kaFE depok on top 100 Indonesia's english blog

Some blogwalking lead admin to Indonesia Matters that came up with top 100 blog composite index from various indicators.

Surprise came when kaFE depok is listed today at rank 30 on the top 100 Indonesia's english blog. After all we are still so young, dealing with specific subject (albeit with all the quasi extensions) and could be more active. There are certainly a lot more worthy blog to rank higher than us.

The honor surely motivate us to climb higher (in term of quality and quantity) and dig deeper into more queries on the multi facet of the economic life. Thanks for all the readers, your visits and comments are always appreciated.

The Ballad of John and Joko

John and Joko live far away from each other, so they use postal services to communicate with each other.

Joko have another friend name Jamal that live closer to him but also communicate by letter. Lately there have been instances where Joko’s package could not deliver to Jamal due to oversize packaging.

John is worry whether the next package to him would be oversize too, so he asks Joko to stop sending him momentarily until there is a checking system (ex: always measures the size before delivery) that ensure size compliance.

Instead of asking another person known and trusted by both John and Joko to verified whether a good checking and compliance system is in place, Joko is furious and threaten to no longer accept package from John until he can send one.

Joko could end up sending none and receiving none.

Fictitious? Silly? Just change Joko to Indonesia, John to EU, package to international flight and size to safety. And you get this story (click here).

In March I already wrote on what to be done (click here). Apparently some people go back and forth without delivering much (click here)

Some questions and answers on collusion

Q : Do cross-ownership always trigger collusive behavior ?

A : No.. Not Always. Some articles shows that cross ownership indeed could trigger collusion especially in static setting (Reynold and Snapp (1986) , Farrel and Shapiro (1990)). Yet in dynamics setting, Malueg (2002) found that cross ownership could lead into non-collusive behavior due to the inability of the firms to punish any defection behavior of the firms. (Malueg, 2002).
While that, Gilo, Moshe and Spiegel (2006), using also dynamics setting, found that the collusive outcome could be found in cross ownership under certain parameter vector.

It means that theoritically, there is no conclusive results on relationship between cross ownership and collusive behavior.

Q: If we can not use theory, what are the proofs of collusive behavior in cross ownership?

A : There are two possible forms of collusion. The first one is explicit collusion and another one is the implicit collusion. The main difference between these two collusive forms is the communication strategy and side payment. In explicit collusion, there is usually any forms of communication between the cartel members. Furthermore, they also have side payment as a forms of punishment from collusive agreement. While that, in implicit collusion, they do not have any of these two main forms on interaction.
Forms of collusive behavior determine the ability of Antitrust Authority (AA) to detect collusion. Most of the revealed collusion are the explicit collusion (vitamin collusion,lysine, etc). AA used any proofs of communication such as : meeting notes etc , as the evidence of the collusion. However, in implicit collusion, these can not be used since there is no proof of communication .

Q : Thus, in implicit collusion, is there powerful tools that can be used as signal of collusion, may be price cost margin, variation of price, comovement in prices, etc ?

A : We could discuss each of possible variables :
1. Price cost margin.
Traditionally, this variable is used as the signal of collusion. Yet it is also has a major set back. Collusion certainly means high price cost margin (PCM). But not all high PCM can be get from collusion. PCM is just an evidence of maket power (not more nor less). High PCM could also be the results of eficiency in cost structure. Konings,Cayseele,Wayzynski (2005) empirically found that high price cost margin in eastern europe after privatisation could be lead by cost efficieny ( due to competitive pressure).


2. variation in price.
Traditionally, we assume that low variation in price could be a signal of collusion. Yet, this view is refuted using the found of green and porter. Green and Porter (1984), and research on Joint Executive Commitee (198?), the variation in price could also be higher in collusion.

The intuition of these result is quite clear. If we used a trigger startegy ala Friedman (1972) or stick-and-carrot ala Abreu (1985-1986), price variation is low in collusive phase. But the price variation will high during punishment phase ( it is proven in price fluctuation at Joint Executives Committe). If we combine these two phase (collusion + punishment), the price variation could be higher rather than that of in competitive era.

Moreover, Rotemberg and Saloner (1986) also found that price ( thus its variation) is also depends on the demand fluctuation. If demand is low, the variation price could be low, yet if demand is high , thus there will be a price war, the variation of price can be high. If we combine these two condition, again we get that variation prices could also be higher in collusion. Hence, it means, using low variation of price could not be just used as the signal of collusion.


