The Economics of Bukber

One of the things that come with ramadhan is the bukber (buka puasa bersama) invitation.

From the casual meal with office friends to gatherings of highschool/uni/sport club, from circle of family to high power meeting (and yes, romantically inclined randezvous) can come under the label of bukber.

So what's with the rush of eating together?

Two economics concepts thought up by two Nobel Prize winner are involved: transaction cost and focal point.

Assuming eat together is preferable than alone (not too restrictive and realistic assumption), then people would not dine together if the cost and coordination is manageble.

People eat all the time but to coordinate time and dine together is rather complicated. In big & busy city with tight schedule it is very difficult to have many people together in the same time.

But during Ramadhan all of people that fast will eat at the same time, so the around sunset time is a focal point of time to meet. Coordination effort (transaction cost) can be focused on finding a place and getting people to come.

There are also demonstration effect, where the more people you know come the more you want to come.

After all, having decent meal with great companions is indeed a step closer to heaven on earth.

Have a great bukber!

The Economics of Fasting

In welcoming the holy month of Ramadhan, I want to continue my long neglected first post on islamist economics series. But I first I must point out that fasting is not an exclusive domain of Islam, it is known in all religions and many ancient culture.

More is better, as the standard assumption in economics goes. Thus reducing consumption, the definition of fasting, should bring less utility right?

But there are also first Gossen law on diminishing marginal utility, meaning the more you consume of the same things the utility would be less on one additional unit of consumption. So less is more.

The first gulp of water at the end of long fasting day could worth more than a lavish meal on a full stomach. As they say, we don’t know what we got till we don’t get it.

So taking the two propositions above, could I conclude that less is better?

N.B

There are also interesting studies on how reducing calorie intake make bodies healthier and slow the aging process. Apparently human body work more efficiently if it has less inputs.

Can Money Buy Happiness?

Ah, one of the oldest philosophical problems and many fine movies have made this topic so alive (The Little Poor Rich Girl by Shirley Temple come immediately)

If money buys happiness then it worth to go through all the hard work to get money. If not, then why so many people continue to spend most of their time to get money which has little effect on happiness.

There has been numerous studies (click here for wide array of it) on happiness and income. Easterlin is one of the earliest economist to go through happiness data (from self declare dataset) and found paradox of happiness. People with same amount of money tend to be happier in poor country, but happiness don’t increase over time with economic growth. Is it possible that it is relative income having more impact to happiness instead of absolute income?

A global study of Sexual Attitudes and Behaviours by Pfizer in 2002 seems to be an odd way to study the relation but please bear with me for a while. It has more than 27 000 respondents from 28 countries with fascinating questions. (yup, sometime I have too much available time)

Three of them will be used in this mini study (How happy have you been with your life in the past year? How physically pleasurable did you find your relationship with your partner to be in the past year? How would you rate your overall health?) The numbers are in percentage of population stating they in moderate/good/very good (answer 3-5 in a scale of 5). Quite interesting to know that Indonesian has the highest number (98%) for question number two with Japan as the lowest (57 %).

I pair the data set with average income per capita of each country for that year, adjusted for cost of living or as purchasing power parity (PPP) in economic jargon so it is comparable across countries. Then I set up a log liner regression model with happiness as dependant variable and income, health and physical relationship as independent variable.

Before going to the result, some caveats need to be address (especially for economists and econometricians out there). There are some issue on subjective data, not that subjects intentionally being untruthful but they may have recalled problem. Some studies found that when asked about the past subjects tend to put emphasis on the extreme than average. Furthermore, I only got the average percentage of each question not the complete panel so the result is not as robust as when I can get the income of all participants. But as Donald Rumsfeld would say, you do regression with the data you have and not the data you want (hey, this is not my PhD dissertation).

I found that income has no effect what so ever on happiness (P value = 0.4472). On the other hand, health is has significant effect. (P value = 0.0140) and one percent increase of population that satisfied with their health correspond to 21,4 % increase in happiness. What about the last variable? The significant level jump to the roof (P value = 0.0001) and one percent increase in population satisfied with their physical relationship correspond to 39.58 % in happiness.

Hmm.. More study certainly is needed. If government want to increase people’s welfare, should it put more emphasis on *ahem* quality of life aspects than the usual investment/productivity/industrialization? So if you have been feeling unhappy lately despite all the material achievement, relax a bit and listen to the old tune by Rolling Stones:

I can't get no satisfaction

I can't get no satisfaction

'Cause I try and I try and I try and I try

I can't get no, I can't get no

Queing in Japan

by Berly

I recently returned from a presenting paper in conference at Japan, as I has read many things about Japan (the second biggest economy in the world, centre of innovation and reverse engineering, etc) I am a bit disappointed to found few skyscraper in Tokyo and Osaka (turn out that taller building more susceptible to earthquake) and little sign of affluence.

