column, makes a good argument in supporting Asean-China FTA. Thumbs up.

Market for Lemons, Jobs, and Friends

The year 2009 ended with "moral hazard" becoming a household phrase, so it is only appropriate to start 2010 with a post on "market for lemons". Our on-and-off favorite sociologist Roby will soon be returning to Indonesia where we suspect he will continue to pester the Cafe baristas with his sometime acidic and bitter but often useful (just like lemons!) questions, comments, notes, links, and whatnot. In this intriguing post, Roby ponders his foray into the job market back home which led him to enter the market for friends, and explains why many times what one finds in those markets are "lemons". - Kate

Market for Lemons, Jobs, and Friends
by Roby

I have decided to return to Indonesia and before experiencing Jakarta’s infamous traffic, undependable electricity, and dysfunctional bureaucracy in Jakarta, I must first solve the most important problem while I’m still here: getting a job.

If I were applying for jobs here things would be much simpler. Although getting a good job is still a challenge, the process of getting a job is simple. Just look at job ads where they are looking for someone resemble my qualifications, send dozens of applications, and wait until you get a response. When the first batch of applications doesn’t work, then repeat the process and send another batch and so on.

It is very unlikely that the above method works in Indonesia. I think, in Indonesia most jobs that are advertised are lemon jobs in the same way that the market for used cars are saturated with lemon cars. The mechanism is the same. People try to move out from bad jobs just as they try to sell bad cars. While if they find good jobs they will keep it. Therefore, the average quality of advertised jobs tend to be lower than the quality distribution in the population. Moreover, the worst job tends to circulate more rapidly.

The best strategy to avoid getting lemons is to get inside information. Typically, this inside information comes from social networks. Furthermore, the best inside information tend to come from friends. Not because friends have better knowledge or better judges, but because they have incentives to not ruin us. Thus, the rational thing to do in a lemon market is to ask friends.

I asked around and got some potential job offers. Being a sociologist, however, I know that I’m surrounded by people who tend to have the same information. To get more diverse information, strong ties are less useful than weak ties. Strong ties tend to create cliques and the same information tends to circulate among the same person. On the other hand, weak ties eliminate redundancy and expose us to novel information. Wanting to throw a wider net, I started making new acquaintances in new communities. In short, in addition to be in job market, I’m also in friends market.

It turns out friends market is a lemon market as well. In a new community, our first acquaintances tend to be lemons. People who are not pleasant to be with tend to have more free time – because others who know avoid them - and hence it is more likely to meet them. Again, inside information is imperative in this case.

Markets solve matching problems. But how markets look like depend on the kind of goods. In lemon markets, it could be that the market mechanism is highly embedded in social relations because people strive for inside information; renders the outcome depends as much on social structure as on individual preferences.

More books to ban?

According to the Jakarta Post (3/1), 20 books are considered "very dangerous to the public" by Justice and Human Rights Ministry. The Minister will "soon ask the AGO to ban them".

Some people never learn.

So Long, Gus Dur

Like many of my peers, I first learn about Gus Dur from his writings in Tempo and then from writings about him in the same magazine (where else?). It was in the mid 80s – I was in high school- that I realized that Gus Dur was not “just” a columnist but also a leader of the largest Islamic organization in Indonesia, the NU. There were a number of articles in Tempo at that time that dwelled on NU’s decision to adopt Pancasila as the azas tunggal and to return to their 1926 khittah, and what those would mean for the coming election.

For someone like me, who spent most of my childhood in Jakarta, who had no deep roots in either NU or Muhammadiyah, and at that time was attending a catholic high school¹, it pained me a lot to have to learn about the word "khittah" just to get through an edition of Tempo. But I remember buried in the dull and tedious discussions about party politics and NU internal politics, was Gus Dur’s argument about Islam being compatible with pluralism.² Being in confined comfort of a school where religious and racial tensions were non-existent, I thought his argument was compelling if not relevant.

During my college years when, to my shock, I found college to be much more heterogenous than high school (duh!) Gus Dur’s views suddenly became more relevant to me. Dynamics between majority and minority as well as racial and ethnic differences became more apparent in college. I started to consciously seek what he and other “public intellectuals” had to say about the issue. When tensions between racial or religious groups became highly charged, I learned that Gus Dur often was the figure who helped resolve these tensions. During these years there were very high profile cases such as where he defended the right of Arswendo for free speech in the Monitor case, very much a lonely figure. But it was the little skirmishes, the low profile battles that he fought, that impressed me more. Our campus in Salemba was very close to LBH Jakarta where Gus Dur sometimes came to give a talk. I remember attending a talk he was giving there on the marriage rights of a couple who were Confucians. Their marriage had been presented before a court because of legal and administrative issue and Gus Dur was an expert witness of some sorts, in favor of the couple. I never knew who the couple were but during the talk Gus Dur was defending their case like they were his own relatives. There were many low profile events similar to that, and I tried to attend some that didn’t require much effort on my part. It helped a lot that Gus Dur had such an acute sense of humor, and one did not need to be a student activist steeped in rethorics to be able to digest and enjoy his talks. I was never an activist and never saw myself as one anyway, so I only read from the printed press the more vocal (and more political) views that he made as the chairman of Forum Demokrasi. Our Salemba campus was also close enough to STF Driyarkara where Gus Dur was often invited for discussions - and almost always came late. It was always worth skipping a few neoliberal (ha!) economic classes for those events.

Then 1998 happened. During the tumultuous years, I was away. Like many others, I was somewhat surprised by the turns of events that resulted in Gus Dur being elected the president. But I remember being very proud to have a man of such conviction becoming the leader of our nation.

As I read through his obituaries in recent days, while trying to recollect what I learned from the man, it strikes me how often people use the word “erratic” (=highly inconsistent), to describe his short presidency and even his personality. This is perhaps the biggest irony, since of all the public figures who were his contemporaries, no one is as consistent in sticking to his principles on humanity, pluralism and democracy as Gus Dur.

Thank you, Gus Dur, and so long.


¹ Like many of my peers in high school, I was interested in the 1987 election primarily because election campaigns were fun (Truck convoys! Free t-shirts! Free concerts!). Incidentally, most students in my school were PDI fans, at least outwardly. Gugun Gondrong was the only student coming to school donning a non-PDI attributes (he wore green PPP headband while riding his motorbike across the schoolyard, but that is another story).
² I’ll leave it for historians to debate how much of Gus Dur’s NU maneuvers were driven by political pragmatism, appeasement, or NU internal politics.
³ As a student studying economics in Salemba, I was perhaps already predisposed against IPTN and everything that had to do with it (funny how an undergraduate thinks). It was not surprising that when ForDem was formed partly as a reaction to the establishment of ICMI, my preference was clear.