These two examples tells us that there is no a general variables that can be used as the clear signal of collusive agreement

Q : If that is the case, do we have a consistent method to detect collusive act?

A : As far I am concern, there is no a general method (which is at least consistent) that can be used to detect all implicit collusion. Bajari and Ye ( 2003), Porter and Zona (1993), Banerji and Meenakshi ( 2004), Bos and Schinkel (2007) have developed some methods to theoritically and empirically detect implicit collusion. However, each method has its own set back (may be good to detect certain form of collusion but not that good to detect another forms of collusion, or the availability of data)


N.B : Congratulation for KPPU. Thank you for the effort.Despite all controversies, this decision on Tamasek , could be a bad signal to all the cartel in Indonesia. Now, they should know that we have a good AA.

Why Jakarta Keep on Flooding at Rainy Season?

It has not been raining for a while, but when it does rain for a couple of hour in Jakarta you can be sure that the street will to flood in many places.

Why can’t the government of Jakarta clean the sewer from garbage and mud before the rainy season, which comes rather predictably, so the water can flow smoothly?

Water on the street weakened the asphalt and after a repeated exposure demands a rehabilitation and outpouring of new layer of asphalt and rocks. Thus, more money from public budget need to be allocated to fix it.

Spending smaller amount of money on prevention of flood seems to be the logical action, right?

The Politics of Budgeting by Prof Rubin is a book that tries to shed light into the budgeting process in America. One insight that he offer is how the budget is a process.

If the item is a carry over from last year with approximately the same amount, then it is likely to get through easily since questioning it meaning questioning the virtue of last year appropriation and few people (especially politician) want to second guess themselves.

If one department does not finish the allocated budget and leave significant sum at the end of the year, then most likely that for the next budgeting year the department will receive less since the legislative will assume that the department can work properly with the smaller budget.

Having a larger budget meaning the head of the department have larger power and discretion (I will not discuss about corruption). The turf war is a never ending fight.

This could explain why there are many program are allocated at the end of the year (I will not discuss the probable interest gain by deferring disbursement).

Does the similar thing happen in Jakarta?

Having broken roads could mean particular department(s) in Pemda DKI will need budget allocation to fix it. Cleaning the sewer before the rainy season mean there will be less broken road. Thus, leave significant sum in the end of budget year which could resulted in less budget next year. What is good for the people of Jakarta may not be what’s best for some people.

But Napoleon once said, "Never ascribe to malice that which is adequately explained by incompetence."

Two Quotes from Wise Economists

“Economist do not know very much about the economy, other people, including the politicians who make economic policy, know even less.”

(Herbert Stein – Professor at U of Virginia and Chair of US Council of Economic Advisors to President 1969-74)

“Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most vehemently.”

(Alan Blinder – Professor at Princeton and Vice Chairman of the Fed 1994-1996)

The first teach us humility, the second warn us on the danger in the lack of it.

Economics of Wedding Reception

After Iedul Fitri come piles of wedding in Jakarta. The next one just more extravagant than the others. Why do we spend so much on the one night celebration?

Is it a signaling gesture? It could be a way to tell the guests that the newlywed has good breed (parents able to finance the lavish wedding) and good connection (politician and business mogul as guest) thus credibly sending signal to current boss and potential employee to open the career path for them.

Is it a sunk cost tactic? The higher the cost of the wedding then the more reluctant the couple (and the family) to end up in divorce since all the cost involved (and photos and other memorabilia) will loose most of its value. Is there a correlation between wedding cost and duration of marriage? I admit this approach must take into account the relative value of wedding cost to (parental) wealth instead of absolute value of wedding cost.

Or is it an investment move? The more extravagant the marriage (the venue is usually a good indicator) it the more it invite the guests to put additional money in the envelope.

What do you think?

A Tribute to David F. Hendry

One of The Great Econometricians

by Dhaniel Ilyas

Sudah cukup lama, saya absen menulis di blog ini karena kesibukan dan ‘mood’ yang tidak kunjung datang. Ini adalah tulisan kedua saya pada blog Kafe Depok ini. Mungkin saja tulisan berikutnya akan berjeda selama tulisan pertama dan kedua ini (enam bulan lebih) ^_^ Mudah-mudahan tulisan yang sederhana ini dapat berkenan di hati para pembacanya. Seperti biasa topik tulisan saya terkait dengan ekonometrika. Kali ini saya ingin mengangkat tulisan mengenai David F. Hendry. Seorang Ahli Ekonometri terkenal yang mempunyai sumbangsih besar dalam perkembangan Ilmu Ekonometri.

