Indonesia: when we should worry with water shortage?

by Dewa Wisana


At the end of the year 2006, people begin to mark year 2006 as “The Year of Disasters”. I do not want to list natural disasters that occur in Indonesia during 2006. It’s too heartbreaking to know that even yesterday; there is another earthquake in North Sumatra and expert said it was only the beginning of a series of another earthquake. I send my deepest condolence for my brothers and sisters in Mandailing.

In Jakarta, I start to observe frequent rain every afternoon or evening. To be simple, it’s a sign of rainy seasons definitely. Many people feel so relieve, except for Jakarta’s government since they have to prepare with yearly flood disaster (or could we called it “never-anticipated-disaster”?!). However, I notice that this year rainy seasons has come very late. There is single serious impact due to late rainy season: drought. It impacted on lack of water supply for agricultural sector and household need as well. As we may notice, there’re hectares of paddy crops had failed to harvest as well as several others hectares of land that totally unable to be cultivated because irrigation system could not support water. In household level, they started not the have sufficient water for daily needs. The wells totally dried up, even that they already digging up again up to 15 meters or even more for some cases. It is clearly seen that drought and water shortage becomes serious problem in many part of Indonesia.

Recently, I watch government television advertisement about saving water usage particularly in household level. We should appreciated this policy, although it not enough especially if we notice that demand for clean water will be still raise up as population also still continue to grow. But, are there any other policies that government should do? There are! At least, they have to start to manage environmental condition related with water sources and flows such as rivers, lakes, water fountains, and many more. On the other hand, increasing capacity of water company’s services is a necessity to fulfill household needs. However, had they notice or thinking about this? I guess not!

That is why I asked the question as in the title above: When we should worry with water shortage? If you believe with The Price of Global Warming, I urge many people and stakeholders to starts worried and take actions on this issue.

Or, would you like to wait until there’s nothing we can do except waiting and extinct?

OPEC and partial cartel (part 1)

by The Dreamer

A few days ago, I read an article on the wall street journal newspaper about OPEC. In the article, it said that OPEC will decrease the output in order to rise the oil price, thus the profit of each OPEC member. After reading this statement, there are several question popped up in my mind :

1. Is it true that the additional profit (of individual OPEC members) by decreasing output (thus price of oil will increase) is at least equal to the (additional) profit by just keep the same or increase the level of output of oil ?

Ok, the answer seems to be quite easy (at least for economics student, doesn’t it?). Now let imposed several additional information : this is a partial cartel. It means that this OPEC competes with other producer ( either by Bertrand and Stackelberg). Thus, any action of OPEC will be responded by other non-OPEC member.

With this additional information, is the answer still pretty obvious?.

To make things get complicated, let’s take into account that there are also potential entrant that will entry if the profit of in the industry is at least bigger than the entry and investment cost.

Now tell me, is the answer is still pretty obvious.?

2. This lead into the second question : is it the optimal action of the OPEC?

For this time, let not discuss it too deep. Since we compare two conditions, we need to the either analytical analysis or numerical analysis.

I think, it is quite tough to be answered actually. For examples, an article by Freshman and Pakes. By taking into account the entry and exit condition, full cartel, and the heterogenous firm, the effort to get the optimal level of collusionunder exit and entry behavior needs a looks-easy-yet-complex computation procedure. Taking into account partial collusion, instead of the full collusion will indeed make freshman-pakes approach becomes more complex.

O k. Just leave this matter into the economist in Harvard or Tell Aviv :D. (Pakes from Harvard and Freshman from Tel Aviv University)

Now, I will not debate this thing. Let’s go back and discuss more basic stuff. Why is there a partial cartel? Under certain assumption (especially the homogenous firms and goods assumption) some analytical solutions, show us that (in case of cournot -not bertrand ) profit of the non cartel firms is higher than the profit of cartel member. If this is true,:
1. why do you want to be a cartel member?
2. why don’t the cartel member invite the non-cartel member to join the cartel. If they do this, they will have a full cartel.

What do you think?

On grandma and land reform

by Dewa Wisana


Initially, my “Labor and Human Resources Economics EIE 31005” class discussed about migration theory and somehow relates the issue with poverty. Then, Isya - one of my student - raised a question about land reform as a solution to cope poverty. Since my counter to her argument seems not so satisfied for her (I suspected so), then I invite her to write down again her argument in the form of essay or article. So, here it is. Please welcome this interesting and quite well-written essay of Isya Hanum.

I like her style of writing, and especially her last question “So, where’s the devil Sir?” I guess I will make this kind of invitation again for my other lecture, and selectively published them so the student will have motivation and continue the culture of “free-academic-speech” (read: mimbar bebas!).

--------------------------------------------------------

Dear Sir,

Someday I would like to introduce you to the Ratman family. Ratman is the eldest of 9 sibilings, his parents came straight from somewhere near central Java. They live not 2 kilometers from my house. Ratman family Sir, is in the garbage business. Their property?a humble shack just beside a dumpster that amazingly (almost magically) fits 11 people (and ironically they are neighbors to an elite private school). This is a question that keeps popping in my head: If the Ratman family get a piece of land back home from the land reform policy how would it be wrong? And if the rest 24.8 million poor people in rural areas and 14.3 million poor people in urban areas get a piece of asset that they could not have/ afford otherwise, wouldn’t they be better off and then wouldn’t they be a valuable economic force? Sir, my grandma would ask the same thing.

So then I orchestrated a simple plan in my mind. First and foremost, whose land to be given away??? There is an 8.15 million hectare empty land [1] (14 times the size of Singapore), that is possible for crop growing and free of ownership. Done ! =).

And now if I were Ratman, who’s finally got a land from the government, I have two choices: trade the land for fast cash, or take the whole family and move out of Jakarta to cultivate the land. Now being the government again, of course I’d want Ratman to go home and cultivate the land, so all I need to do is create a set of law that is strong enough to impede Ratman from selling his new land land immediately.

Now, to cultivate the land Ratman Labor, Machineries, Fertilizers, etc. And how could he afford them? Loan sharks are available and easy. But as the government I have an obligation to save Ratman from loan sharks (or death by loan sharks) by bridging the gap between demand for capital and supply of capital. Thus access to capital must be made easier, collateral need not be obligatory, monthly installments should be moderate and interest should be lower than conventional banks (like Grameen Bank).

After attaining capital, Ratman needs machinery to be more productive (it turns out that his parents, 8 siblings, and 2 cows as a manual tractor is not enough). Again market mechanism could not help Ratman to afford/ buy tractors (just like it could not help ratman afford land). So again I have to make access to agriculture machinery easier. I guess through soft loan, subsidies or grant. I have never noticed the echo of “mechanical agriculture” in Indonesia Sir, or is it just me? I know US has done it a century ago though, and India too, like in the 60s or so. With more land cultivated and more machines in agricultural sector, national agriculture productivity can be boosted. I believe mechanized agriculture is impossible without land reform, because fixed land and more machines means many “buruh tani” will be out of job.

The story goes, now Ratman’s land is very productive, but his village is so remote that only 1 purchaser can afford to access Ratman’s location, moreover Ratman has no access to the bigger market. New problem arises: that purchaser has too much power to set price. Ratman has no choice then, he and his friends would have to sell their bountiful crops to this one guy, with a bad price. To prevent this, I have to make market more accessible to Ratman and his friends. First, build road, bridge, port or airport: infrastructure! Second, when national demand is fulfilled, I have to make foreign market accessible to Ratman and his friends. Lobby foreign countries to lower trade barriers for our agricultural commodities.

That Sir, is my simplistic view on land reform policy. I believe that it could not work alone, definitely should be followed with policies that make capital, machinery, and market more accessible to those who get the land. Only then can it be effective and it can be a rural pull-factor because it reduces rural-urban income disparity and thus will reduce rural-urban migration. It can reduce poverty, it can reduce unemployment. Although the 8.15 million hectare is projected for only 4 million families, it can alleviate the prosperity of 12 million poor people (assuming 1 family= 3 people), not bad.
So where’s the devil Sir?


best regards.

Isya Hanum

[1] Tempo Magazine, 4-10 December: p.46

Poor farmers: credit access and social capital

by Berly

The Physiocrat school from France in 18^th century put supremacy on land. Even though recent economic research suggest innovation as the engine of growth, Quesnay and his heirs have many strong points. Indonesia certainly can learn from land reform conducted in China (communist) and South Korea (non-communist) which provide strong foundation and more equality for future growth.