But I found people, lot of them. More than 66% of the 127 million Japan populations are living in urban area. With mountains and forest still filling most of Japan landscape, there are more than 50 % of population lives on 2 % of land. With population density of 1,523 persons per square kilometer for habitable land, Japan society is certainly a crowd.

I remember reading (please tell me the author if you happened to know) the supposed correlation between population density and social order. In highly dense population, society is compelled to developed norms where people tolerate other more, being nicer to other or both. It quite makes sense since a shoot-from–the-hip cowboy character would find many reasons to be angry with more people swooshing around (just try to get in Tokyo subway in rush hour).

Combine the high population density with justice system during pre-Meiji era where death is almost the single punishment. That should weed out most of energetic and rebellious gene that did not become samurai. The social system in pre-Meiji era also organized in a mini cell (10 household) where mistakes will result in punishment for all. Thus, the Meiji reform and introduction of western knowledge is imposed on a discipline and responsive-to-direction from-the-top society that said to inspire Borg race in Star Trek series.

I am especially fascinated by the queue for metro/subway in busy station. Instead of standing in random and start queue when the metro arrive, the Japanese just walk to designated place where the door will be, start queuing in neat two lines and wait there until it arrive. Inside the bus and metro, if you hear any ring-tone then you can be sure that the phone is own by a non-Japanese, and of course there are no graffity or bubble gum stain in the public transport. There is unexceptionally high regards for public good.

I have lived in Holland and visited both UK and Germany, all three with long history of population density, structured society and industrialization (even if with less severe justice system compare to Japan). Can’t start wondering if there is any correlation between civic duty (queuing habit, strict law enforcement, norms of saying sorry & thank you, etc) has strong correlation with industrialization and economic growth.

What do you think?

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.

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?

The Political Economy of Venice Carnival

by Berly

My first knowledge about Venice was from Donal Duck comics from childhood time. It is suppose to be a place where a romantic couple (even though Daisy Duck could be annoying some times) leaving a masked carnival to get into a gondola slowly moving in the canals while listening to the gondolier (yes, it’s how they are called) singing o’ sole mio.

So it is quite a disappointment to visit Venice and find the gondolier are not singing (by the way, you’ll need 50 euro for a ride) and gondola is just an over-glorified canoe/getek.

But the masked carnival is way underrated. Since my university organized a daytrip, I went there last week for the opening of the carnival.

Amidst all the captivating sights and hurly-burly of thousands of exuberance tourist, this extravagant carnival is a resulted from proper response to market failure.

Imagine your city has a long history of certain activity that can be re-enacted and bring tons of tourists (read: profit) but some money is needed to organize the festival. Those elaborate costumes, artist performances and massive stage do not come for free. Since the cost of organizing the festival is much less than the benefit from tourist then wouldn’t each citizen of the city (assuming all will benefit, quite true in the case of Venice) will hurry to contribute right?

Wrong! The benefit of carnival is felt to all through higher sales of handicraft gallery, souvenir shop, restaurant, etc (which Venice are full of) but each is better of if a carnival is set up without they are paying for it. Why not let others pay and just sit down waiting for the tourists to come?

This is a classic case of public good where the voluntary free market will not provide the best solution since the money collected will be below the optimal level. A public good is a something that once already set up (ex: bridge) can not limit the use only for those who pay for it (hence, free rider). The free rider problem is so severe that even neo-classic school (the poster boy of economics) is admitting it, albeit putting the topic in obscure last pages used to be skip by lectures catching deadline on covering more “important” topics.

Here is a description from the official website
“The Carnival of Venice officially began in 1296, when the Senate of the Republic authorized the carnival with an edict declaring the day before Lent as a day of celebration. After a break of almost two centuries, the traditions of the carnival were recovered by the Municipality in 1980 and since then the event has been held with great success each year”

So, it takes a government to start it all. There is roughly two ways to deal with public good, either to make it totally private or totally public. The government (except when under occupation, Venice always been a republic with elected government) has the coercive power to issue taxes and gather the needed money to cover the cost of carnival. Mancur Olson (The Logic of Collective Action) and Amartya Sen (Hunger and Public Action) have pointed out the possible divergence between private and public actions long time a go.

Another interesting feature of this carnival is the theme, which is “The Dragon and The Lion”. The Winged Lion is the symbol of Venice. The Dragon? You guess it right. It’s for China. Even a 710 years old tradition can not ignore the newly awakened economic power of middle kingdom.

Enjoy the weekend.. It’s carnival time… La dolce vita!