Tulisan ini saya mulai dengan kutipan akan kata-kata Joseph A. Schumpeter, seorang ekonom besar sejaman Keynes yang ’kalah pamor’, namun tidak diragukan lagi memiliki kontribusi yang luar biasa.

”The only way to a position in which our science might give positive advice on a large scale to politicians and business men, leads through quantitative work. For as long as we are unable to put our arguments into figures, the voice of our sciences, although occasionally it may help to dispel gross errors, will never be heard by practical men. They are, by instinct, econometricians all of them, in their distrust of anything amenable to exact proof.” (Joseph A. Schumpeter, ‘The Common Sense of Econometrics’, Econometrica, 1 (1933), p.12.)

Disini terlihat salah satu cita-cita awal dari pengembangan ilmu ekonometri. Tapi pada perkembangan selanjutnya terdapat ‘kesulitan-kesulitan’ untuk membentuk ‘exact proof’ ini. Para ahli ekonometri terus menerus mencari teknik-teknik ataupun metode-metode yang dapat semakin menyempurnakan ilmu yang mereka geluti.

Pada ‘Introduction’ dalam bukunya yang berjudul “Dynamic Economics”. Hendry (1987) menawarkan empat ‘golden prescriptions’ dalam ilmu ekonometri sebagai usahanya untuk memberikan ‘arahan’ kepada para praktisi-praktisi yang menggunakan ekonometri dalam menghadapi permasalahan-permasalahan dalam pencarian model yang ‘baik’ tersebut:

1. Think Brilliantly: if you think of the right answer before modeling, then the empirical results will be optimal and, of course, confirm your brilliance. Many conventional textbooks simply assume that the model is correct – we will not do so…, although the methods proposed deliver the right results if this case happens to apply.
2. Be infinitely creative: if you do not think of the correct model before commencing, the next best is to think of it as you proceed. While no valid constructive method can be proposed, data evidence can help guide model development in a systematic manner.
3. Be outstanding lucky: if you do not think of the ‘true model’ before starting nor discover it en route, then luckily stumbling over it before completing the study is the final sufficient condition. This may be the most practical of these suggestions. Failing this last prescription:
4. Stick to doing theory!

(Catatan: Preskripsi ini tidak diterjemahkan ke dalam Bahasa Indonesia untuk memperoleh pemahaman yang lebih optimal dari pemikirannya)

Kurang lebih Hendry mengatakan kepada para ekonom-ekonom yang menggunakan ekonometri untuk berusaha brilian dan kreatif. Ini adalah hal yang saya rasa diperlukan untuk membentuk apapun agar menjadi ‘baik’ dan ‘optimal’. Namun preskripsi yang ketiga cukup mengejutkan saya: Anda harus termasuk orang-orang yang mempunyai peruntungan yang tinggi! Lalu, jika semuanya tidak berhasil, jangan keluar dari teori! Jika teori (ekonometri) yang ada pun tak mampu menghasilkan model yang memuaskan, bagaimana?

Apakah seorang ekonometrisian yang handal harus memiliki peruntungan yang tinggi? Bagaimana jika kita adalah seseorang yang lebih mendekati kepada peruntungannya ‘Donald Bebek dibanding rivalnya si ‘Untung’? ^_^

Ternyata Hendry tidak berhenti sampai disitu… Kurang lebih hampir satu dekade setelah itu dia mengatakan:

“These sufficient conditions are tantamount to the assumption of omniscience of the modeler and we cannot rely on their sustaining a viable methodology. Fortunately, these prescriptions are not necessary… That no realistic sufficient conditions can be established which ensure the discovery of a ‘good’ empirical model, nor are any required for empirical econometrics to progress. However, there are a number of necessary conditions which can rule out many poor models, allowing us to focus on the best remaining candidates.” (Dynamic Econometrics, 1995)

Kita perlu hati-hati dalam menginterpretasikan dan membahasakan ‘exact proof’ yang dicita-citakan Schumpeter di awal perkembangan ilmu ekonometri. Kita memerlukan para ekonom yang mempunyai ‘seni tinggi’ dalam mempresentasikan ‘pendapat-pendapat’-nya yang didasarkan oleh ‘bukti-bukti empiris’ sebagai ‘the best remaining candidates’ yang ada.

