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.

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

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).

The Political Economy of Iedul Adha

I am currently reading a couple of Ha-Joon Chang's books. The Korean-born and lecturer at Cambridge has fascinating analysis of globalization today and how we got to it; not by free market but selective industrial policy and protectionism.

In East Asia Development Experience. he cited import restriction of luxurious goods in South Korea as strenghtening national unity and work ethics. The rich and powerful are not seen as splurging with expensive imported goods while the worker is working his ass. The common practice is to used locally produce car as official car of government head (Proton in Malaysia, Toyota in Japan and Hyundai in Korea).

So what Iedul Adha has to do with all the above?

Ramadhan and Iedul adha is an amazing pair. In the first, all eligible population (rich or poor) is going through thirst and hunger together. While on the second, the richer population is getting the poor population some good and meaty meal; it even forbidden to fast on Iedul Adha. How is that for solidarity.

Maybe Indonesia should consider to restrict import of >1 billion car and >10 millions handbags in the spirit of Iedul Adha

Ready for higher fuel price?

Scarcity causes higher prices, and that's a good thing. Higher gas prices lead to conservation on the part of consumers, exploration on the part of producers, and innovation on the part of alternative energy entrepreneurs.

… Price controls, gas rationing, windfall profit taxes, gas tax holidays … are all bad policies that may make you (and politicians) happier in the short run but will make everyone miserable in the long run. Your solution to high gas prices is to adapt"

"Who's to blame for $4 gas" Environmental Economics

I wish that Indonesian start to realize how long they enjoyed BBM subsidy and what is the impact of those enjoyment. For more than 30 years, low price of BBM - due to subsidy, not only affecting national budget but also over-consumption behavior, under-production strategy, lack innovation on energy efficiency. And, another but very long run impact of such low price of BBM is our environmental quality degradation. It happened not only by giving up our natural resources - i.e. oil stock - simply for consumption, but also pollution externality and other degraded environmental depletion.

Now, you may tell me that I do not care for poor people?

I can answer you the same way you rejected increasing price of BBM, "There are still another way". There are still a lot of ways to help the poor. Keeping price of BBM low only give the poor pain killer, but not panacea. When you force us to swollen the pill of "BBM subsidy", then whether you realize it or not, you close the door for another way to help the poor.

Barack Obama and Behavioural Economics

This blog is not in the business of endorsing US presidential candidates. Nor we harbor illusion that our position can move votes there.

Nevertheless, as economist wanna-be I could not help but excited over an article (click here) that point how Richard Thaler, one of the early economist that point out behaviour anomalies could not be explain by standard model, is in close contact with the candidates. Behavioral Economics is currently getting stronger hearing in the mainstream after recognition from Nobel Prize committe in 2002 & 2005.

One of Obama policy attributed to his influence cited in the article is:

“For example, one key behavioral finding is that people often fail to set aside money for retirement even when their employers offer generous 401(k) plans. If, on the other hand, you automatically enroll workers in 401(k)s but allow them to opt out, most stick with it. Obama's savings plan exploits this so-called status quo bias.”

Good to know that Obama that despite his soaring rhetoric (watch here and here), base his policy on solid and strong economic ideas. They say that economics has turned cynical and can do nothing but become empty shell of materialism. They say that economics can not bring insight about real human behavior into useful policy recommendation. To those charges, let us answer in three words. Yes, we can!

Addendum (01/03/08) from an article in The Economist:

"His chief economic adviser, a respected young academic called Austan Goolsbee of the University of Chicago, is sensible and pragmatic. His plan to save millions of people from struggling to fill out their tax returns is a gem. Anyone who earns only a salary and bank interest, both of which are automatically reported to the taxman, will be sent a tax return that has already been filled in, which they can accept or reject. At a stroke, countless headaches would be averted."

Simple assessment of new emissions tests

My concern with this issue started after I read a news titled "Motorists to pay for emissions tests". At the end of the article, one university student raise his opinion as

"I agree that emissions tests are important, but I don't want to pay 100 percent of the fees if I have to just clean up my exhaust because my carbon emission's too high. It would be too much"

That statement is clear shown that the Governor have not yet realize what is the "costs" of emissions tests. In this case, I mean the following costs after emissions tests. I believe, Mr. Governor only concern that emissions tests will force people to be more cautious with their vehicle's emissions and or the tests could generate revenue. Actually, Mr. Governor must concern several aspects not only "enforcement" and "revenue" factors.

