I am now reading an excellent book by Edward Glaeser of Harvard, Triumph of The City . It's about (great) life in cities and it brings me to the work of Gilles Duranton and Matthew Turner as well as William Vickrey.
Let us imagine a typical situation many of us face in Jabotabek. Every morning you ponder if you would drive your car to work. While taking a shower, you make a mental calculation on the benefit of driving your car (for example, comfort) and the cost of it (gas, time, car depreciation, etc). If the net is still higher than taking taxi, bus, or KRL train, off you hit the road by car.
You may feel good about yourself because you think you've done proper marginal benefit and cost analysis? Alas, it's not the case. You miss important point: your decision makes other drivers' cost of driving increase.
As now the road is one car more crowded, time to drive is longer. Your private cost and benefit analysis does not take into account social cost of having one more car, your car, on the road.
Econ 101 calls this a negative externality. It is more evident when we use resources with zero or artificially low price, such as road. Multiply such (private) miscalculation with hundred thousands of Jabotabek car owners, we have all too familiar traffic jam we see every morning in the city.
Jakarta's traffic jam can be maddening indeed. Out of your frustration, you may demand for building more roads. After all, it's just about supply for roads that doesn't meet the demand, so you think.
Alas, this might be not feasible for two reasons. First, there is space limitation in already crowded Jakarta. Second, even if technology can overcome this constraint (tunnels or fly-over, for example), we'll soon come across Duranton and Turner (2010) and their fundamental law of traffic congestion.
The law says that more roads will proportionately increases car's kilometer traveled. Why? Because it increases the current residents' as well as previously-beyond-road-network residents' car use. It also brings more travel intensive production activities in the city. As a result: more roads, same traffic jam.
OK, what about, you say, more public transportation in Jakarta?
It will reduce traffic jam only if substantial number of car owners shift to public transportation. But, you know that if I leave my car at home and take bus, road will be less congested and travel by car will be more pleasant.
The catch-22 is that I know it well, too. As a result, nobody gives up his/her car. After all, who wants to takes trouble by taking bus only to allow more pleasant travel of other car owners? Public transportation will just reach more non-car owners previously outside public transportation network to enter Jakarta.
We again may end up with more public transportation, same traffic jam.
So, what’s the solution? To know it, we need to see the late William Vickrey and his work on road congestion problem. But it has to wait for another blog posting.
Stay tuned.
Tuesday, June 21, 2011
Monday, May 23, 2011
So You Think You Can Dance Know What The Poor Wants?
Think again.
Let's say we provide the poor with cash money transfer, what do you think the poor would spend that money for? I bet that many of us would think that the poor would buy more basic staple food, like rice, or perhaps to pay for education fee for their kids, because, rightly so, the poor has low calorie and nutrition intake and low education status.
But suppose we found out that the money is spent for buying more cell-phone card credit, pulsa HP, what would you think?
Some, or perhaps many, of you would get mad and deem this act as unacceptable. The poor must buy more food or basic education, you insist, because it would help them out of poverty.
Let me take different view nonetheless. First, perhaps they're not as starving or badly in need for education as you think. Second, even if they indeed have low calorie intake and education status, in their calculation, ability to communicate with friends and relatives using cell-phone gives them more pleasures and utilities.
And I am OK with this. I believe that the poor knows what they're doing.
As simple as it may seems, you probably could not easily share this view -- you think you know what the poor has to do more than they do. Or even, you think the poor folks don’t know what needs to be done with that additional money.
In this interesting article, Abhijit Banerjee and Esther Duflo of MIT, with their extensive experience on poverty researches around the world suggests that such oversimplifying and paternalistic view on the poor is probably of little use. So is any well-intended poverty reduction reform based on that standpoint.
Yes, more nutrition and education would eventually lead to better productivity, hence income, and less poverty. But probably the poor has different expectation. There is one paragraph in that article that I would love to quote in full.
Econ 101 tells you that if you want to maximize the recipient's utilities, you should not set any conditions on your money transfer -- and let them decide to buy whatever gives them higher utilities. But if the objective is to maximize your utility (as the giver), you can impose specific conditions for the recipient to get the money to make sure you get what you want – e.g you demand the poor spend the money to buy rice because it satisfies your belief that more calorie is what the poor needs.