The land reform process needs an honest, comprehensive and scientific assessment (both on whose land, which land and for who), restriction on selling the distributed land for medium period and government credibility that this will be a one time measure (otherwise resources will be spend to get more land and to defend land). I had a long discussion with a Fisipol- UGM lecturer doing post-doc in U of Amsterdam and sadly those conditions are far from fulfilled in Indonesia. Furthermore, results of recent land reform in Indonesia have been rather unsatisfactory (most recipients sell their newly acquired land shortly).

If one of the main benefit on enlarging the land possession is the access to credit market lets focus on the credit market it self. The assumption of no credit constraint is one of neo-classical economics most un-applicable preconditions. That’s why Muhammad Yunus and his Grameen Bank justly deserve his Nobel Peace Prize (I would add the Nobel Economic Prize as well) for opening up credit access to poor people.

The late M. Hatta returned to Indonesia after watching admirably the cooperative system in Europe that increase collective bargaining power of farmer, get rid of wasteful middle man and sell the product directly to consumer. The cooperative employ capital (instead of the other way around) to build vast network of suppliers, processing plant and end-point shops. (for farmer cooperative on Tuscany click here).

Why this is not happening in Indonesia despite heavy constitutional mandate? One line of argument (beside low education level) put the blame on low trust/social capital (read Putnam and Fukuyama) among Indonesian farmer that inhibit them to pool resources for common good, low recognition for property right (many farmers still don’t have the ownership certificate of their land) and low credit access.

Let’s prioritize on the farmers. BPS Report for February 2006 show that 44, 47 % of Indonesian workforce are in agricultural sectors. But the trend in developed countries is a decreasing tendency then to stable around 5 % of population while increasing the efficiently of agricultural production. Some researches (sorry I forget the authors’ name) found that very few Indonesian farmers want their children to be farmers. So why not honour their wishes and improve out education so their children have multitude of choices of occupation in the future.

A Game Theoritic Analysis of Polygyny

by Berly

We will discuss the current hot topic in Indonesia (Hollywood already has a TV series onthe topic since early this year) in economics context. I will employ game theory as tool of analysis since it involves strategic interaction and the payoff depend on other people’s response. (for quick review click here)

The etymologically correct term is polygyny since polygamy is the case with multiple spouses for both genders (the term for one woman with many husband is polyandry).

Let lay out the assumptions. I assume common knowledge (structure and payoff) and reveal preference (the husband will tell truthfully whether he wants poliginy and the wife will tell truthfully whether she accept it or not).

I don’t know how to draw the game tree in blogspot so verbal description should do.

It is a two stage game where on the first stage the husband decides whether to do polygyny and tell his wife. I will only discuss the case of husband with poligyny inclination since otherwise nothing happened and the couple stay monogamous. On the second stage the wife decide whether to accept her husband intention to do polygyny or not.

For husband the preference in descending order is polygyny, monogamiy (with first wife) and divorce first wife to marry the incoming woman (before receiving complains, this condition not apply to all men/husbands). I will discuss the wife's preference a bit later.

Since the husband strictly prefer polygyny to divorcing the first wife to marry the incoming woman then the first wife could threat for divorce if she don’t want poligyny. The husband cancels his intention and they stay monogamous.

Why this is not always the case? The threat is not credible if the husband know the first wife’s preference is (in descending order) monogamous, polygyny & divorce. Meaning the husband know the wife in the end will choose to accept the second marriage than get divorce and be a widow.

The financial struggle of non-working women to get new job after long unemployed is an uphill struggle. There is also problem of society looking down on widows and the difficulty to get new husband after divorce.

First wife everywhere! You can, paradoxically, prevent your husband (if he has the inclination) from conducting polygyny by credibly demonstrating your willingness to divorce him.

So get a good job with decent salary, keep the social network (in case you need better job/ husband) and staybeautiful. You will keep your husband of yourself as long as you want him (caveat, if the assumptions used above are applicable in your case).

More economics of polygyny by our Anglo-Saxon friends here (I also recommend this and this movie for weekend).

poor farmers: access to land

In responding to Peter Timmer in Jakarta Post (here) and recent discussion in kafe depok, I would comment on the point on the lack of agriculture land. Since the debate of rice economy mainly discusses who should play a role in food policy, the market or the state? Let step aside from it and look back to farmer’s household having tiny plot of land. What is wrong with that? It is argued that small plot brings lower yield regardless the productivity probably be higher with advance investment. It is true though. But this is not the farmers’ fault having small plot of land.

(read more here)

to conclude, if we want to improve the welfare of the poor farmers but they do have tiny plot, why dont we give them the land for doing farming?

poor farmers, is it always the price that matters?

Well this morning, digging up to one of my favorite blog, founding interesting article,Oke then, what in the hell people is talking about anyway, rising price of rice would hurt the farmers or not? , well that's an old story i have had in the past, and really, till now, i'm still wondering why would that happened anyway.

The Quarrel between works of economist in development economics, in a certain manner would however change a cross time. My guess is the man, from whom kompas has quoted his words in this article is an old fashioned one -if I say he to be an economist though. What he’s arguing is nowadays still being such a controversy among development economics, whether rising price of rice would make farmers better off? whether farmers will increase their production as a result of price effect?, would the income-marshallian effect would eliminate slutsky substitution effect ? Well I would say, that depends, depend on where do you look, what do you seek, and when.

You see, that’s the problem being Political economist, you’ll never be, or- even better - consider to be neutral, though I should say Economics were never been neutral anyway, but policy must be neutral, neutral with what you keep in your tiny head, because your head could not keep up with all complexity in this growing market economies. Neither if you are market fundamentalist, nor I should say Structuralist.

That’s why I’m completely disagree with people considering themselves as an economist,development economist, talking to the news, about policy, without solid facts, to me, they are nothing but politician needing some vote for another election campaign success. What these guys were telling the news is that Farmers are often abused by the global market, and therefore we need to accelerate their income by keep the price (of rice) rising, well guys.. reveillez-vous… have you heard anything about such a complex problem with agricultural households?

There is a problem called Separability problem, which shows that agricultural household is facing two intertwined problem in the same time, because they are acting as a producer and consumer at once, for agricultural products. Therefore their profit maximizing condition were constrained in a non-recursive way and instead, simultaneity occurred. Thus the agricultural household could not operate as a common maximizing behaviour individuals.

Even when price is rising up to the sky, farmers will surprisingly might reduce their production, and therefore cause a higher gap of income, because the price negative effect is not only the rice, it multiplies a lot,seeing that the other consumption goods will rise as well.

So when will farmers will have a greater profit, and becoming rich?, frankly I don’t really know, what the answer for this, anyone has a clue? I’ve been thinking about this since I was studying Introduction to Development Economics, well, I suppose that farmers will get better off by increasing their production, not by raising their price, because their welfare is endogen to the price itself.

Nevertheless some research as Benjamin(1992), Pitt and Rozenweig(1987) has proven that there is no such things like separability condition in Indonesia, well I think they have overrated our country, first of all, their research is only conducted in Java region, could not aggregate their result though,What happen if this separable thing were concentrated in some areas without adequate source of water, with pathetic quality of soil? Seeing that Jakarta is so polluted, then what happened in Jakarta, would be totally different with what would happened in Papua for instance.
Secondly, their stories were way out of our time, it’s been almost 20 years now, and were facing a lot of up and downs in our economy. Thirdly, these researches were concentrated in labor market imperfect market, in a general term. Off course there should be another way in having another conclusion totally way around.

Another thing to look more precise is that often, the cause of non-separable problem is complex, it might comes from any different kind of market imperfection, and even the source might come from one market that is totally perfect ,why? Well because this one single market that is ironically perfect has caused some other market imperfect as noted by some of easterly in his critics of multi tasking of MDG

Looking to the facts on the field, people has a large constrained of collateral, thus access in credit, Farmers have a large barriers of trade because no easy access to the market, then the transport cost is high, people in the mountains were so isolated that their cultivated their land on and on without sufficient fertilizers, there are too many imperfection against the farmers, and I agree that these guys need help. But saying that rising prices of basic needs is a fair deal for consequences of oil price shock is confusing and misleading.

Instead of using our budget for subsidizing rice, we should increase the ability of trade and access on information, by giving them decent infrastructure, friendly bureaucracy, cutting some hands in the bureaucracy in export and import for example, do you know that rice produced in Thailand is far more “pulen” and More tasty, and it smell so good, that people would prefer buying it than other cheap rice. Here, thousand miles from Thailand, we eat Thailand product, and we pay in euro, and no indo-rice product made it to come here. Anyway how many Indonesian people, having opportunity to go abroad, who consume Indonesian rice, if they already had a chance to have Thailand rice? not many I guess, with a small disparity of price I’d prefer to let go my nationalism in rice, though.