There are three aspects that he might be consider before applying - supposed to be - environmental policy: 1) cost efficiency, 2) administrative and practical feasibility, and 3) fairness in the distribution of costs and benefits. Lets assess Mr. Governor policy with the three aspects mentioned.

Cost efficiency: The emissions test pay policy may be cost-efficient policy in terms of the basic idea of the test it self. By conducting the single-uniform test for all kind of vehicle, we could recognize how many vehicle contribute pollution and then we can set an exact target of how much pollution need to be reduce and in which way. Theoretically, the tests itself could be used to calculate marginal abatement cost from each polluter (vehicle users). However, in terms of calculating abatement costs, the fact that there are more than 9 million people living in Jakarta, plus 3 million additional people around the peripheral area, it will be very difficult to identify the marginal cost of abatement from each vehicle. In short, the test might be an efficient way just to know the total pollution produced by registered or voluntarily vehicle tested, but not so efficient for reducing pollutions. Moreover, the fee for emissions tests itself is possibly quite affordable for most of vehicle users. But, if the owner have to service and conduct special maintenance for their vehicle to reduce the emissions due to the emissions tests results it will not efficient at all for the owner. This argument will be related with distribution of fairness that will be discuss later.

Administrative and practical feasibility: This policy is obviously feasible to conduct. However, the lack of proper and efficient system in administration may be results to low monitoring, low enforcement, and potential corruption. Administering "lots of" vehicle is the critical issues here. When the administration transfer the decision of whether a vehicle is required to be overhauled or not due to high emissions to a particular repair shop, it requires high degree of monitoring and enforcement. Maintaining the credibility and capability of selected repair shops is another critical issue of monitoring and enforcement on selected testing agent. With a huge number of vehicles in Jakarta, this policy is administratively becoming very sensitive to conduct. It will need intensive monitoring system, sophisticated enforcement (especially for private owners), and special bureau to supervise the selected testing agents.

Fairness in the distribution of costs and benefits: There are three groups of economic agents that involved in the selected policy, the vehicle owner, the testing agents, and local administration. For the local administration the policy seems very inexpensive at all. For the vehicle owner, the testing only is not that so expensive - should be. But, potential additional cost for engine maintenance to meet the requirements must be very significantly unfair. How can we identify by how far our cars need to be repair to meet the requirements? In this case, the testing agents is the first economic agents that possibly gain benefit from this policy. While the local administration gain benefits in terms of targeted lower pollution (we can debate on this later), and testing agents benefited from testing fee and additional services costs that might be occurs; the vehicle owners is the only entity that face the uncertainty and should be cover the costs. It is obvious that small firms and company in transportation sectors will be suffering most from this policy because they have to face huge overhauled engine of their vehicle fleets to meet the emissions standards.

(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.

Air pollution: an agenda for cleaner energy

Commemorating the earth day on 22nd of April, Minister of Environment announced a ban new cars production (here) to reduce air pollution in the big cities. It sounds sensible with the fact that population of car has been increasing over 12% per year. As a result, cars in the roads has exceeding the current carrying capacity of existing roads. Regarding to the target, this minister' proposal would be ineffective. Why?

Any minister even president can't do much in terms of stopping car production besides Indonesia is not car producer instead we assemble imported car domestically, some of them are completely build up (CBU). Let imagine that minister can persuade the companies not to sell cars to Indonesia, as soon as the companies will flee to other neighbouring countries just to find softer businesss environment' regulations. Unemployment would rise adding up to current 12,7 million jobless population (here)

Now, if you can't find any new car in the market, where do you go? 2nd hand market or maybe black market. Although the 2nd hand market gives you better price, it will be slightly higher than before. You may find good car but you have to be aware that only few of them has good quality in terms of latest technology to reduce emission. In situation where less choice available, you would end up with affordable car wether or not it has proper technology for emission reduction. Emission technology would not be your first priority to buy car. So, moratorium of car production is not really as green as it looks.

Clean energy is a global agenda, and it would not be solved only with reducing car production. Instead it should be integrated with other agenda such as providing more conservation area in the cities. It has to be put as part of spatial plan which regulate and enforce the application of emission stadard. Lastly, economic incentive such as tax reduction or tax burden would encourage or discourage people to comply.