Now a million dollar question would be which one matters more -- your utility or their utility?
Let's say we provide the poor with cash money transfer, what do you think the poor would spend that money for? I bet that many of us would think that the poor would buy more basic staple food, like rice, or perhaps to pay for education fee for their kids, because, rightly so, the poor has low calorie and nutrition intake and low education status.
But suppose we found out that the money is spent for buying more cell-phone card credit, pulsa HP, what would you think?
Some, or perhaps many, of you would get mad and deem this act as unacceptable. The poor must buy more food or basic education, you insist, because it would help them out of poverty.
Let me take different view nonetheless. First, perhaps they're not as starving or badly in need for education as you think. Second, even if they indeed have low calorie intake and education status, in their calculation, ability to communicate with friends and relatives using cell-phone gives them more pleasures and utilities.
And I am OK with this. I believe that the poor knows what they're doing.
As simple as it may seems, you probably could not easily share this view -- you think you know what the poor has to do more than they do. Or even, you think the poor folks don’t know what needs to be done with that additional money.
In this interesting article, Abhijit Banerjee and Esther Duflo of MIT, with their extensive experience on poverty researches around the world suggests that such oversimplifying and paternalistic view on the poor is probably of little use. So is any well-intended poverty reduction reform based on that standpoint.
Yes, more nutrition and education would eventually lead to better productivity, hence income, and less poverty. But probably the poor has different expectation. There is one paragraph in that article that I would love to quote in full.
…We often see the world of the poor as a land of missed opportunities and wonder why they don't invest in what would really make their lives better. But the poor may well be more skeptical about supposed opportunities and the possibility of any radical change in their lives. They often behave as if they think that any change that is significant enough to be worth sacrificing for will simply take too long. This could explain why they focus on the here and now, on living their lives as pleasantly as possible and celebrating when occasion demands it… (Bold is mine)Granted, their decision to buy more cell-phone credits, or TV set to watch infotainment, or to carry out lavish traditional and/or religious party is perfectly understandable.
Econ 101 tells you that if you want to maximize the recipient's utilities, you should not set any conditions on your money transfer -- and let them decide to buy whatever gives them higher utilities. But if the objective is to maximize your utility (as the giver), you can impose specific conditions for the recipient to get the money to make sure you get what you want – e.g you demand the poor spend the money to buy rice because it satisfies your belief that more calorie is what the poor needs.
Now a million dollar question would be which one matters more -- your utility or their utility?
Tuesday, April 26, 2011
Wednesday, April 20, 2011
ACFTA again
Ten, fifteen days in a row - maybe more - the media is filled with heavy mercantilism again. It's about ACFTA. They say, Indonesian market is being flooded with Chinese cheap products: from textile to fruit to toys. All these destroy Indonesian producers. Not good.
Interestingly, no one mentions about the benefits to consumers: cheap prices are good. One article in Kompas (17/4) rightly quotes a small orange trader saying that Chinese oranges are good, the supply is reliable, and the quality is better - all with cheaper price than local oranges. So yes, some local businesses are benefited, too.
But they are rotten, say the complainers. Really? According to a news (also Kompas 17/4, same page), the Chinese exporters have started to adopt Indonesian National Standard. So?
A few note that the increase in Indonesia's trade deficit against China has a lot to do with yuan's and rupiah's appreciation against dollar. And because rupiah appreciation is relatively stronger than yuan appreciation, Chinese products become relatively cheaper to Indonesian importers than the other way around. So, this is not just between Indonesia and China. It also involves US. And all other countries, for that matter. You want to block China? Block everyone else too. Good luck with that.
Of course I'm not saying everything China is good. But when you find smuggle or illegal products, impose the correct punishment, not to burn the whole ship. Otherwise, you'll just be used by them inefficient, rent-seeking, protection-loving domestic producers. At the cost of consumers. And all the rest.