You may argue that they are dumping their products, I would say, if they do that, why don’t we do the same thing? We import rice from Thailand, which is relatively cheaper, and then we export, say to France, all of our commodity, or may be even exported it to Thailand, in the end, the price would converge, and the only thing that that we could use in comparing the two is their quality, that is our base line, and In the end, no one will buy our rice, since we’re consuming the same Thailand rice.

So the bottom line is, the problem is not what Thailand has did with their price, but why they could make such quality to be well known to the world. Another example is another close neighbor of ours, Vietnam, they Exported many kinds of things, small agricultural things, like chilies, spinach, noodles, fisheries, fast food-kind of things, which were really fancy in this country. As a result, their price goes up, with a single addition in their package, a usual package of frozen “tongkol” mixed up with ingredients,-with a little help of Microwaves- will change to a well prepared Vietnam gourmand, , and so is fast food, we could get a tasty Chinese foods by buying all the ingredients available there.

A strange thing is Indofood, and KOKITA stuff were easily found here, but no Indonesian imported it, it licensed to some Indian company, in contrast, Chinese supermarket “tang frere” were amazingly famous, and we can find all asian taste ingredients there, even Indonesian’s sambel oelek, what's I’m going to say about this is that,global market were not so racial to the agricultural goods, the thing is. you have to improve your quality, your package, your additional values, and the most important, increase your market. That’s where Chinese success came from, they have already ruled the world, even before Chinese open up their market. That’s why we always find Chinese restaurant every where, Chinese banks in every corners of the street of Paris.

What I’m saying is, if you want your farmers to be rich, stop them of being a farmer, and a farmer only, instead, becoming a farmer and entrepreneur as well. Farmers in Indonesia were so characterized with lack of education, and information. Indeed, they lack of source of money, but they need education and information the most, to reveal what is really the meaning of globalization, what is to have freedom to choose, and how they could sell their product. Of course we have no means to give such policy like the common agricultural policy in Europe, and certainly we could not let the farmers hurt by the prices.

But still do not give up hope, we could make it, as long we stop complaining, and stop listening to politician, pretending as an economist.

Rizal Adi Prima

A letter to Mr President

Dear Mr SBY

It is has been quite a while since you officially be the president of Indonesia. During this three years, you already travel a lot to foreign countries. As far I know, you have already been in US, Cuba, Rusia, Japan, etc. You told us that during the visit you will promote Indonesia into foreign investor.

Let me ask several question : Do you know that firms is a rational economic agents. {Even in bouded rationality literature, firms always assume as a rational agent. this is not a kind of man-made-so-that-analysis-could-be easier assumption. firms have lots of resources so that they could analyze everything (most of things) before they make their investment decision}. Do you know that the higher-the wider the hierarchy of public servant In Indonesia, vertically and horizontally, the less productive they are?.Do you know that the corruption and bribary level is so high that the cost of doing bussiness in Indonesia is so high. (for your reference, you could see the research by Ari Kuncoro and Henderson in NBER). Do you know that any Doctorate Honouris-Causa you have do not make any difference to Indonesia economy.Do you know that how hard you are being a good guy in UN will not give any much effect on indonesia economy yet -silly-nasionalism-pride.Do you know that as long as the cost of doing bussiness in Indonesia is still high, there is no way will an investor go to Indonesia and invest here. Do you know that as long as the bussiness contract is not protected, then the firms will not sign any contracts in Indonesia.

No matter how hard your effort to go to foreign countries and persuade the firms there to invest in Indonesia, they will not go here for sure. Firms are not a charity organization. Going abroad for this reason, without any correction on Indonesia Bussiness climate, will not give any effect on their belief on Indonesia. Now, Mr Presiden, let me give you one suggestion. Please stay in Indonesia. Do your homework. Clean up all the mess. Going abroad for state visit has a huge opportunity cost. It is better for you to use the money you spent during the visit to somewhere else more productive.

Thank you very much for your attention

Best Regards

The Dreamer

A Question on Perfect Information

by The Dreamer

In economics understanding, moral hazard is happened because of imperfect information between economics agents. Due to this hidden information, the agents -who knows better- abuse this knowledge such that it affects the pay off of the another agents. Off couse this problem would not be exist if this knowledege is available to all agents. It is already analytically proved (by Stiglizt, Salanie, Dixit,etc.) that perfect information give higher social welfare rather than the imperfect information.

Now let me tell you two stories : If u ever think to change ur occupation to be a criminal, there are some notes u should remember :

1. Always clean all the trace, finger print, shoe print, etc. It is all can be used to take u down

2. Do ur plan carefully, observe, observe and observe . Most people have pattern. Rarely do this people break the pattern. Observe the pattern on the next victim

3. Do not expense all the money you just get.Do not put it into bank or in your house. Police can always have a search warrant into ur house. It is better to send it to Swiss Bank or ask people to have legitimate bussiness.

4. Do not change ur life habit

5. Provide a very good alibies, and stick with the alibies. Police can not do aything without a clear evidence.

6. etc..

Any man can learn and extend the list by wathich regularly the FBI files and True Crime Scene in discovery channel. (a police in Indonesia must also use the same method) More over, if you want to be a rob an empty house or car, you can just join the lock pocket society (here)/read the manual on the internet (here ) and buy the lock pick kit through internet. It is max US$30 for a standard kit (here , here )

By telling a first hand story on how FBI, any police agency, and Locks works, any people can beat the system and harm any other people. For sure the agency and the lock industry can always reserach for a better method to fight the crime or a better-and-uncraked key. But once the this new method implanted, thanks to the perfect information, any people can can spread the method to crack the new method. (I do not have any statistics on the proportions of crime solved (wrt total crime committed) in US before and after the FBI, true crime scene. If there is, we could do the empirical test)

Contradicted with the common knowledge, in these two situation, the higher the degree of perfect information, the higher the possibility of moral hazard. My point is perfect information is good. But there is always a people try to abuse this perfect information for their benefit in cost of other (yes..it is also called moral hazard). May be something is just meant to be imperfect

The Economics of Sexual Behaviour

by Berly

I was just thinking to write a piece about economics of happiness since my department going to organize summer school about it.

That is until I stumbled upon two interesting articles. The first article was published on Lancet, the Econometrica of medical journal, with Professor Kaye Wellings from London School of Hygiene and Tropical Medicine as principal author. The second one was presented by Todd Kendal at Stanford Law School’s Law and Economics seminar. You may wonder what those two articles got to do with Economics.

The first paper is aptly titled “Sexual behaviour in context: a global perspective.” (Now that’s a topic people can think global and act local). Welling et al found that the richer a country, then the later people married and the higher incidence for premarital sex with men enjoying (no pun intended) higher increase than women.

The rich country’s citizen experience larger age differences between men and women when they loose their virginity (in case you are wondering, it is 16,5 year and 17,5 year for UK and 24,5 year and 18,5 year for Indonesia). Lastly, the high income country saw more sexual partners for women than in low income countries (in Cameroon, Haiti, and Kenya, men on average have multiple partners while women tend only to have one).

The second paper studies relationship between pornography, rape and internet. Kendal used state level panel data in US from 1998-2003 to found a 10 percentage point increase in internet access is associated with a decline of 7.3%in reported rape victimization. Cross checking the data with arrest list, he found the decline is largest on young male but having no significant correlation with other crime types. One of the main arguments against porn is its addictive properties (like smoking) that push users for more and more stimulation that could lead to rape if continuously feed upon. The study refutes it.

So increasing education and investment for higher income are only a façade for glorified pervert world? When Todaro talked of development as increasing choice and Sen spoke of development of freedom, they may not realized that they are also advocating rich women to be able to choose between multiple sex partner and teenager boys using their freedom to substitute rape with internet porn.

But I can’t help but wondering how my undergrad development economics class would be much more interesting if these topics were covered. Development is indeed an elusive concept.

End of Summer Hiatus

by Administrator

Yes, we have been idle during this summer.

But isn’t the renowned philosopher Bertrand Russell said that “The wise use of leisure, it must be conceded, is a product of civilization and education…….Men who, in their professional work, have become interested in some phase of economics or government, will be able to develop their ideas without the academic detachment that makes the work of university economists often seem lacking in reality” in his 1932 essay entitled In Praise of Idleness.