Tulisan yang luar biasa menurut saya dari seorang ahli ekonometri besar. Saya amat menghormati ilmuwan-ilmuwan yang terus menjaga ‘kegelisahan’-nya akan ‘pencarian kebenaran’, bukan alih-alih terus mempertahankan ‘kepercayaan-kepercayaannya’. Salah satu contoh klasik adalah Gunnar Myrdal, yang meragukan pemikiran-pemikiran awalnya di masa-masa akhir kehidupannya. Juga Alfred Marshall dalam surat-suratnya. (Hubungi saya jika tertarik mengetahui hal ini.) Seringkali para ekonom hanya membetik satu pemikiran pada satu fase kehidupan para pemikir besar ini untuk mendukung pendapat mereka tanpa berusaha memahami kompleksitas dari proses pemikiran mereka. Saya selalu berusaha memahami para pemikir-pemikir tersebut terkait dengan konteks kerumitannya sesuai dengan ‘proses’ yang mereka jalani dan berusaha menggunakan semua ‘cahaya-cahaya pemikiran’ mereka untuk menyelesaikan ‘permasalahan riil’ yang ada, bukan menjadi pengikut-pengikut salah satu dari mereka dengan ‘buta’.

Mereka adalah orang-orang yang rendah hati akan ‘cahaya kebenaran’

Catatan: Tulisan sederhana ini dibuat penulis akan penghormatannya kepada David F. Henry. Seorang ahli ekonometri besar yang terus menjaga ’kegelisahan’-nya. Sang ekonometrisian yang terus ’mencari’ tanpa henti dalam mengarungi lautan ilmu ekonometri. Sebagian besar isi tulisan ini didasarkan akan bukunya yang berjudul ”Dynamic Econometrics”.

Why Buses in Jakarta Are So Unreliable?

Any of you even sat on a public bus (excluding Busway) in Jakarta would be familiar with the story.

The buses would stop and go slow when we want them to go quicker. They would put too much passenger in side. There is no telling when they will come even though, when you go to the bus terminal at the end of line there are a lot of them (ngetem). Some of the air con are not working properly.

Why can we have a decent and working bus like in our neighboring countries such as Malaysia and Singapore (Manila’s Jeepney is almost as bad as Jakarta) ?

The public and paying customer, supposedly, want comfortable and safe ride to destination. The bus drivers want money. There is nothing wrong with economic motive but where is the invisible hand?

But in Jakarta (I don’t know enough about other city in Indonesia) each bus driver collect money directly from passenger. So their objective function (to use economic jargon) is to maximize revenue with gasoline and (possible) police punishment as constraint.

They would not stop in the middle of the main street for 1 hour, except engine trouble, since doing so would attract costly fine from the police. But if waiting additional 10 minutes on the street side can enhance their passenger/revenue then wait they will.

But police and punishment can only go so far against economic incentive. What we need to do is change the incentive.

Let all bus become Busway. Not that all need special lane, but to pay a bus driver by a fix reasonable wages regardless of the number of passenger they carry. Don’t let passenger pay to drivers (put extra payment compare to buy ticket beforehand should reduce the practice sharply), they need to buy the ticket before get on the bus.

Thus, there is no incentive for the drivers to pack so many people inside the bus and to move incessantly slow. Incentive work at the margin

It doesn’t have to be have to be state owned company, just as long as the bus company care about their reputation and know holding it up will increase their revenue. We need to open the license for new bus company and we also need to get rid of part-time-and-occasional driver (supir tembak) since they care little about reputation (is a series of one shot game for them).

Then we can fix schedule and give bonus to drivers if the bus on time and penalty for being late (at least for departure time at endpoint). Let Jakarta have a decent public busses that we deserved and has been waiting for so long.

It doesn’t have to be like this forever.

So You Don’t Want To Regain the Lost Weight

So you lost some weight during the Ramadhan month and you afraid that the multiple Eid feasts on family and friend’s houses will (or already) bring back some added inches on your waist (and other places)

And there will be some halal bihalal meeting with family, friends and business partners. Such horrors.

What can you do about it? And what a marketing professor from Cornell can tell you?

Brian Wansink focuses his academic life to study how we decide and – and how much – to eat. Its not as silly as it first sound, food and beverages is a multi billion dollar business worldwide. Any cues that can make consumers eat more, and spend more money, mean some additional fat in the company's bottom line (pun intended).

In his book entitled Mindless Eating , some of his wisdoms at the table are to use small spoon, small plate, and don’t let other people clean the remains or refill your plate/glass while you are still at the table.

Those things should not make a different. After all it is the amount of food we put into our mouth that matter. And we as rational human with will power and self control should be able to know when enough is enough. Right?

Apparently not.