Interestingly, no one mentions about the benefits to consumers: cheap prices are good. One article in Kompas (17/4) rightly quotes a small orange trader saying that Chinese oranges are good, the supply is reliable, and the quality is better - all with cheaper price than local oranges. So yes, some local businesses are benefited, too.
But they are rotten, say the complainers. Really? According to a news (also Kompas 17/4, same page), the Chinese exporters have started to adopt Indonesian National Standard. So?
A few note that the increase in Indonesia's trade deficit against China has a lot to do with yuan's and rupiah's appreciation against dollar. And because rupiah appreciation is relatively stronger than yuan appreciation, Chinese products become relatively cheaper to Indonesian importers than the other way around. So, this is not just between Indonesia and China. It also involves US. And all other countries, for that matter. You want to block China? Block everyone else too. Good luck with that.
Of course I'm not saying everything China is good. But when you find smuggle or illegal products, impose the correct punishment, not to burn the whole ship. Otherwise, you'll just be used by them inefficient, rent-seeking, protection-loving domestic producers. At the cost of consumers. And all the rest.
Wednesday, April 06, 2011
Law for Sale -- Revised Proposal
Pramudya Octavinanda has very interesting ideas on how to design anti-corruption policy in response to my earlier posting here. Let me start with his points that I agree with.
First, the main objective of penal sanction system should be to recover the state's assets corruptors stole as much as possible. Second, it also has to prevent corruptors to buy (il)legal protection and political position that allows them to steal in the first place and afterward. In other words, it should make bad guys miserably poor.
Yet, what I don't really agree with is the idea to link two or more anti-corruption agencies for the sake of efficiency. If you let this happen, what we would likely have is an anti-corruption monopolist. This monopolist can sell their services either to corruptor or to the state whichever pays higher price. So if you want them to work in favor of the state and arrest the corruptor, the state has to pay or provide incentive more than what corruptor can do. This is expensive.
So I think I'd still opt for competition amongst anti-corruption agencies.
Now let's discuss Pram's objection on this competition. He said that without (formal) case transferability, competition won't work. But this is actually the very basic premise of my proposal for more competition -- that is to increase transferability. In my idea of transferability, bad guys can not rely on one agency to get protected, because other agencies can still arrest them legally. Competition would remove privilege of one agency over another; and with this, a case can be "transferred" to any agency willing to arrest the bad guy.
As for incentive for these competing agencies, as also asked by Mova in his comment, I'm thinking to incorporate Pram's insight on making corruptors poor and maximizing state's stolen assets recovery in incentive structure as follows.
Let's make the state (say President, or the Ministry of Finance) determine how much money they want to see back to state's coffer. If there is 100 bn IDR state's loss in a corruption case, they can set, say, 90 bn IDR recovery target and announce this to the competing anti-corruption agencies. Any agency taking this offer has to provide 90 bn IDR to the state but can take the remaining receipt, i.e 5 bn IDR if the agency can make the bad guy repay 95 bn IDR to the state.
So the state doesn't need to add more resources (higher salaries, bonus, etc) to anti-corruption agency, but any residual outcome belongs to the winning agency.
Do you think it will work?
First, the main objective of penal sanction system should be to recover the state's assets corruptors stole as much as possible. Second, it also has to prevent corruptors to buy (il)legal protection and political position that allows them to steal in the first place and afterward. In other words, it should make bad guys miserably poor.
Yet, what I don't really agree with is the idea to link two or more anti-corruption agencies for the sake of efficiency. If you let this happen, what we would likely have is an anti-corruption monopolist. This monopolist can sell their services either to corruptor or to the state whichever pays higher price. So if you want them to work in favor of the state and arrest the corruptor, the state has to pay or provide incentive more than what corruptor can do. This is expensive.
So I think I'd still opt for competition amongst anti-corruption agencies.
Now let's discuss Pram's objection on this competition. He said that without (formal) case transferability, competition won't work. But this is actually the very basic premise of my proposal for more competition -- that is to increase transferability. In my idea of transferability, bad guys can not rely on one agency to get protected, because other agencies can still arrest them legally. Competition would remove privilege of one agency over another; and with this, a case can be "transferred" to any agency willing to arrest the bad guy.