Following his line of thought, proper idleness is just the product and influence of proper civilization. Even better, it also produce more realistic economist. And in the time like this, more of practical (not just a freak and an undercover) economists are just what the world need.

Blanchard (2004) in analyzing economic future of Europe noted that in this continent, more of the productivity rise is used to increase leisure time compare to America. If in term of total output per worker Europe is behind US but if the unit of measurement is change to output per hour per worker then the difference is negligible.

And aren’t we, as (half finish?) product of European education system, also supposed to absorb the institutional arrangement and social consensus of society around us in addition to optimization techniques and quantitative methods of mainstream economics?

Now we are more energize than ever and looking forward to serve you better economics and a-bit-related-to-economics articles. We also have new contributors just starting their study in Europe, so please check us out.

Summer is dead, long live summer!

duh!

klik, sepi
aku sunyi
tok tok...
someone is online

tak ada jawaban, aku mati
tik tik...
papan ketik diendus-endus oleh tikus
apa yang kau cari pus..?
dua tikus menari dibawah lampu
klap klap...

kenapa tak kau makan bukuku supaya pintar?
200, 300,1000 kata, masih jauh
duh!

8-9-06 (%) 6:43am

another...

I believe that the tears have not faded away yet. But, another disaster has knocked our door again.

A deep condolence and sympathize with my brothers and sisters in Pangandaran area for the losses due to the tsunami...

Which one should we sell? Culture or education?

by Berly

The Jakarta Post yesterday put out two interesting article that can be analyzed together.

The first is how finally Jakarta’s official start to get serious about cultural tourism and preserve the architectural heritage in Kota while at the same time makes it more convenient for tourist-wannabe to wander around. With train and Busway station nearby, it will reduce the need to drive through the legendary traffic jam of that area.

The second elaborated how the special admission route, in the past used to intended for smart students from remote areas of Indonesia, becoming more and more expensive. Want to study medical at Unpad? Just prepare Rp 150 million and you are can start cutting the corpses. But if fisheries are your pond (no punt intended) then Rp 7.5 million is sufficient. The ITB blue jacket with Ganesha symbol will set you back Rp 45 million. You still need to pass the special entrance exam though.

Let’s talk about the supply side. If the Kota area has been restored (a big if) then many people can enjoy the scenery and atmosphere at the same time without reducing other’s people enjoyment (hooligans and “ngamen”/begger aside). It will take a large number to reach overcrowding, but at special events/festivals (with ancient costume if possible) it is the crowd that draw more crowds.

But University seats are different. Assuming (as economist used to) the same number of lecturers, classes and faculty’s social facilities, then it will lead to decreasing rate of educational quality due to larger class less individual attention from lecturers.

There is also problem of noisy signal. Ever complain that what you study in (top) university did not really prepare you for work? Michel Spence has the answer and he got a Nobel Prize in Economics for it. it's not really matter what you study as long as mastering it signal your inner quality that will make you a productive worker once the company hired you. Graduating from top university used to be such signal in the past. There is possibility that companies (and society) will take a more careful look at Indonesian top universities alumni in the future.

The first case usually categorized as public goods and the second as private goods in economics. Restoring the architectural heritage increase enjoyment of people (local and tourists) but none of the individual building owners will take the step and finance it since they will get only very small part of the benefit. On the other side, the parents are willing to pay large amount since the expected benefit of university degree (I did not say education) will be felt mostly by their child.

Read more on tertiary educational financing in the analytical series by AP here, here and here. By the way, the article did not mention University of Indonesia. Anyone know what happened there?

IMF is watching you

by Berly

The Jakarta Post (TJP) published a letter from IMF yesterday (click here). It’s not a new Letter of Intent since Indonesia already out of “intensive care.”

The letter is supposed to be a rebuttal of Stiglitz interview (for transcript click here) published earlier in TJP. The letter was signed by Daniel Citrin, Deputy Director of Asia and Pacific Department, which is higher than country director (see organizational chart here) but not still not count as Senior Officials (see compete list here).

Before we deal with point by point rebuttal to IMF, let’s start by point out that the interview was published on June 5 instead of June 6 editions.

Their first rebuttal is pointing how the regional economy is booming. One of the most common logical fallacy is “post hoc ergo propter hoc.” For non Latin readers, it means assuming that if one event happens after another, then the first must be the cause of the second. So if East Asia countries are booming after being under IMF treatment, then the prosperity must be because of IMF. Too bad that if we include China and Malaysia (which did not gone through IMF and also booming now) the claim loose much of its strength.

Their second response is to claim the Fund's response to the crisis contributed to the region's rebound. IMF claimed (read here) that they resolve the crisis (yup, that is the title of the document) by “ensure that the funds will be used to resolve the borrower's balance of payments problems. They would also help to restore or attract access to financial support from other creditors and donors”.

What about the conditionality? Some of the performance criteria (read the complete list here) are “macroeconomic policy variables such as international reserves, monetary and credit aggregates, fiscal balances, or external borrowing.”

Their third, and the lamest, is to state that the IMF is a constantly evolving institution. “As part of this process of reform, the approach to crisis prevention and crisis resolution has changed over time, reflecting the lessons learned.” To read in plain English, “we f****ed up before but we would not do it again. Just trust us.”

And what actually Stiglitz said that prompt the honorable deputy director to react so swiftly? Let me quote at length two important questions and his reply:

“As a steadfast critic of the IMF, what would you suggest to the IMF to make its future policy advises work better?
The problem is that when a country goes into a downturn, it is told to cut back on expenditures and raise interest rates. Their policies are what we call pro-cyclical, that exacerbate the downturn. What I advocate is a counter-cyclical policy: When you lend money to a country, you tell them to keep interest rates low and to keep taxes low to stimulate the economy. So, you have a loan that would stimulate the economy so that the economy could grow.

But the IMF loans are to strengthen reserves, not to finance economic activities.
That's why their loans do not help the economy recover from a crisis, that's exactly the problem. Their finance focuses on financial stability than real stability. They have to focus more on real stability.”

Hmm… it sound very similar to first year macroeconomics course I had (and as I am studying at post-grad level, still recommended at most cases of depression as long as not causing high inflation). Lord Keynes proposed it more than fifty years ago and it is one of few policy prescription that has been followed closely by western countries. But it is exactly what the policy that IMF asked countries in crisis NOT to do by insisting to reduce government expanditure (which worsen impact to the poor) and increse interest rates (which fail to reduce capital flight and bring new investment in short run, when it is most needed).

As a former chairman of Economic Advisor to President Clinton that oversaw longest economic boom in American recent history and chief economist of World Bank (as well as OECD), Chairman Joe has his own experiences and opinions. Too bad he was never chief economist of IMF. Maybe IMF will be watching it's own member's economies and taking care of it more than being so busy watching its own reputation.

For more sharp analysis on IMF usefulness (and uselessness), read an excellent short piece by Paul Krugman here.

football capitalism

Saya tentu berharap judul tulisan ini akan mengundang banyak respon, artinya saya berhasil. Demam piala dunia ternyata bukan milik negara yang berhasil mengirim kontingen ke event dunia ini tetapi sudah sampai di pelosok belahan dunia termasuk negara berkembang.

Ada teman bilang: lalu apa masalahnya? saya bilang tidak ada karena tidak dosa orang suka bola; begitu juga jika ada yang menganggap demam piala dunia seperti angin lalu. Teman yang lain bilang: kalau piala dunia bisa menuntaskan kemiskinan, baru saya mau menonton. Nah lo? menarik juga ide teman saya ini, apa mungkin piala dunia bisa menuntaskan kemiskinan?
sementara kita pending dulu pertanyaan ini untuk bahan renungan saja. Kembali ke judul 'provokatif' diatas, sejauh mana kapitalisme berhasil menggiring bola dan juga dunia? seperti bisnis lainnya sepak bola adalah bisnis tentu saja sangat menjanjikan. liat saja gaji pemainnya dan siapa saja para investor dibelakang klub-lub ternama. ambil contoh chealsea yang dibiayai oleh milioner dari Rusia.

