Price increase "abnormal"

The headline of Kompas today reads "The Price Increase [of Beef] Not Normal". It is reported that by the third week of November the price hit IDR 150,000/kg - while it had been hovering around IDR 80,000/kg in the foregoing six weeks.

The resource persons interviewed reason that 1) self-sufficiency should be achieved and import should be further restricted, 2) the domestic stock is actually sufficient.

The two explanations contradict each other. If the domestic supply is sufficient, then we don't need the call for self-sufficient anymore. We're there already. Secondly, if we are self-sufficient, there's no reason for foreign sellers to ship their meat here.

And both explanations contradict the title of the headline. If now the price increase is "not normal", then an increase in the supply should push it downward. Self-sufficiency and import restriction are likely to have the opposite effect. As for the second assertion, if the domestic supply is sufficient, price should be normal. Apparently, as the headline says, it is not.

Few Updates

I must have been either very busy or very lazy (most likely the latter) lately that I don't serve anything in the Cafe or realize that a truly excellent and readable book on development economics has been around since April 2011. The title is More Than Good Intentions by Dean Karlan and Jacob Appel.

I just read the Introduction, but because I need to work on something else now -- like reading Karlan's article on Observing Unobservables -- , I'll be back soon for more review. I may also write about the current state of economics education in our universities which share a theme with a report on how (the plan for filming) James Bond in the country was turned down by those in power due to some deep ignorance.

In the meantime, we will play jazz in this cafe. This time, Fall by Miles Davis Quintet (youtube).

We Found Love

Heck, I'm bored of econ. Wanna talk about Rihanna and her song We Found Love.

I believe Rihanna was a gladiator in her previous life. Not just your regular gladiator. But she's like the king, I mean queen, of all mean, cold-blooded gladiators in the history of mankind.

No seriously. Listen to this song We Found Love. Don't tell me you don't think of violence as you listen to the beat. Frankly, whenever I catch this song on the radio, I imagine Rihanna is sitting on a surrendered big bull, hurt the poor thing with something that looks like a leather whip. Or maybe an ice pick.

Like: We found love in a hopeless place (one poke on the bull's ear), We found love in a hopeless place (second poke on the bull's back), We found love in a hopeless place (third one on the belly), We found love in a hopeless place (by this time, Rihanna makes a crawl jump and lands on the bull's head).

Then the song repeats again.

Twice. No actually four times.

So, bulls, run for your life.

Update: So @acopatunru thought I confused "gladiator" and "matador". Ah, potato potahto. But wait, think of Rihanna as a gladiator, who, after knocking down her opponents in the stadium, goes for extra fun torturing bulls. That would do it.

About Our Tempe #657

Apparently for some people it doesn't make sense that while most of Indonesians love to eat tempe, the country keeps importing soybean, its main raw material, since 1970s.

Yet, our friend Haryo Aswicahyono (@Aswicahyono) shows that our love for tempe is actually quite feeble. Our soybean and its related product consumption is only about 2.5 percent of total food consumption. But, if you insist, let's assume that tempe is a must dish most Indonesian households need to consume, why we import soybean?

That's probably a wrong question to ask. Tempe is widely available on our dining table (in other words, affordable for many of us) because we can import (cheaper) soybean, rather than produce them domestically -- not to mention that soybean itself originally is not a tropical crop.


Regardless you like it or not, our love for tempe can grow thanks to imported cheap soybean. 

Readings on Indonesian Economy

Prompted by a discussion with a friend who is interested in Indonesian economy and by my recent task of reviewing a new book on the same subject, below is a list of a must-read (relatively recent) books I recommend to understand the (contemporary) Indonesian economy. Of course this list is just a fraction of the literature out there, including the many individual articles and papers in journals. But for undergraduate students (e.g those taking "Perekonomian Indonesia" - Indonesian Economy - course in FEUI, these are nice first reads I would suggest). My co-baristas and I will try updating the list.

• Basri, M. Chatib and P. van der Eng (Editors). 2004. Business in Indonesia: New Challenges, Old Problems. Singapore: Institute of Southeast Asian Studies.
• Booth, Anne. 1998. The Indonesian Economy in the Nineteenth and Twentieth Centuries: A History of Missed Opportunities. London: Macmillan.
• Dick, Howard, Vincent J.H. Rouben, J. Thomas Lindblad, and Thee Kian Wie (Editors). 2002. The Emergence of a National Economy: An Economic History of Indonesia, 1800-2000. Leiden: KITLV Press.
• Hill, Hal. 1996. The Indonesian Economy Since 1966: Southeast Asia's Emerging Giant. Cambridge: Cambridge University Press [Second, Updated Version: Hill, Hal. 2000. The Indonesian Economy. London: Cambridge University Press].
• Manning, Chris and Sudarno Sumarto (Editors). 2011. Employment, Living Standards and Poverty in Contemporary Indonesia. Singapore: Institute of Southeast Asian Studies.
• Pangestu, Mari. 1996. Economic Reform, Deregulations, and Privatizations: The Indonesian Experience. Jakarta: Center for Strategic and International Studies.
• Reid, Anthony (Editor). 2012. Indonesia Rising: The Repositioning of Asia's Third Giant. Singapore: Institute of Southeast Asian Studies.
• Thee, Kian Wie. 2003 (Editor). Recollections: The Indonesian Economy, 1950s-1990s. Singapore: Institute of Southeast Asian Studies. 
• Thee, Kian Wie. 2012. Indonesia's Economy Since Independence. Singapore: Institute of Southeast Asian Studies.