As for incentive for these competing agencies, as also asked by Mova in his comment, I'm thinking to incorporate Pram's insight on making corruptors poor and maximizing state's stolen assets recovery in incentive structure as follows.
Let's make the state (say President, or the Ministry of Finance) determine how much money they want to see back to state's coffer. If there is 100 bn IDR state's loss in a corruption case, they can set, say, 90 bn IDR recovery target and announce this to the competing anti-corruption agencies. Any agency taking this offer has to provide 90 bn IDR to the state but can take the remaining receipt, i.e 5 bn IDR if the agency can make the bad guy repay 95 bn IDR to the state.
So the state doesn't need to add more resources (higher salaries, bonus, etc) to anti-corruption agency, but any residual outcome belongs to the winning agency.
Do you think it will work?
Thursday, March 24, 2011
Law for Sale -- or Corruptor's Revealed Preference
I think it is good to have competition amongst anti-corruption squads or law enforcers. Think this way: a corruptor can bribe the police, but, in competition, the general attorney office or KPK will still be more than willing to arrest him/her - and vice versa.
Now you may want to say: what if the corruptor bribe them all? It's possible, but at least it is now more expensive to do so than with single anti-corruption office. The competition raises the corruptor's cost of wrongdoing and make anti-corruption more efficient.
Better yet if we can somehow set an competitive auction mechanism in which police, general attorney office, and KPK can bid to arrest a corruptor and force this corruptor repay the certain amount of the state's loss, and the office proposing lowest operational budget would win.
Who's afraid of such competition (a.k.a the loser)? First, the one from less efficient office. Second, and the foremost, the operation target, that is the corruptor him/herself. The non-corruptor would have no objection about this.
Now, if you know someone fiercely takes troubles and makes a lot of fuss on this competition among anti-corruption agencies, you may ask yourself and be suspicious if he/she is either from the less efficient agency or Mr/Ms Corruptor him/herself.
We economist call it his/her revealed preference -- regardless her/his stated preference as self-proclaimed anti-corruption bravados.
Now you may want to say: what if the corruptor bribe them all? It's possible, but at least it is now more expensive to do so than with single anti-corruption office. The competition raises the corruptor's cost of wrongdoing and make anti-corruption more efficient.
Better yet if we can somehow set an competitive auction mechanism in which police, general attorney office, and KPK can bid to arrest a corruptor and force this corruptor repay the certain amount of the state's loss, and the office proposing lowest operational budget would win.
Who's afraid of such competition (a.k.a the loser)? First, the one from less efficient office. Second, and the foremost, the operation target, that is the corruptor him/herself. The non-corruptor would have no objection about this.
Now, if you know someone fiercely takes troubles and makes a lot of fuss on this competition among anti-corruption agencies, you may ask yourself and be suspicious if he/she is either from the less efficient agency or Mr/Ms Corruptor him/herself.
We economist call it his/her revealed preference -- regardless her/his stated preference as self-proclaimed anti-corruption bravados.
Sunday, March 13, 2011
Kate Goes Randian
It's always nice to meet up Cafe's regular patrons outside the cafe itself and last I just met with a self-declared green-line youths, named after one of subway line here -- although some actually came from places way beyond regular subway system.
And, man, they're such a bunch of smart people. They know stuff that baristas could only wish to know - from Warkop to game theory to Mathematica to what's hot in Newbury street. What is initially a plan for simple dinner turned out a lively discussions on various stuff, including whether the illustration for Nash equilibrium in the Beautiful Minds film is really a Nash equilibrium -- it is not.
And of course on Emma Watson - and her plan to take 9 months leave from her study - and Natalie Portman. Alright, ladies, James Franco, too.
But after the Vietnamese spring rolls and main dishes were almost finished, they revealed their true motive for coming all the way to see yours truly in the last day before spring break. A classic question: "Who is Kate Salemba?"
I almost burst into laughter. Apparently they love you, Kate. And don't worry, quoting Aco's tweet, you remain discreet and elusive as we all knew it.