In his experimental studies, Wansink found that average subjects eat 15 % more using big spoon and 25 % with big plate. Having the bones of chicken wings cleaned up by waiters while watching a sport match at a bar on average resulted in you eating 28 % more.

The classical rationality argument that using small spoon and small plate resulted in more energy thus making you want to eat more seems not to be working here. It seem that human mind affect by relative as well as the absolute. The more we see empty space (a.k.a plate) the more we want to fill it up, with little regard on actual quantity, while taking every spoon as equal. This mispredictions are robustly repeated an not a one time aberration.

While you are at it. Loose the flower on the table and put food on the table with fewer colors since Wansink found doing the opposite strongly correlate with higher food intake. Apparently having color and smell around at meal time distract human mind and trick us to eat more.

People said we are what we eat. Maybe it’s better to say that we are what we decide to eat with.

Old Challenges for New IMF Chief

by Berly

One of the old challenges Mr Strauss-Kahn should immediately addresses, ironically, is the mechanism how he received his post. An unwritten rule establishes that the IMF's managing director must be European and that the president of the World Bank must be from the United States. The practice is increasingly questioned since IMF policy affect developing countries significantly more. A developed country in financial crisis can afford not to take IMF advice and loan since their access to financial market are not drying up. IMF usually become the main, sometime the only, source of fund for developing country in crisis and exerted enormous influence.

The voting weight of each IMF members are determined by the amount of money a country provides to the fund relative to the size of its role in the international trading system, but the relative size reflected each economic prowess more for the time IMF was founded than today. Europe is over represented and US practically held a veto with its 17 % vote since major decision require 85 % support. In 2001, China was prevented from increasing its quota to reflect rising share of its economy ensuring it remained at the level of the smallest G7 economy. Under leadership of Rodrigo de Rato, China contribution has been allowed to be increased slightly further.

The second old challenge is the role of IMF. The Great Depression were characterized by bank run caused by panic investors and IMF was supposed to act as lender of the last resort to prevent systemic meltdown at international level. Recent studies (Banerjee, 1992; Lux, 1995) in behavioral finance has shown that herd behavior to sell investment at the first hint of trouble is a self fulfilling prophecy that precipice the crisis it fear.

Each member country entitled to withdraw a percentage of its quota immediately in case of payment problems meaning developing country has quick access to less fund just where the need is greatest. When a member country in need of financial infusion, IMF should act like a central bank in similar situation. Lend freely with penalty, slightly higher interest rate than usual, for a temporary period.

IMF tends to overestimate the ability of high interest rate to attract investment after crisis despite the empirical evidence otherwise (Sach, 2005). The structural adjustment program and fiscal austerity to repay the loan, normally in full value despite principle of share responsibility, typically disproportionably affect the poor population and caused political instability which heighten and prolonged the crisis IMF supposed to ease in the first place.

Evading the policy strait jacket of IMF lead developing countries to accumulate huge amount of reserve, mainly in form of US Treasury bill, to defend their currency in the face of speculative attract. Southeast Asian nations have been developing a regional cooperative to share foreign exchange reserves in the event of a crisis. But developing countries received low return from T-Bill and the opportunity costs are calculated to be 300 billion dollar per year (Stiglitz, 2006). The amount is more than four times the total foreign assistance in the world and could have been used to reduce poverty and increase education/ health expenditure if IMF properly conducts the job it’s designed to do.

As finance minister in Socialist government from 1997 to 1999, Mr Strauss-Kahn challenged his party orthodoxy and cut the public deficit to qualify France for the euro. Let’s hope that he still got the backbone to challenge Washington Consensus orthodoxy as IMF Managing Director. The world certainly need, and deserve, a better IMF.

Fasting and Intertemporal Choice.

by Berly

During Ramadhan, the Moslem all over the world withheld from food, drink and sex from sunrise to sunset. There are many research that point out the health and social benefit of this practice, but what drive most people to do it is the quest for the Almighty’s grace and benevolence.

Economists study the choice people made. While some still insist on model of fully self interest agent, some try explain why people behave the way they do. After all, isn't the great Gary S. Becker from University of Chichage that said De Gustibus Non Est Disbutandum (preference/choice is not to be questioned).

If people refrain from consuming certain goods, which bring positive utility in normal times, at certain then it must be because not doing so bring higher utility directly or indirectly (you can bring peer pressure and historical construct if you like) during Ramadhan.

Numerous researches has proven that most people care more about now and present than later. Even if the utility from consuming now is lower than the cost that likely to follow later. This has been one of the strongest explanations of self destructing behavior such as drug addiction, criminal, outside-marriage-pregnancy, etc. Many people are poor calculator of their own well being.