Related: Rizal's note on Development Economics

Marhaban, ya inflation

As always the case, prices are hiking up as the fasting month is coming. In the month of Ramadhan, muslims restrain from eating and drinking from dawn till dusk. One would expect a drop in demand for food and beverages.

But this is never the case. Instead, prices soar in response to a jump in demand. Because actually most people want better or even more extravagant meal to break the fast. Furthermore, events like "buka bersama" (breaking the fast together - usually with rich variety of food, in restaurants or otherwise) are pervasive. Some people have twice in one evening. Nearing the end of the fasting month, not only food's prices are high, but those of clothes also rise. Because people want new, fancier dress in the Lebaran Day. Then there is "mudik" (homecoming, special in Ramadhan for its massive flow of people - and money), where migrant workers go visit their hometown, bringing presents and usually, some good dose of cash. Some even buy new motorbikes, ship them with train, and have happy time in their villages.

Now, with these information, how do we not expect higher inflation?

But people and the media always blame the government for not being able to halt the soaring prices in this particular time. As a result, the government officials always appear in defensive mode. Some come up with funny arguments ("stop eating chilies", "we will punish sellers who raise prices too much", etc).

In fact, hiking prices are good in the above situation. They need to go up to respond to the large increase in quantities demanded. Otherwise, the filter effect of price is dead: we will see even more extravagant fiestas in the holy month - not that it's a bad thing.

So if any, the government should do something on the supply side, not on the demand side. And that's not by punishing the sellers who now see opportunity to reap extra profits. No. But by improving the logistics and infrastructure condition of the country. That is, keep working on tackling the most constraining factors in our economy. Yes, that's more like longer term program to address the economy as a whole, rather than a short term solution to the Ramadhan-led inflation. But why should it be the latter?

Two New Members

Hi all. Been away for a while. But partly because I'm out looking for nice and sweet things to decorate the cafe. Why? Because we're welcoming two pretty babies: Agatha (Aco's daughter, born May 7th) and Sekar (Rizal's daughter, born July 9th).

You wanna study violin? You'd better buy an expensive violin

One of my most favorite musical instruments to hear - not to play, I can't - is violin. I admire this guy Ngatmin from Kudus, Central Java who produces hand-made violins and sells them at IDR 1-2 million a piece (Kompas, 11/7). He also sounds very confident: "Our quality is better [than competition from China]. I guarantee you that. We'll also keep the handmade process, instead of turning into machinery. Because we know our products will still be sought for. We'll not lose our market".

So it is at odds that Kompas suggested to "block importation, for local producers need protection". They reported that Chinese massly-produced violins sell here at IDR 500-750 a piece. Again, a Ngatmin's violin, a better violin that is, sell at a higher price. So what's the problem? As Ngatmin himself says, the qualities are different. Isn't it just so natural that the one with higher quality is more expensive?

Kompas also wrote that those who purchase violins in bulk prefer Chinese made to local ones. Supposedly these are for schools or music training centers. I don't see any reason to complain. In fact, I hope more and more Indonesian kids (including the not-so-rich who can only afford Chinese violins) can play violin. Later, some of them who are serious and talented will sure buy the better one: Ngatmin's violin.

On Our Development Economics

Last week, I had a lunch with an economist who has published some articles in leading journals of the profession using Indonesia as data source. It was a nice conversation on various things Indonesia from what a Professor title really means (no easy answer on this) to why there are so few Indonesian economists to who's who in Indonesian economists (small) circle.

Then he asked this: "How do you guys teach Development Economics?"

It took me probably four or five seconds of awkward silence -- the time for me to recall syllabus of my undergrad's Development Economics and some more recent courses related to Development Economics in the Department that I knew, and reconcile them with syllabus of the same courses in classes in his Department or other Department in another side of the river that I am also familiar with.

I had to do some jujitsu to make our current state of Development Economics not look too terribly lagged behind, only to, in the end, admit that we in Indonesian universities badly need an upgrade and update on the issue.

I think the current Development Economics no longer so much discuss structural transformation or long run growth or inequality from macro perspective, but moves toward on how to make marginal improvement for effectiveness of (credible) public policies at micro level. The contemporary Development Economics also makes extensive use of now more widely available micro data and/or feasible experiment/surveys equipped with now much better (microeconometrics) tools.

And this is perhaps what Department of Economics in Indonesian universities need to catch up with.

It's OK to burn books. If they are yours.

It is saddening to hear that Gramedia, a major publisher and bookstore in Indonesia had to burn one of their newly published book, because some hoodlums don't like it. Long time ago I offered this solution to Playboy fiasco (involving, yes, you got it right, the same hoodlums): buy the magazine and burn it, if you like (see here and here). This Gramedia case is a bit different. Or not? No one buys the book and the store owner burns it themselves. Well, they are effectively the same. There is no violation of property rights. Gramedia owns that book*. They have the right to burn it. Just like I have the right to burn my OWN books, that is, the books that I already purchased and hence the property right lays on my hands.

I'm not saying that this situation is of no concern. We are concerned. By the fact that the community where we live in has been so colonized by some thugs who always act as the moral police ready to ransack whoever disagrees with them. And ransack they do. The problem here is the absence of the state in protecting its citizens from freedom of fear.  

--

* Yes, there might be some complication. Depending on how Gramedia deals with the author, some degree of property right might still belong to the latter - however, I would assume Gramedia (should) pays for some compensation, in one way or another.