And, man, they're such a bunch of smart people. They know stuff that baristas could only wish to know - from Warkop to game theory to Mathematica to what's hot in Newbury street. What is initially a plan for simple dinner turned out a lively discussions on various stuff, including whether the illustration for Nash equilibrium in the Beautiful Minds film is really a Nash equilibrium -- it is not.
And of course on Emma Watson - and her plan to take 9 months leave from her study - and Natalie Portman. Alright, ladies, James Franco, too.
But after the Vietnamese spring rolls and main dishes were almost finished, they revealed their true motive for coming all the way to see yours truly in the last day before spring break. A classic question: "Who is Kate Salemba?"
I almost burst into laughter. Apparently they love you, Kate. And don't worry, quoting Aco's tweet, you remain discreet and elusive as we all knew it.
Monday, February 28, 2011
Unimportant Update
Uhm, hello.
It feels a bit awkward since it's been quite some times that I don't blog. The reason? I don't know. You may want to say Twitter, but I don't twit as many as other twitteratis do. Let us just say that I am busy doing something else -- or it is more costly to blog lately.
What is the "something else"? One of them, by default, is working on something economics. Like getting back to drawing board and trying to digest more on the financial crisis, both from micro and macro approach. The micro part is on theories for banking and financial market instrument, including strategic portfolio management. The macro part is on information problem and business cycle -- at this point, it's on how to model self-fulfilling proficiency and move from multiple to single equilibrium commonly found in the model of financial crisis.
And the more I learn about those stuff, the more I feel how stupid and slow I am.
The other thing is to enjoy an extended winter up here. More to come.
It feels a bit awkward since it's been quite some times that I don't blog. The reason? I don't know. You may want to say Twitter, but I don't twit as many as other twitteratis do. Let us just say that I am busy doing something else -- or it is more costly to blog lately.
What is the "something else"? One of them, by default, is working on something economics. Like getting back to drawing board and trying to digest more on the financial crisis, both from micro and macro approach. The micro part is on theories for banking and financial market instrument, including strategic portfolio management. The macro part is on information problem and business cycle -- at this point, it's on how to model self-fulfilling proficiency and move from multiple to single equilibrium commonly found in the model of financial crisis.
And the more I learn about those stuff, the more I feel how stupid and slow I am.
The other thing is to enjoy an extended winter up here. More to come.
Saturday, February 19, 2011
Unintended consequence #258
(Warning: subjective judgment ahead)
This is funny. Arguably the most popular twitter application in Indonesia -UberTwitter just got spanked by the duke, Twitter. Why?
Before speculating on that, let's first establish the claim above, namely "UberTwitter is the most popular twitter app in Indonesia". How's that so? Maybe because most people who mobile-tweet use BlackBerry and this BB is arguably the most popular smartphone for those who tweet (or those who want to use its network scale advantage: it has a free and secure chat service, so many people use it or 'forced-by-peers-to-use-it'. Then came twitter frenzy and UberTwitter happened to be right there in the corner). Yes this sounds like an endogeneity problem, but who cares.
OK back to the Twitter's spanking on UberTwitter. According to some friends (yes, I'm that lazy to do fact-check to the official source, why should I?), it's because UT 'monetizes' its service while carrying Twitter's name. Others say Twitter doesn't like the fact that UT's name is half Twitter's (and the child becomes more popular than the parent, no?). Whatever the reason is, let's move on to the unintended consequence(s).
First, this is like a happy day for SocialScope - that's another app but less famous than UT (at least until yesterday). Now that Twitter had punished UT, people started to find a good replacement. Some tried the Twitter-for-BB. My verdict: "It's OK but not so impressive, in my opinion. Next!" So next came SocialScope. Hey, this feels cool. And I just noticed, many, so many, of my friends migrated from UT to SS, passing the endorsed-by-the-duke Twitter-for-BB. Ah, sorry TfBB.