Thus, their utility function (sorry my apology for economists infatuation of making graphical representation out of almost everything, don’t get me start on mathematics) is shape like a hyperbola where the impact of present action get higher weight over the later period. The short hand is hyperbolic discounting.

If fasting work as intended (and robust through time) then the gravity of choice would shift from now to later and from this world to afterworld. People would care not about what good now for themselves but more to what good in the eye of Almighty. Daniel Goleman in his best seller "Emotional Intellegence" pointed out those with willingness and self control to wait for better things are more succesfull in life

When Robert E. Lucas Jr. in his Nobel Prize winning model of rational expectation model proved what ever government do would not matter (policy irrelevant) for a rational and fully informed economic agent, is it possible to extend the model so that for some people the utility function will be strongly anti hyperbolic (help me on this, what is the correct term) so that the present mortal and corporeal world do not matter? In the utmost case only the Almighty does, all else is irrelevant.

(tak) merdeka dari kelangkaan

Gelegar kemerdekaan baru saja kita nikmati. Perayaan dimana-mana sungguh menyiratkan sebuah bangsa dan sedang bergembira dan berbahagia menikmati arti kemerdekaan. Pun kemerdekaan juga mempunyai arti yang berbeda bagi setiap orang. Sungguh sayang, ternyata kemerdekaan tidak berarti merdeka dari kelangkaan barang kebutuhan pokok seperti minyak tanah dan minyak goreng akhir-akhir ini.

Sudah 2 hari ini minyak tanah menghilang dari pasaran, termasuk dari lingkungan tempat saya tinggal. Alhasil dari segelintir kios yang masih menyediakan minyak tanah, harganya sudah melambung Rp 5 ribu dari harga normal hanya Rp 2.600,- (harga naik 100%!!). Dalam banyak pemberitaan, kelangkaan ini terkait dengan program konversi BBM ke gas.

Saya tidak berpretensi mengatakan konversi minyak tanah ke gas itu buruk. Akan tetapi jika menganggap kesuksesan program ini hanya diukur dengan jumlah tabung gas yang diserap oleh pasar, itu adalah satu kesalahan. Dalam ekonomi, barang subsititusi adalah barang yang saling menggantikan karena utilitas yang diperoleh kurang lebih sama, seperti halnya minyak tanah dan gas. Yang terjadi ketika minyak tanah langka adalah orang mencari sumber energi alternatif seperti kayu bakar, tenaga matahari, briket batubara, gas LPG. Kayu bakar untuk konteks Jakarta sudah sulit diketemukan; apalagi tenaga matahari membutuhkan transfer teknologi tinggi; briket ketersediaannya masih dipertanyakan; termasuk pula gas LPG yang dalam program konversi ini disediakan dalam ukuran yang lebih kecil yaitu 3kg.

Selain persoalan distribusi dan ketersediaan infrastruktur pendukung program konversi gas, daya beli masyarakat khususnya menengah ke bawah harus menjadi perhatian. Salah satu alasan menggunakan minyak tanah adalah bisa membeli sampai eceran terkecil walaupun dari sisi harga ditanggung lebih tinggi. Saat ini gas yang tersedia hanya tabung 15kg dan baru-baru ini saja ada tabung ukuran 3kg, apa mungkin kita membeli gas 1kg saja? Ini problem lain dari sisi produksi dan biaya investasinya.

Pada masyarakat yang berada pada level transisi, pemilihan minyak tanah atau gas mereka cenderung indiferen. Artinya jika mereka saat ini masih setia dengan minyak tanah setiap saat mereka bisa melakukan konversi ke gas, dan masalah biaya konversi bukan lagi soal. Dalam program konversi sesungguhnya merekalah yang layak jadi target karena pada kelas masyarakat ini subsidi minyak sudah jelas salah sasaran.

