Politician and business

Politician's business is one of the hot issue in this election (nope, I havent get around to write about neo-liberalism...maybe not enough market incentive)

Does politics and business mix well together? They could, but the possible downside is also quite severe.

To forbid businessman to go into politics is as mistaken as to allow politician take advantage of state apparatus for their own private benefit. Some middle path is required.

I took cue to practice in some developed country and proposed a blind trust where a politician's money is invest without him knowing where it is put to avoid conflict of interest.

More on this link

Neoliberalism and law formulation

Megawati recently made these written statement:

"Kejadian yang dialami oleh Prita merupakan bukti kasat mata, dampak dari neoliberalisme, di mana kekuatan pasar bebas dengan lembaga-lembaga multinasionalnya dapat dengan mudah menggunakan hukum seperti UU 11/2008 tentang Informasi Transaksi Elektronik (ITE)"

Despite much sloganism inside and citicism to it, would Indonesia would be better off if all the legal product is evaluated publicly whether it will benefit corporation more than commom citizen. Even more so if it is done by an independent body with competent people on it.

Let the debate continue.

The war of slogans

The election fever is reaching new height with labelling effort to box the opponents.

I'd like to know more concrete policy and the number of each presidential candidate instead of empty slogans and the race to steal narrative.

Indonesian deserve a real and substantive debate on economic policy in order to make an informed choice.

Anyone know the website of economic platform of each candidates?

Financial crisis & behavioral economics

TNR pubilish an article (click here) by Akerlof (Berkeley-Nobel Prize Winner) and Shiller (Yale). The title is provocative "Our New Theory of Macroeconomics' and very powerful excerpts below:

"The role of irrational behavior in the macroeconomy is not trivial and obvious to see. It requires the development of a new theory, which we only just have begun to provide in our book. In this book we strove to put together an array of evidence, some of it from psychology, some of it from economic research, that gave an overall picture that we think is in stark contrast to the usual paradigm.

It is a picture that stresses factors that are totally absent from conventional macroeconomic theorizing: that the economy is affected by variations in the level of trust, by storytelling and human interest, by perceptions of corruption or unfairness, by anger and optimism, by social epidemics causing changes in gut instincts and feelings. Those factors, we firmly believe, are ultimate causes of the boom we saw a few years ago, and the bust we are seeing now".

respond to Posner's (Chicago) review (click here) of their book "Animal Spirit.

Seem like a worthy book to read. And a call to arms for behavioral macroeconomist.

Update: more book reviews on origin of financial crisis (click here)

Election conduct and election system

So many interesting things happened during this election, sometime hard to choose which one to focus on.

Should it be the meteoric rise of Democrat Party? or the plot within plot of coalition? or the disenfrachised voter by KPU incompetence?

But they all have been covered rather extensively. and so little coverage has been given to systemic analysis of election system. District system has many advantages that is sorely needed in a large and plural country like Indonesia. Thus I argued (click here)

Econoland

The Economist has a graphic, and hilarious, description on the global state of economy. Among the thrilling experiences Econoland will offer are:

The currency high-roller: Float like a butterfly with the euro and drop like a stone with the pound! Chamber of horrors: Tremble at the wailing of distressed debt! Fiscal fantasyland: Watch the economy shrivel before your very eyes as you struggle to stop growth falling! Bankrupt Britain: Pit your wits against the government as you try to sink sterling and bring the country to its knees! The Severe Contest: Try your strength against a bear market!

Click here to see it.

Economist and Election

The economist magazine have an interesting article about Indonesian election (click here)

and Nurkholisoh, an old time friend, publish a splendid article on the Economics of Election (click here)

I am also still optimist on Indonesian democracy eventhough acknowledge there likely to be many, avoidable, glitches in this election... May the journey continue smoothly.

update:
Another excellent article (click here) on the Economist on Indonesia election

Show off to buy less

Earth hour is a very interesting experiment. It turn the bandwagon effect upside down.

The standard bandwagon effect is to display consumption so peer pressure lead more people to consume similar item. It worked especially well on luxury and branded items.

But enviromental concern could also be treated as luxurious consumption item and peer pressure could be used in many ways. Slimming down and going to the gym is one example where it work to reduce consumption of high-fat substance.

The number is quite encouraging. Just in Chicago area it save 100 megawats of electricity (click here). Anyone has corresponding number for Indonesia?

Prabowonomics?

Have been reading some opinion article on Prabowonomics.

Among them are Teguh Dartanto in Koran Tempo, Bersihar Lubis in Medan Bisnis, Heri in his blog dan Vivanews feature.

Does it really deserve a school of thought by itself?

The strands of policy seems to have emphasis on role of the state and primary sector, with a healthy dose of scepticism to globalisation. Dartanto put forward a thoughful critics of some of its target.

Name-nomics is a good cacthphrase in the time of frenzy campaign. So I am looking forward to read more of SBY-nomics and Megawati-nomics as well as JK-nomics.

It would be interesting to have more debate on economic platform of each party though and less musical campaign.

Even though also quite likely that Indonesian campaign promises are, in Ron Ziegler's immortal argot, "inoperative" on the day after the election.

Mother Nature's Wrath or Government Negligence?

Almost one hundred people dies and more than one hundred still missing in Situ Gintung tragedy.

It is a shock indeed. Especially since I live nearby.

Is it mother nature striking back due to lack of water absorbance or negligence by government? I think its a little bit of both.