Then the next round of unintended consequence. Some people have been using SS for quite some time (esp those with iPhones, no?). Not that many but sufficient enough to form some kind of elite-group (I don't know how to put this, but you know that feeling when only a handful of persons including you use some cool stuff? Snob or whatever, it feels good, weird good, but you got my point). Now, suddenly the demand for SS is shooting up. Back then it took days (even weeks) to use it (it requires you to beg to become its user -wtf?). But now, you can use within 4 minutes since first download of the app. And it's cool.
So what's the implication? The snobs are now seeing the price of their eliteness is falling steadily! Like "damn it, now we're not so special anymore". Ha, sorry dudes.
Now what's the last, possible unintended consequence? The emergence of other applications, obviously. I've been using Twitellator for iPad and I love it. Maybe it's time for them guys there to hit BB market. If they are willing to give it out for free, unlike that on iPad.
OK, my coffee is getting cold.
Tuesday, December 28, 2010
My one-year twitterexperience
I think Twitter is fun - more so than Facebook. Because: 1) Twitter is shorter and hence more efficient, 2) Twitter has an instant reward-penalty system: you tweet good, you're treated well; you tweet bullshit, you're treated harshly. Think about that Golkar guy Bamsoes who was constantly lambasted by the whole Twitter universe, because, well he deserved it.
I'm rather new there. And passive, I guess. So what I'm sharing here is just based on my short experience observing what people do in the Twitland. Oh, maybe a little disclaimer first: I'm a fan of a group called #somaykrat. I think they're interesting without being pretentious. To many they're probably boring, especially when they go #kode or #kasus and all that childish stuff. But hey, I like 'em. Why am I probably biased? Because some of them are baristas here. (Yes, I'm considering how to best cut their pay in the Cafe 'cause they now rarely serve the drinks). Who are all the members by the way? I don't know, 'cause it seems the group is growing from time to time.
Now about other twitter (or, should I say "tweeter"? - have to be more careful now, as those somaycrats are typo nazis -- exactly, who the hell do they think they are? But I don't want no #ctarr or #pritt). I don't follow many people (can't keep up with too many). But from time to time, I see RTs from whom I follow. If they're interesting, I usually read their timeline (is that a stalking, I dunno).
First, I've seen some people who I knew from Blogosphere now living in the Twitland, too. Some appear more interesting than when they are blogging. There is this one guy who blogged really well and also tweets cool stuff. But he likes to go after anyone he dislikes and engage him/her in a debat kusir. There are some guys who give lectures in the Twitland (hey, I'm serious). This lecture-in-tweet is called kultwit - sounds a bit Freudian, I know, but who cares. Some kultwits are useful, imho. But when they hit number 30 or something, I get so sleepy, especially when everything of it you can get easily from the wonder of the web. But, to my surprise, some people demand more of it. Whenever they don't know something, rather than google or wiki it, they would just go "kultwit dong". Like we live for them, spoonfeds.
And then there are people who take Twitter so damn too seriously. They would expect politicians to tweet only about politics (or even "they should reach out more to their constituents.. bla bla bla") or economists to tweet about economics and economics only. Or law thingy for legal scholars. How boring if we all do it that way. C'mon, this is supposed to be for fun. Right? (oh God, I'm patronizing. Sorry).
There is also a few Twitters who like to expose other peoples' privacy to public. For example, if they know someone's relative are in the Twitland, and they don't like that someone, they will tell the public "Hey, I found his daughter. Here's his account. Go get her instead" - or other sentences to the same effect. Wow. Some respected(?) blogger even do it so the relative can "give insight to her father" - he hates the father (all do, but that's beside the point). Respected? Hah.
And some just love to teach others how to tweet. Like "don't RT this or that", "you should've replied, not RTed", et cetera, like they are Zuckerberg himself. Usually the same people, when get cornered in some debate (What? A debate in the Twitland? Are you out of your mind?) will use the discussion stopper "Read my timeline" (a Twitter-equivalent of "Talk to the hand").
Anyways, I'll stop here. Some barista complains I write too damn long. But I just like to thank Twitter. For it is fun. It also reveals the true colors of people like Tiffie and his ilks. Or some lousy pemreds who do everything to protect their muddy boss.
#Bye #now, #tweeps (is this the correct way?)
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