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.