Untuk konversi gas, saya melihat masih ada cara lain seperti pipanisasi gas ke lingkungan perumahan (Yang saya tahu sudah ada di lokasi tertentu di Bogor dan Surabaya). Secara finansial, konsumsi gas akhirnya memang jauh lebih murah dan untuk investor, target konsumen yang cukup besar akan menurunkan biaya produksi per unitnya. Dari sisi feasibility, langkah ini lebih baik dan mencakup area yang lebih luas serta cocok juga untuk masyarakat menengah ke bawah. Bandingkan dengan pemakaian tabung gas yang (1) mahal; (2) tersedia ukuran tertentu saja; (3) tentu saja hanya menguntungkan pabrik pembuat tabung.

baca juga beberapa alasan kenapa saya (belum) memakai gas.

tak TKI berkalang Tanah

Derita TKI Ceriyati yang lari dari majikannya di Malaysia patut menjadi renungan (disini). Pertanyaan kenapa seseorang mau mengadu nasib menjadi tenaga kerja migran, saya kira masih relevan. Pertanyaan ini sebagian terjawab dengan melihat kaitan antara penguasaan lahan pertanian yang terkonsentrasi akibat proses industrialisasi khususnya di wilayah pedesaan. Dalam hal ini menarik jika melihat analisis Lenin tentang struktur agraria di Rusia ketika itu (disini). Perubahan lanskap sosial terkait dengan penguasaan lahan pertanian menyebabkan polarisasi kelas antara borjuis desa (gabungan antara petani kaya dan menengah) dan kelas pekerja pertanian yang berasal dari petani miskin. Petani miskin yang tidak punya tanah akhirnya hanya punya sedikit pilihan, bekerja pada petani kaya atau migrasi. Pilihan migrasi ini pada jaman Lenin sepertinya kurang dikenal. Namun, film Far and Away yang menceritakan keadaan imigran Irlandia di Dunia Baru Amerika menunjukkan kondisi yang mirip (sebab dan tujuan migrasi) antara imigran Irlandia dan para TKI kita di luar negeri.
Tidak ada yang bisa melarang seseorang memperbaiki kehidupannya bahkan pergi ke luar negeri. Disisi lain negara berkewajiban mengamankan rakyatnya dari penderitaan dan kesengsaraan. Untuk itu persoalan penguasaan lahan yang semakin sempit misalnya di Jawa Tengah penurunan pengusaan lahan pertanian 0.15% pertahun harus ditangani secara baik jika tidak dapat berpotensi mengganggu pasokan pangan yang dapat menjalar ke krisis lainnya. Solusi untuk saya saat ini adalah redistribusi lahan, bahwa kepemilikan lahan perlu pembatasan yang menjamin akses petani miskin (terutama perempuan) kepada tanah. Harapannya akses tanah yang cukup bisa mengurangi keinginan menjadi TKI. Satu lagi prasyaratnya pemerintah mengembalikan perhatian kepada sektor pertanian.

Whither The Third Way?

I just come across one article among of so many eulogy to parting UK Prime Minister, Tony Blair. I found it interesting since it discussed the so called third way after him (instead of the usual Iraw problem).

In Blair words,” A false opposition was set up between rights and responsibilities, between compassion and ambition, between the public and private sectors, between an enterprise economy and the attack on poverty and exclusion."

The ninety witness social democrat like Bill Clinton in US, Schoeder in Germany and Blair in UK rised to pinnacle of executive power with the third way as their mantra. As Dionne from Washington Post put it, “beyond" -- a big word at the time -- both the "old left" and the "new right." Surprisingly, London and Washington were replacing Stockholm and Paris as epicenters of the democratic left. The word "socialism" was out, but "community" was in. "Collectivism" was replaced by the smoother word, "solidarity."

So what is the Third Way? Anthony Gidden defined it as:

“...a centrist philosophy of governance that embraces a mix of market and interventionist philosophies. The Third Way rejects both top-down redistribution and laissez-faire approaches to economic governance, but chiefly stresses technological development, education, and competitive mechanisms to pursue economic progress and governmental objectives.”

There are many arguments that national government is loosing policy power due to globalisation (ie: the famous trilemma in monetary economics). But what could stop government to put higher proportion of budget to education, health, R&D and infrastructure (instead subsidizing a national champion company/industry) while maintaining rule of law where market could function (when it can)?

The role of government is more effective on the factor market and institutional referee instead of an active player. Of course the billion dollar question is what is the exact proper mix between market and interventionist policy? What is the yardstick?

Maybe it will be clearer on The Fourth Way…

Just an Added Thought on Institutions

Firstly, I owed Berly for this brief essay, because while trying to answer his question, I end up with this too-long-comment-reply, of which was a good-productive thing though. And so here we are.

A complete institutional structure consists of three parts: Formal rules, Informal rules and Characteristics of rule enforcement. In my humble opinion, the main problem now is within the first one (Although I also believe there are several significant problems with the two other parts, but let me just emphasize in the first in this case) .