Ini baru sebagian kecil dari cerita besar global capitalism. jika kita mau memperhitungkan berapa uang yang terserap oleh demam piala dunia ini, dari mulai pernak pernik seperti kaos, souvenir dan barang-barang lainnya sesungguhnya timbul pertanyaan: dari event dunia seperti ini siapa yang paling di untungkan? tentu saja jawabannya pebisnis antara lain hotel, transportasi dan supporting sector lainnya yang ikut kecipratan. lalu dari pihak2 yang mendapat keuntungan dalam piala dunia, berapa %-kah komposisi mereka secara total dalam sistem ekonomi? semakin kecil komposisi mereka dalam economy sementara keuntungan yang diperoleh mewakili komposisi mayoritas, maka tidak salah jika saya mengklaim sepakbola sudah dikapitalisasi.

Gives Us Strength...

Upon the earthquake in our beloved province Yogyakarta, we feel so sad and send our deepest condolence for the unfortunate cause of death and injured. May God give us more strength to cope this sadden.

"This is my prayer to thee, my lord---strike,
strike at the root of penury in my heart
Give me the strength lightly to bear my joys and sorrows
Give me the strength to make my love fruitful in service
Give me the strength never to disown the poor,
or bend my knees before insolent might
Give me the strength to raise my mind high above daily trifles
And give me the strength to surrender my strength to thy will with love"

(Gitanjali by Rabindranath Tagore)

Euro music

Sorry for not economics at all this time. I cannot help myself not to share this great entertainment from Eurovision Song Contest 2006. You may find my detail posting related with this contest in here (with additional song lyrics in here). Just for now, let me do some “maksa” thing by relating Eurovision 2006 results with a bit of economics term. My main issues are about “product differentiation” and “consumer sovereignty” among European music audience.

As we all may know, a lot of song contest only prefers particular type of music which is mostly pop or ballads or sometimes rap or even hip hop (for Indonesia there are also KDI for dangdut music). Also, most of the performers are shape with glamorous, good-looking, fashionable style, and clear-nice voice. In economic term, we can say that a song contest would like to produce a well-defined package of merchandise that people will buy (vote). Therefore, this situation is – perhaps – violating the rule of ideal market mechanism.

Consumers (voter) have no other choice to buy because the variety of the product (song or music) was not diversified enough. Not mention that possibly there are potential consumers whose not vote because their preferences not available in the market (contest). Thus, if this choice of competition is still maintained then we can expect that there is no ‘growth’ in the society.

What we have seen in Eurovision 2006 is that another product has been offered by Finland. It was rock music. A rock band with ugly monster appearance called Lordi has been chosen to represent Finland in the competition with dominant pop or ballads song. Typical rock music style with fires on stage and loud music were performed by this band and they really rock monster! And surprisingly they gain most votes from 35 European countries audience. Even, many commentators said that this year Eurovision is the best ever, mainly because of this band uniquely-superb performance. (You may see their performance here)

IMHO, Eurovision (especially Finnish Eurovision committee) has gain very good point by giving a chance for rock music to compete in the contest. It is not only creating a good opportunity for other music genre but also offering people with more choices, which mean more audience and potential market. Simply by saying that product differentiation is still important in music market and need to be further expanded. Such a good spirit and approach on managing a big competition for a continent like Europe. Also, the consumers in this market (I mean the voter of Eurovision) show a significant sovereignty by responding very well on a new product offered.

To call for comments or opinions, I am wondering if in Indonesia there will be such a contest where all kind of music and performers may compete. It does include different island and culture in Indonesia’s diversity on folk’s music. Any of you have connection with TV broadcast? Maybe we can sell this idea…

Finally, keep the music play please...

Tell me, my migrant friends!

Tell me, my migrant friends, what did you expect from migration to the more developed countries such as the Netherlands, Belgium, Norway, and Italy? Why did you not just stay in Indonesia? Before you moved, what did you desire? What motivated you to come here? And when you are now living in these countries, is your expectation met already?

Those questions of mine were triggered by my actual experience as a mover. And I was not the first one who actually asked those questions. There are many studies focusing on migration decision process (motivations, expectations) and on migration consequences (rate of return to migration).

Migration decision is considered as an important decision, i.e. it has profound consequences on our lives, and usually driven by certain motivations. Our motivations were shaped by internal factors within individuals (characters, preferences), and external factors outside the individuals (the opinion of important others, our families, our budget, etc). In this writing, I am trying to identify the process of our migration, based on what I have learned (and please correct me if there are any improper lines or incorrect concept!).

1. Free decision
I think it is safe to assume that our decision to migrate abroad for studying is a 'free' decision (not forced). So, our migrations are not forced migration such as caused by natural disasters or war. (For basic concepts on forced migration, see Boyle et al 1998).

2. Bounded rational
Usually, when we studied in economics, we assume the decision-maker as a rational being. Now, let me introduce you to a concept called 'bounded rational'. Rationality in economic theory assumes full information. Bounded rational is a concept that defines rationality as bounded by limited information and how an individual perceive that information. The information is contextual, which is gathered from one's immediate environment (for further reference, see De Bruijn 1999).

Therefore, we do not assume 'unlimited' and homogeneity of choices. As an example, a person who lives in Madura might consider (bounded by one's contextual information) to move to Surabaya or to Banjarmasin. But he/she might never think to move to Biak at all! In microeconomic theory, we will approach the choice to move for this particular person either to Banjarmasin and Biak as homogen.

(Berly was informed about STUNED scholarship and thus created contextual information for him different from those who never heard such a scholarship).

3. International migration
Our migration is an 'international migration' because of its temporal and spatial dimensions. It is across the boundary of a country (from Indonesia to Italy or Norway), and for relatively permanent period of time. More than 6 months is usually the common period for a movement to be considered migration (see, for instance, the definition of migration from Indonesia CBS) instead of circulation or commuting.

4. Our motives!
What were our motives to migrate? De Jong and Fawcett (1982) identify the motives for migration as follows: wealth, status, comfort, stimulation, autonomy, affiliation, and morality in their Value-Expectancy model. A person weighs these motives to migrate with one's expectation of the outcome. For instance, a male farmer in Banten might has a motive for better wealth by moving to Jakarta, but if he thinks the chance to get better wealth is not high, he might decide not to move at all. A female worker might think that being close to her husband (affiliation) is more important than her income (wealth) that she considers to move with her husband and thus loosing her job.

Based on value-expectancy model, our stronger motives might be wealth and status. We want to get higher degree and usually we expect better income later on. For me, I also consider stimulation, i.e. having pleasurable activities as one of my motives. I like to travel, and I want to see big cities in Europe!

5. Our dreams come true?
This is something that is very interesting for me. Usually, we have certain expectations prior to the move. Now we already moved. Do we meet our expectations? How is our post migration situation? Probably, some of us get more respect when we had vacation in Indonesia (better status) because we are pursuing higher degree. We probably miss home a lot ('hunger' of affiliation).

Through time, our motivations might evolve, and we see things differently. We expected certain things, get some things, and loose some things. That is what happened to me. I expected what a person who pursued a higher degree expected: better status, better wealth, stimulation, among others. But I evolved to see things differently. My biggest gain from my migration is not what I ever expected before coming here to Groningen: I found the meaning of my life....and I think there is no theory on this motive of migration yet! And in this sense, I think I can say that my dreams have come true! How about you?

Reference:

• Boyle, P., K. Halfacree and V. Robinson (1998), Exploring contemporary migration, New York:
  Addison Wesley Longman Ltd.
• De Bruijn, Bart (1999), Foundations of demographic theory: Choice, process, context, Amsterdam: Thela Thesis Publishers.
• De Jong, Gordon F. and James T. Fawcett (1981), “Motivations for migration: An assessments and a Value-Expectancy research model, in Gordon F. De Jong and Robert W. Gardner, eds., Migration decision making: Multidisciplinary approaches to microlevel studies in developed and developing countries. New York: Pergamon press.
  

Productive people of the world, Unite!

by Berly

Worker and labour is the big things on May. After all May day just passed and all the fuss about Indonesian labour law still on the front-page.

And my history of economics class just has a session on Marx. The teacher is a ardent (albeit moderate) Marxist and currently writing a book with working title of “Marxism as Freedom.”

Don’t get me wrong, one of the reason (beside behavioural and institution approach) I applied to the PhD in Economics program at University of Siena is the left flavour in curricula and within faculty members, which is rare on mainstream program. I read the materialist interpretation of history and The Capital part I during my undergrad. I still feel that exploitation, imperfect mobility of labour and asymmetric bargaining power is under-addressed in current economic analysis.

But I have a problem with the Marxist rallying cry of “Worker of the world, Unite!”