Checking the bottom of dam is not a high priority in budget allocation. But maybe it should.

The incentive is heavy on building new infrastruture but much less on maintenance.

Deepest condolescent for many lost of life and livelihood

Debating the toxic

Fianally comes the long awaited Obama-Geithner plan (click here) to clean America's bank from toxic asset.

But Krugman attack the plan as causing despair. head investor won and tail investor loose. (click here)

If government is subsidizing private investor and protecting them from risk, why bother. Just do it directly and nationalize the bank. Those director should be held responsible for their action.

No more USD 165 million bonus after destroying the financial system.

Bradford de Long provided Q& A version of the plan here. But its positive tone is criticize by Krugman (click here).

Let the debate continue.

Stimulus and election

Never let a crisis goes to waste. Thus said Obama's chief of staff.

As election looming, this is a chance to propose something grand and visionary in stimulus without worry (too much) about inflation and international credit rating.

Must admit quite dispapponted with both the detail of stimulus (click here) and the way election candidates present themselves (click here).

Looking for silver lining and rainbow after the rain.

The Economics of Money Politics

Money is the root of all evil. But money also make the world goes round. So I guess the trick is not to let evil bloom but keep it to stirs the world.

That is the same tricky balancing act to be done in campaign financing. The political party needs money but country as a whole loose when the party need more money than the money need the party.

A regulation is especially needed in Indonesia where income inequality is very wide. f allowed, some rich people could capture government policy and use it to their advantage with little regard for the rest of population.

My to cents worth (not sure can buy how many politician) in this article at Jakarta Post (click here).

Of Dinosaur and Mammal

An economy deserve a second and third chance. Usually done by discarding old business and business model replace with new ones.

That is where entrepreneurship comes in.

An ossfied economy where the big dinosour continue to rule is not in interest of anyone, except maybe those dinosaur. That is why Indonesia need to use this crisis to ease entry barrier and improve climate for entrepeneurs.

After all, mammal was only come late in earth history. And now we are the most successful start up on this planet.

More on my Jakarta Post article (click here).

The long smoke of MUI 'fatwa'

I penned an op-ed in Jakarta Post (click here) on MUI fatwa.

The go-to model to analysed addictive behavior is the one developed (click here; JSTOR subcribtion required) by Gary S Becker, a Nobel Prize winner and briallant economist. A more recent model by O'Donogue and Rabin is worth a look (click here)

Interesting how religion could play part (or could they?) in policy debate. Even more so since there is no punishment (or excommunication) for disobeying the fatwa in the way MUI structured in Indonesia. It is more of moral suasion than a directive. Would be interesting to analyzed the impact on cigarette sales figure

The responds to more article on the comment section of Jakarta Post website are quite lengthy and passionate. Still thinking whether to respond and in what tone. Any suggestions?

What caused the crisis

It will take years and many arguments to settle the questions

But Alan Blinder from Princeton and former vice chairman to the Fed provided a preview in NYT of decisions that lead us closer to current circumstances

Wild Derivatives
Sky-High Leverage
A Subprime Surge
Fiddling On Foreclosures
Etting Lehman Go
Tarp’s Detour


(for complete article click here):

Econ matter in Obama Inauguration Speech

State of US economy:

"Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet. "

Remaining potential:

"Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions"

What to be done:

"The state of the economy calls for action, bold and swift, and we will act — not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. And all this we will do."

Role of government and market:

"Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control — and that a nation cannot prosper long when it favors only the prosperous. The success of our economy has always depended not just on the size of our Gross Domestic Product, but on the reach of our prosperity; on our ability to extend opportunity to every willing heart — not out of charity, but because it is the surest route to our common good."

Europen Economist on Financial Crisis

Just find out a link to download a complete book for free by strong list of European economists o financial crisis. The authors including Guido Tabellini, William Buiter and Paul de Grauwe.

Highly recommended to anyone interested in non Anglo Saxon point of view. Click here to read in full

P.S.
The VoxEU website is an excellent portal of column and papers of many top European economist. Ignore at your own perils.

Economist on Indonesia

Economist put out an article on Indonesia. they are quite optimistic

Most banks are healthy, thanks to radical reform after the Asian crisis of a decade ago. And in 2008 the country achieved rice self-sufficiency for the first time in 24 years. Manufacturing is starting to feel the heat but only 25,000 workers have been laid off since November. And, according to research by the Asia Foundation, an American NGO, the huge informal sector has yet to feel much of an impact of the crisis.

Click here to read complete article

Getting NPWP is quite a taxing effort

I was calculating the benefit against cost of having NPWP. Being a student with unsteady job(s) make worry about the hassle of filling a tax return especially if I am abroad.

But Pak Darmin, the director general of tax, is a shrewd economist and he knows how to tilt the incentive. Just like busway make life harder for non-busway user. Now the non-NPWP have to pay higher percentage from salary and property sales as well as, a deal clincher, got to pay 2.5 million if ever going abroad.

Thus I went at final days of sunset policy, turn out to be extended to end of february, to the my area-designated tax office. It was pack with people, one official there told me they got 600+ applicant in one day.

But the system could be improved for sure. They dont have numbers but one must wait to be called to get the NPWP card after submitting the form. So people stand shoulder to shoulder close to the announcer to be able to hear him. It get really hot and exhausting. If they better planned then we could have a seat while waiting for our number to be flashed on the announcement.

Yup, it was quite a taxing endeavour. While the IT system of tax has been improved, the human side still need more work.