The general function of the formal rules is to enhance transactions on political and economic markets. In democracy (such as Indonesia right now), the exchange on political markets determine the economic rules. So then inefficiency in political markets will bring inefficiency in property rights, and inefficiency in the latter will eventually lead to socially inefficient organizations, increasing costs in transactions and then reducing the probability of mutually beneficial exchange through specialization within the economic markets. I think this is the updated problem in a newly-democratized Indonesia.

There is a very high transaction costs on political markets, because of little transparency of the political processes, little competitions among them, and the last important thing, is that we do not have the constitutions that brings the self-interested politicians in line with the creation of this efficient formal-economic institutions. A quite similar conditions also hold for Thailand and the Philippines, where military-feudal-based political interventions are still used up till now.

Let's then have an example for the latter point:
Right now the Assembly is busy drafting a bill on political parties, which includes one of the controversial articles regarding the possibility of Party Owned Enterprises. (What is this crap???!!)* Personally (again) I think this is an outrage.

Politicians are also always being self-interested and utility-maximizing agents. If constitutions do not align with the people sovereignty, politicians will not promote their economic interest in the course of pursuing their private goals. So it’s a necessity to restrict politicians constitutionally (Hayek). And that's what we’re lacking off. And as a now-democratic-state, it's remarkable that up till this point there are no efforts to propose such draft of constitutions. Well, this emphasized one of my points before of why institutions in Indonesia are still very weak, and hopefully this also can answer the question from Berly’s comment. Or maybe I shall make some essays discussing more about these institutional-constitutional frameworks later on. Happy Christi Himmelfahrt** holiday, and let me finish this essay with a quotation from Boediono, of which I quoted from one of Prof. Hal Hill paper: “‘Beware of possible disharmony between politics and economics.. Never take economic stability for granted... Institutions and governance should receive the highest priority in the overall strategy” (Boediono, 2005, p. 323, on lessons learnt)

* Please kindly ignore this author’s self-comment
** The ascension day of Jesus Christ in German words

A Brief Institutional Analysis of The Cabinet Reshuffle

„....creation of new rules does not in itself immediately produce new stable forms of behaviour… while rules can change overnight; individual responses will be much more complex and slow to adapt.”

These quotations from Douglas C. North, a profound institutional economist, were the first thing that came out of my mind when I heard that the President finally announced his cabinet reshuffle. So what’s exactly this quotation mean? And what are the relations with the Cabinet reshuffle? Well, we shall proceed then, and I hope I can briefly explain my intentions.

So here it comes. I believe that institutions in Indonesia are still weak. And so what is institution anyway? In this sense, let me once more, quoted from North. He clearly point out that institution is the rules of the game. Institutions are humanly devised constraints that structure human interaction, or moves of the game. It’s the circumstances that make self-interested-homo-oeconomicus constrained with bounded rationality chooses their optimum pay-offs. In this part, let me generalize and simplified institutions as regulations, so that I meant that regulations in Indonesia are still very weak. In developed countries, each regulation is a prime and clear signal to the market or individuals, more than the person who is (politically) in charge, endorsed or made the regulations. But in Indonesia, it’s vice versa, as people seem more interested in who’s in charge. And I’m not going to blame them, because that’s how it works. New minister, new regulations, and that’s all what they believe for the truth. And if it’s true, so what’s the fuss about reshuffling? New regulations will bring new complex frameworks of social interactions associated with more uncertainties. And in the sense of institutional economics, this will eventually lead to higher transaction costs in the expense of economic performance and growth. And this is what the quotation is all about (and for the sake of the readers I shall not write it again).

In Indonesia, new ministers could (eventually) mean new regulations, and if they are not in the footsteps of the old ones, they are a step back. We can obviously saw the disputes about regulations among the ministers not so long ago. And replacing the ministers is not the answer. I’m sure that we will see more to come. And this is what will happen if reshuffling is only a case of political adjustments. Reshuffling is OK, but regulations, if they were agreed for common sake, let’s say of those which normatively maximize social welfare, should be kept intact.

And so let’s go back to the general analysis of institutions. In the case of newly-democratized Indonesia, it is important to recognize that economic development alone will never adequate and should always be paired with institutional development and awareness. In general, modernization is defined as process of improving the capability of a nation’s institutions to meet increasing and different demands. And thus a modern nation is one in which the institutions are able to meet or adequately handle the increasing and different demands made on them. Growth in economic development is change, and change is inherently “destabilizing”, especially in the era of globalization where domestic issues and international challenges can no more be separated. Altogether, there is one important future challenge for Indonesia; on how can it adopt changes due to socio-political pressures needed for a successful economic development, and thus learn that institutions do matter.