In classic Marx analysis, there are two classes of people. There are capitalist who own capital/factory and there are worker who only has their labour to offer. I am not even going to talk about labour theory of value where different skill and effort of labour force is not acknowledged, just rambling about definition.

First, who are the labour & capitalist now?

We must admit that labour is such a wide ranging category now. An MBA from Harvard that work in Wall Street, PhD in economics that advise governments’ policy, surgeon on hospital, bankers in J.P Morgan/Citigroup, football star in Italian Serie A and IT engineer in Silicon Valley are all labour. Of course the sweatshop worker and farm labourer also in the category of not owning the mean of production. It’s safe to say even if they all equally labourer, some are more equal than other.

And the capitalist… there are still conglomerates like Salim group in Indonesia, Rupert Murdoch in media and McDonald/Coke in consumer product. But that definition also include owner of small tile factory, small shop/restaurant and artisans that could not be mistakenly taken as the previous groups.

Second. Are being a worker is certainly worse than being capitalist/factory owner?

Would you rather be Michael Jordan or Broto family in Losmen Sinetro? The first is a worker and the second are owner of mean of production. Just put people in those two category is no longer enough to explain (econspeak: degree of correlation) their welfare.

Third, how can someone become capitalist?

The classical Marx concept is sufficient to explain the society of Industrial revolution era where class membership is determined almost solely by birth. It is inevitable that those two come into conflict. But now the role of education (even if the richest person in the world is still a college drop-out) and market opportunity (J.K. Rowling is richer than Queen of England now) are big determinant of wealth. Welfare and social status is more merit-based today than it was two hundred years ago. (but I still prefer to be Michael Jordan).

So I prefer the unity of productive people for good cause (not a fan of rich heirs wasting their family's money). A rockstar teaming with software billionaire and Professor in Economics done more for Africa than all the class conflict and land seizure that could be done there. (btw, that is capitalist and worker working together).

Amartya Sen once asked “Equality of What?.” Do you want a world where everyone have equal wealth (but each person’s need maybe different), regardless of contribution (how to make people contribute according to full ability). Or do you prefera world where everyone start equally, no family and all brought up in a commune? Or do you would like to see a world where everyone has equal chance to success?

Call me a conservative but I like the arrangement of modern welfare state (especially in Europe). I find it a bit Rawlsian that basic need is within reach of everyone. Here they got health services where (almost) everyone is insured, education where quality and cost are not inversely related and rule of law. I’d say they put big stress on equality of process/opportunity and some application of equality of starting point (if you are very poor, state will provide income). You can be successful and rich, but that mean you pay more tax (worker and capitalist). Don't just take it from me, Jeffrey Sachs seem to think along similar line (to read click here).

Flaming rhetoric is still needed to shake people from completely accepting the world inequality. But it is the quiet and behind the screen policy that could make the real difference.

Pertamina, Shell dan... Telkom?

KORAN TEMPO - Metropolitan, Jum'at 05 Mei 2006

Some Quotations:
"Bersaing dengan Shell, Pertamina Banting Harga"

"Juru bicara Pertamina, Muhammad Harun, membenarkan adanya kebijakan banting harga itu. Menurut dia, kebijakan banting harga itu dilakukan untuk bersaing dengan kompetitor yang ada. Namun, kebijakan itu hanya untuk lima pompa bensin yang ada di Jakarta dan Tangerang. "Daerah lain tidak, hanya yang berdekatan dengan kompetitor," ujarnya".

"Dengan adanya kebijakan banting harga itu, kata dia, masyarakat akan diberi kebebasan memilih. "Yang penting masyarakat diuntungkan," katanya".

Telkom, kapan giliranmu?

Looking for an alternative for pollution..

is it still relevant one or may be all of these policy options to solve the problems of pollution? i said these are classical approach and i am looking for an alternative. can somebody help me? thanks for reading.. enjoy..

1. The plant requires to install a particular pollution-reducing technology

The policy largely depends on the use of technology to reduce pollution. It is assumed that by using particular pollution-reducing technology, pollution abatement is encouraging. It has advantage of fitting with interest of regulator and polluter because of its simplicity and short time perspective of many policy decisions. The solution provided is compromising as it allows economic growth to progress while pollution may be reduced. On the contrary, the initial investment for the new technology may be high hence it may affect the plant’ performance. As a result output’ price will increase then reduce the profit of the plant. Therefore only the big plant is likely to survive.

Applying standard technology provides less choice to explore the cheaper’ technology available hence no incentive for inventing a cleaner technology. The information regarding financial capability of the plant and the level of pollution technology are less visible therefore government needs to collect detail information on these matter. This will increase administrative cost.

The underlying assumption of this end-pipe policy, it assumes homogenous emission level so that by using standard technology it can achieve the certain level of pollution. In the case that the level of emission of the plant is higher than of the abatement technology can do, hence the policy is less optimal to control the level of total pollution.

2. The government sets a limit of allowable pollution

This type of policy is directly related to reduce quantity of emission produced in this case; the maximum pollutant can be released to the river. Compared to the use of standard technology, this policy is more efficient to achieve target. For polluters, the policy gives more room for maneuver to comply with the regulation either by reducing output or the choice of abatement method to meet the mandated goal. They can choose these options within their cost structure. In contrast with applying standard technology the marginal cost of reducing the output is much lower. It is possible for polluters to trade off between pollution units, which is impossible for technology type of policy.

On the other hand, in terms of cost to government, it is expensive to monitor how effective the plant achieves the target. In addition, the cost might occurred when the government has tacit collusion with the plant setting the allowable level which paid by the whole society. The assumption of perfect information again becomes less evident and government’ accountability is needed in this case. Lastly, the impact to the plant is the increase of output’ price however this increase is higher than of applying new technology policy.

3. Introduction of pollution tax per unit pollution produced

The pigovian tax is meant to reduce social cost (externality) occurred by dirty production. However in order to be effective, the tax should be high enough so that has an effect to polluter’ behavior. The lower tax produces less impact to behavior especially if the polluters hold much money, they prefer paying the tax and keep polluting. Whereas, the medium to small size of polluters can’t afford when the tax is set too high. The marginal cost of additional tax paid is higher than the profit they can make from production. Furthermore, the plant will shut down and the investors move the investment to the other country where the regulation is rather lax.

The advantage of this policy is providing source of revenue to the government. By this additional revenue, government can expand their ability to improve economic growth. Despite the huge money it gets from the tax, the government should be accountable to manage such fund or else inefficiency and wasting resources might take place. Unless the government would have achieved higher level of development, the whole society will suffer from the pollution. In brief, this policy may be preferable for its costless in nature but earn a lot of income for government.

Budaya Malas dan stabilitas dari kartel

Cerita dari seorang teman : Salah satu perbedaan cewek dan cowok :
"Kalo nemenin cewek belanja cape, soalnya untuk nyari satu barang, mereka akan compare harga dari berbagai toko yang ada. Waktu tiga jam lebih hanya untuk mencari satu item. Sedangkan kalo nemenin cowok belanja nak, soalnya mereka cenderung membeli ketika mereka suka barangnya dan harga nya masih dalam budget line. Untuk membeli satu item, hanya butuh waktu sekitar 20 menit. Alasannya cowok tidak mau keliling untuk bandingin harga adalah malas atau dalam terms yang lebih ilmiah, cost of searchingnya terlalu mahal"

Budaya malas dalam hal ini adalah perilaku konsumen yang cenderung tidak suka membandingkan harga dari satu produk dengan produk yang lainnya. Sedangkan budaya belanja (shoppers) adalah budaya yang suka membanding-bandingkan harga satu barang dari berbagai macam toko.


Stigler (JPE,1963) dan Stahl (IJIO 1989) menemukan bahwa keberadaan konsumen yang sangat suka untuk membandingkan harga (shoppers) akan menyebabkan firms cenderung untuk berkompetisi. Oleh sebab itu, perilaku kartel cenderung menghilang.

Dengan memakai argumentasi ini, kita harus menggiatkan masyarakat untuk rajin jalan-jalan dan compare price (being a shoppers) agar perilaku kartel menjadi berkurang...:D

Is democracy necessary condition for economic ?

Ap wrote an article defending democracy as the necessary condition to achieve economic growth at cafesalemba. Is this always the case?

It is true that institution does affect the economic performance. But which innstitution ? Is it always true for democracy? If this is always true, how could we explain the Singapore economy, certain periods of previous Soeharto era and present growing china economy,and many other examples? Obviously, these examples are not in democratic regime, but they have a remarkable economic performance.

Since there are several counterfactual example, this hyphotesis could fail the external stability test. There must be something that is more reliable variable that could explain the choice of institution and economic growth. I think, the relevant question are :

1. Does the government commit not to grab everything (by taxing) and give certainty in property right.
2. credibility of the commitment
   

Acemoglu (JEL 2003) said that the most important variable is commitment by the government. If there is full commitment, then the issue of institutional choice is not a matter(democracy or autoriter is not the issue/Political Coase Theorem applies and the ruler just choose policy that maximize the eonomic performance conditional on the charateristics of citizen).
Otherwise, if there is partial or no commitment, then the choice of intitutional become matters.

The only set-back in this paper is the credibility issue. If we take into account the credibility issue, then the main factors should be commitment level and credbility issue.

The Dreamer

market vs government role: TRIPS in LDC

rekaman pandangan mata dari sebuah diskusi virtual:
(translation is provided)

bayuni01: eh ci kone (eh katanya kamu) kirm pertanyaan ke kafedepok
bayuni01: sube cang jawabin (aku sudah jawab)
kadek_artha: pertanyaan ane ceeen? (pertanyaan yang mana)
bayuni01: sube... ketemu?? (udah.. ketemu?)
kadek_artha: suba2 (udah2?)
bayuni01: engkenn (gimana)
kadek_artha: hehe seberne ne pertanyannya riva
kadek_artha: dia ahlinya
kadek_artha: tpi ya cang agak ngerti bedik2 (aku ngerti dikit2)
kadek_artha: emang ada trade off
kadek_artha: antara incentive investment
kadek_artha: dan keadilan
kadek_artha: beneh sing? (betul ga?)
bayuni01: ngga harus
bayuni01: tergantung value si investor
kadek_artha: value investor kan jelas
kadek_artha: profit
bayuni01: kalo dia punya value bahwa the higest value not in the money
bayuni01: he is willing to invest to get the better health which is more valuable than money
bayuni01: but this is not the case anyway
bayuni01: :D
kadek_artha: menurut ci investor yg seperti itu siapa?
kadek_artha: menurut cang hanya pemerintah
kadek_artha: yg bisa lakukan itu
kadek_artha: oleh krn itu
kadek_artha: ada dua sumber investasi dr drug itu
bayuni01: maka itu kenapa pemerintah ga boleh keluar dari pasar
kadek_artha: hahahaha
bayuni01: kedek...:=)) (kok ngakak?)
kadek_artha: hahaha
kadek_artha: yen ada solusi pemerintah ne cang males (aku malas kalo pemerintah jadi bagian dari solusi)
kadek_artha: hahahaha
bayuni01: amen care ci engken.. (menurutmu bagaimana)
kadek_artha: tapi ada jalan lain yu
kadek_artha: misalnya dg lisensi
bayuni01: siapa yang dapat lisensi? siapa yang bayar?
kadek_artha: secara teori yu
bayuni01: ngga itu partially bener...
kadek_artha: nah main teori ni
bayuni01: cuma harus ada terusannya
kadek_artha: secara teori ramsey pricing
kadek_artha: sebenerne
kadek_artha: investor itu masih bisa diuntungkan
kadek_artha: krn
kadek_artha: sifat elastisitas demand dr obat
kadek_artha: di negara berkembang itu sgt elastis
kadek_artha: jdi
kadek_artha: harga obat di negara berkembang itu sendiri
kadek_artha: sebenerne jdi murah gitu
kadek_artha: artinya
kadek_artha: investor itu
kadek_artha: sebenerne
kadek_artha: masih bisa untung
kadek_artha: dg jual di negara maju
kadek_artha: yg relatif lebih inelastis sifat permintaanya
kadek_artha: dg dia menjual di dua pasar itu
kadek_artha: invetor sebenrnne sudah untung kok
kadek_artha: menurut kuuu
kadek_artha: tpi
kadek_artha: teori ini menjadi tdk relevan
kadek_artha: krn tdk bisa menangkap
kadek_artha: kejadian2 seperti di india
kadek_artha: yg mengcopy habis
kadek_artha: obat2 dr negara maju
kadek_artha: dan menjualnya dg harga sangat murah
kadek_artha: nah itulah
kadek_artha: maka TRIPS ditetapkan
kadek_artha: krn itu merusak pasar bgt
kadek_artha: dan lebih gawat lagi
kadek_artha: obat2 ituuuu
kadek_artha: oleh india
kadek_artha: di ekspor ke negara2 maju
kadek_artha: makin gawat lagi
kadek_artha: tdk fair kan jadinya
kadek_artha: ?
bayuni01: 1. obat yang elastis itu apa aja?
bayuni01: 2. kopi habis di india sudah dilakukan sebelumnya karena harganya sudah mahal, jadi ini reaksi yang wajar
bayuni01: 3. kalo ada trips maka yang mahal semakin mahal. pertanyaannya siapa yang untung?
kadek_artha: TRIPS juga reaksi yg wajar bukan?
bayuni01: 4. apakah fair kalo extract obat diambil dari NSB tanpa membayar apapun kemudian NSB harus membayar obat yanf dibuat dari tanaman yang tumbuh di wilayah mereka?? artinya NSB rugi 2 kali, perusahaan untuk 2 kali atau mungkin lebih
kadek_artha: hehehe
kadek_artha: begini yu
kadek_artha: tanaman diambil dr indonesia
kadek_artha: mislanya
kadek_artha: kalo gak ada pneliti
kadek_artha: dan ahli bidang obat yg tau kalo tanaman itu bisa jadi obat
kadek_artha: maka tanaman itu kan menjadi sekedar tanaman kan?
kadek_artha: yg mahal itu adalah membuat tanaman itu menjadi value
bayuni01: lalu siapa yang memberikan value mengenai indigenous knowledge? gampang dek, tahu subak (di bali) seandainya dia adalah cara yang efektif untuk irigasi lalu ada yang neliti kemudian menjadikannya resep untuk dipakai ke seluruh dunia, berapa value subak menurut mu? siapa yang kasih harga? apa dia tercermin ke harga pasar?
kadek_artha: oooh kalo subak itu beda
kadek_artha: iya juga sih
kadek_artha: tpi itu harus dipastikan dulu yu
kadek_artha: kalo misalnya itu hanya tanaman
kadek_artha: yg datangnya dan hidup dr Tuhan
kadek_artha: diteliti ama org luar
kadek_artha: nah itu tdk bisa dicerminkan dlm harga pasar
kadek_artha: kalo misalnya
kadek_artha: subak
kadek_artha: itu adalah sistem yg sudah dibangun
kadek_artha: maka aku setuju dengan kamu
bayuni01: sekarang berapa transaction costnya kalo mau informasi yang bener2 lengkap?
bayuni01: kalo perfect information, trips ga ada masalah. tapi information is unequal so..
bayuni01: nah sekarang sistem yang sdah dibangun, emang menurut mu orang yang menciptakan tidak mikir2? trus kenapa mereka ga diperlakukan seperti investor yang minta trips?
kadek_artha: merekanya gak minta
kadek_artha: hehehe
bayuni01: trus ga minta mereka ga berhak??
kadek_artha: begini yu
kadek_artha: kalo kita biacara adil kadang2 susah
kadek_artha: misalnya
bayuni01: trus kalo minta, jadi boleh?
kadek_artha: kalo org yg menemukan sistem subak itu
kadek_artha: sudah cukup bagi dia
kadek_artha: maksud ku
kadek_artha: ga masalah
kadek_artha: dia hanya mendapatkan apa yg dia dptkan
bayuni01: hahahaha
kadek_artha: trus kenapa harus dikasih
bayuni01: berarti pengusaha masalah kalo dia ga dapat trips
bayuni01: serakah dong...
kadek_artha: loh bukan serakah
kadek_artha: krn mereka rugi
kadek_artha: mereka perlu invest
kadek_artha: yg ngeluarin duit
kadek_artha: kalo subak
kadek_artha: kita gak tau siapa yg menemukannnya
kadek_artha: harusnya mereka berhak siiih
kadek_artha: tpi gini deh
kadek_artha: kembali lagi
bayuni01: trus subak ga pake uang, jadi ga berhak
kadek_artha: hahaha
kadek_artha: begini deh
bayuni01: trus kalo ga tau yang nemukan, kita pasrah
kadek_artha: bukaaan
kadek_artha: yg menemukannya juga diem kok
kadek_artha: hahaha
kadek_artha: begini aja yu
kadek_artha: maslah pricing
kadek_artha: memang cang sepakat ajak ci
kadek_artha: kalau memang tanaman misalnya diambil dr indo
kadek_artha: dan itu sudah ada yg menemukan bahwa tanaan itu obat
kadek_artha: maka perlu ada negosiasi diana
bayuni01: nah kalo diem kenapa ga dibuat supaya mereka klaim?
bayuni01: informasi dek..
bayuni01: siapa yang pegang informasi..
kadek_artha: trus bukan berarti
bayuni01: local punya informasi, investor juga datang untuk cari informasi? tapi informasi yang didapat kadang tidak di trade secara fair
kadek_artha: value dari informasi itu menjamin bahwa kalkulasi harga menjadi lebih murah kan
kadek_artha: di negara berkembang
kadek_artha: apakah value dr informasi itu tak terhingga?
kadek_artha: melebih cost dari org melakukan investasi?
kadek_artha: cost dr informasi itu juga perlu diperhitungkan cang sepakat
kadek_artha: trus bagaimana menilai value dr informasi itu
kadek_artha: kalo misalnya
kadek_artha: ada org indo
kadek_artha: ngasih tau
kadek_artha: 'eh disini ada tanaman bisa dijadiin obat tradisional
kadek_artha: misalnya
kadek_artha: nah berapa value dr informasi itu
kadek_artha: ?
kadek_artha: kalo misalnya yg memberi info itu diberikan uang 1 miliar
kadek_artha: tpi cost untuk membuat tanaman itu benar2 menjadi obat 3 miliar
kadek_artha: tetep aja kan
kadek_artha: ?
bayuni01: masalahnya apa bener informasi itu (atau lebih luas dibilang indigenous knowledge), di hargai segitu? masalahnya apakah info itu benar2 perfectly distributed? kalo iya, berarti informasi = price, tapi apa iya? kalo iya, aku setuju proposalmu.
bayuni01: prakteknya pertukaran informasi dilakukan pada situasi tidak seimbang, investor lebih tau suatu tanaman lebih bernilai dibanding tanaman lain. lalu orang lokal, apa punya info soal itu?
kadek_artha: nah
kadek_artha: krn org lokal gak tau
kadek_artha: artiya
kadek_artha: gak ada value informasi kan?
kadek_artha: yg harus dibayar oleh investor
kadek_artha: ?
kadek_artha: mungkin cang salah tangkep
kadek_artha: jdi sori
kadek_artha: hehehe
bayuni01: poinnya gini dek
bayuni01: kalo market itu bekerja sempurna syaratnya perfect information kan?
kadek_artha: iya
bayuni01: dalam hal ini informasi itu tidak dimiliki oleh pihak2 yang berkepentingan secara tidak merata. satu punya lebih banyak, satu punya sedikit bahkan tidak punya sama sekali. nah, disini sumber dari unfair trade. bagaimana kamu bilang fair ketika mereka menjual obat secara mahal, padahal mereka mendapatkan bahan2 atau informasi dengan cara murah?
kadek_artha: nah itu kembali lagi yu
kadek_artha: bagaimana kita mem value informasi itu
kadek_artha: kadang2
kadek_artha: loe bener
kadek_artha: informasi itu imperfect
kadek_artha: imperfectnya
kadek_artha: adalah
kadek_artha: seperti yg loe bilang tdi
kadek_artha: orang2 lokal
kadek_artha: tidak tau bahwa tanaman itu memeiliki value
kadek_artha: sedangkan org pintar dr luar tau
kadek_artha: nah
kadek_artha: siapa yg loe beri value lebih besar
kadek_artha: orn indo yg punya tanaman dan gak tau informasi itu berguna
kadek_artha: atau org luar yg gak punya tanaman
kadek_artha: tpi dia tau bahwa tanaman itu berguna
bayuni01: semuanya harus di value supaya fair. masalahnya kita undervalue dengan lcal knowledge
bayuni01: investasi harus di value, indigenous value juga harus di value
kadek_artha: iya kalo itu cang sepakat
kadek_artha: caranya gampang aja deh
kadek_artha: org dr luar pergi ke indo
kadek_artha: lihat ada tanaman
kadek_artha: nah org luar bilang
kadek_artha: eh
kadek_artha: ini tanaman bisa dijadiin obat
kadek_artha: bisa nyembuhin sepilis
kadek_artha: hehehe
kadek_artha: trus orang luar itu gak melakukan apa2
kadek_artha: kita bisa menilai kan berapa value nya?
kadek_artha: sekarang
kadek_artha: andai org luar itu melakukan research
kadek_artha: tanaman itu dibawanya ke pabrik
kadek_artha: ke labortorium
kadek_artha: di teliti
kadek_artha: kemudian dibuat jadi obat
kadek_artha: dengan kemasan bagus
kadek_artha: nah kita bisa menilai juga kan berapa value nya?
kadek_artha: menurut ci
kadek_artha: mana yg lebih besar?
kadek_artha: menurut cang
kadek_artha: cost dr investment
kadek_artha: research
kadek_artha: itu jauuuh lebih besar
kadek_artha: sehingga mau gak mau
kadek_artha: biar pengusah itu tetap untung
kadek_artha: harga menjadi tetap mahal
kadek_artha: solusi yg paling adil adalah
kadek_artha: negara2 seperti cina
kadek_artha: ato india
kadek_artha: kalo bisa research
kadek_artha: lakukan lah
kadek_artha: jgn mengcopy
kadek_artha: kalo bicara keadilan harus melihat dr semua pihak yg terlibat
kadek_artha: tdk hanya investor
kadek_artha: tpi juga org lokal
bayuni01: semua pihak yang terlibat, pertanyaannya mana yang lebih banyak secara jumlah? komposisi masing2 pihak secara total?
kadek_artha: oh kita gak bicara jumlah
kadek_artha: tpi kita biacara value
bayuni01: adil itu lebih baik dinikmati lebih banyak orang, atau dinikmati oleh yang sedikit?
bayuni01: dengan value yang sama jumlah yang diterima beda dek kalo jumlahnya beda, satu akan lebih sangat besar, satu lebih kecil
kadek_artha: gini2 yu
kadek_artha: yen ci kuliah (kalau kamu kuliah)
kadek_artha: ada anak ane belog (ada yang bodo)
kadek_artha: ade anak ane dueg (ada yang pinter)
kadek_artha: misalkan
kadek_artha: anak ane belog jumlahnya lebih banyak
kadek_artha: apakah kita harus memberikan nilai lebih besar
kadek_artha: bagi orang yg belog dan jumlahnya byk
kadek_artha: dibandingkan anak dueg
kadek_artha: menurut ku
kadek_artha: yg adil adalah
kadek_artha: kalo nilai yg belog itu 5
kadek_artha: maka berikan dia 5
kadek_artha: berapa pun jumlahnya
kadek_artha: yen nak dueg maan 8
kadek_artha: berikan dia 8
kadek_artha: walopun dia cuman satu org
bayuni01: berarti orang miskin ga bisa beli obat dibiarkan mati????
kadek_artha: untuk menjawab pertanyaan ci
kadek_artha: sebenrnya cukup menggugah kaum pasar seperti cang
kadek_artha: hahahahaha
kadek_artha: disinilah pemerintah berperan
bayuni01: nah jadi proposal ku bagaimana dek????
kadek_artha: pemerintah berperan bukan berarti TRIPS gak ada kan?
kadek_artha: TRIPS untuk investor
kadek_artha: pemerintah untuk org miskin
kadek_artha: udah
kadek_artha: adil dah
kadek_artha: pemrintah beri subsidi
kadek_artha: untuk pengusaha lokal punya lesensi
kadek_artha: sehingga harganya murah
kadek_artha: tpi tetep saja cang percaya
kadek_artha: intervensi pemerintah itu belum cukup
kadek_artha: tetep aja harus ada inovasi dr pengusaha lokal
bayuni01: itu yang aku bilang tambahan jawaban yang aku bilang diatas
kadek_artha: ah masa sih?
bayuni01: Kadek Sutrisna: misalnya dg lisensi
bayuni01: siapa yang dapat lisensi? siapa yang bayar?
Kadek Sutrisna: secara teori yu
bayuni01: ngga itu partially bener...
Kadek Sutrisna: nah main teori ni
bayuni01: cuma harus ada terusannya
kadek_artha: ooooh
kadek_artha: iya2


di akhir diskusi: kami bersalaman dari jauh..... (amsterdam-denhaag cuma seketik dua ketik aja ternyata hehehe)