Proportional election = parliamentary corruption?

First I acknowledge there are many cause of parliamentary corruption.

Lax law enforcement (pre KPK) is certainly important factor. And so is the possibility of tradeoff between justice and money. The more money (from corruption) you have, the more likely you can hide evidence of wrongdoing.

But the path to become MP is very much up to discretion of party leader. At which province you will be put forward and at which rank number.

The discretion is basically something the party leader can disperse as he/she pleases since most party campaign not on individual MP but on a national figure and party history. And money is certainly one way to please a person. If a prospective MP has to pay significant to get his/her seat then the investment need to be recoup.

The incentive would be much less in district system where people choose a person. Each party has to put forward the most prospective candidate to win; a primary system where internal party election decides on candidate is even better.

Anyway, Indonesia certainly needs better campaign finance system so we know who give to party/candidates and how much.

Sjahrir, the political path of a political economist

I am saddened to read an article on The Jakarta Post today is entitled,” Economist and 1974 student leader Syahrir dies.”

I know Pak Ciil (as he frequently called) more through his writings and his TV show and few of his seminars that I attended. Actually my mother know him much better, his wife is my mother’s classmate, and frequently mentioned about him even before I entered FEUI.

I never took his class at FEUI. He decided to stop teaching the Indonesian Economy course at 1998 after the crisis and he said he couldn’t continue teaching the same things after so many things change

As far as I know he never teach in undergrad FEUI again afterward. He published some books (I have almost all of them) and increased political activity that culminated in establishment of New Indonesia Party (PIB).

Even though he had the name recognition as a popular economist frequently quoted in newspaper and appear on TV but his political party suffer the fate of his namesake Sjahrir with PSI (Indonesia Socialist Party); filled with intellectuals but apparently not appealing the masses and gather little vote. His last formal position is advisor to president SBY, economist till the end.

He is best known on his part of student leader in 1974 where the New Order jailed him for three years. Released from jail, he managed to get scholarship until PhD in Harvard University with dissertation entitled Political Economy of Food. Quite a prescient topic that still very relevant today.

I met him just last month, where we both speakers for a seminar in UNAS. He is still the exuberant and energetic self, even though he mentioned that he is on short leashes from his doctors but it doesn’t show a bit. He started his speech by expressing, boomingly, his regret and apology for the police violence on UNAS and then go on to analyzed globalization’s impact to Indonesia.

His departure is a loss for today’s and future economist. He has shown that economist needs to uphold a value despite the risk and to be able to communicate it to the common people.

Good bye Pak Ciil.

On competition

From Greg Mankiw's Blog, I couldn't agree more. Competition will benefited to consumers. It also encourage the business to be efficient, to some extent.

When I talked about competition, some people will speak behind me very softly, "Well, you are really do not care with other people business. Competition will kill those people's business".

Anyway, I will speak softly as well and said "I will not be a hypocrite by saying that I do not like cheap price. And I will definitely support any business that could offer me more. The rest is only about my budget and willingness."

FEUI Economists and Nationalism

This is an unusual post which prompted by an extra-ordinary article written by first year FEUI student in Jakarta Post (click here).

FEUI, where all contributors of this blog get our bachelor degree, economists are getting more than our proportionate share of being called less than fully nationalist. Even accused by some of selling out .

The media played significant part to perpetuate bifurcation between the use of market power for the benefit of the people and to apply free market principled at all cost.

The first is usually FEUI economists' position and the second is what the public judge us to be.

One of the class by Prof Dorodjatun that still clearly stamped in my mind was when he stated that FEUI economist must always be ready to be summon to serve the nation and Indonesian people.

Putera wrote in his article that"The economics that I study at FEUI is not the science of greed; it is knowledge that can be applied to solve important social problems that Indonesia is dealing with at the moment"

....and that's why we (want to) become economist!

Do You Want Someone That Wants you?

To mark the release of Sex and The City in Jakarta, its time for another post on relationship economics (The issue of fuel raise has reach fatigue point anyway, at least for me).

The main plot connector in SATC is whether Carrie will end up with Mr Big. She (and the audience) is taken to emotional roller coaster along the path to find the answer.

But why she did not settle for a-less-emotionally-draining-but-sufficiently-good-and-rich-man ?

Groucho Marx once quipped that,”I don't want to belong to any club that will accept people like me as a member.”

The logic of the statement is when a club willing accept him, without needing him to go through lengthy verification of good credentials/network, then it is not exclusive enough and good enough for him to join.

Change club to relationship and we got the Carrey dilemma. Should she wait until the flashy-and -almost-perfect -but-unfathomable Mr Big to proposed or to “lower” her standard and go for another man that clearly want her.

The problem is unobserved and asymmetric information. People can’t really know the inner quality of other people and his/her as partner in romantic/marriage relationship until they are in it.

But selectability is a good cue and signal. If one person has many possible suitors then maybe the quality for Mr/Miss Right is there. They can’t be all wrong.

But if one is too eager or too wanting then the targeted person is justified to wonder whether that is the best s/he can get. Couldn’t I do better (note: the notion is subjective as it is multi dimension)?

So what to do in this conundrum? If one don’t want person that want them then nobody get together with anyone.

One gateway is quality certification. So the two know that they are both in the same range of desirability level and could not do much better. It requires an independent arbitrage trusted by both parties to do the assessment.

In a classic proverb, that’s what friends are for.

Gender-in tuh BLT...

Rame-rame ngomongin harga minyak naik, mikirin nasib subsidi yang mau dikasih ke orang miskin. tapi ngomongin isu gender kaitannya ke BLT sepertinya masih jarang. silahkan baca dan komentar disini

A Case for Price Control

I know that economists are supposed to be against price control. Let market decide what is the appropriate value of goods and services.

But there is exception for every rule.

Galbraith wrote a little known gem entitled, Theory of Price Control. He was the price czar and ‘kind of” economic advisor to Kennedy in addition to be longtime economic professor at Harvard.

In essence he argued that price control should be in inverse proportion of market perfection. The worst the market function, the more price control can do to improve general welfare.

After the rise of fuel price in Indonesia, we fitness price of goods and services are rising. The bus transportation even pushes for 25 % increase for bus fee despite the fuel price increase "only" 28.7 %.

So we face some kind of prisoners’ dilemma in here. Everybody is raining the price of their product in anticipation of the rise of other products in order to protect there purchasing parity in addition of cost transmission.

In human term, the price increase is happening partly because increase in price of inputs and partlyattempt to maintain ability to consume similar bundle of items.

Considering the market for public transportation and agricultural goods are hardly perfect then what is needed for the expert (and economist) to start calculating the multiplier impact tof fuel increase, with solid methodological foundation, to the economy (especially tran sport and agricultural goods) and come up with just and appropriate price.

The Central Bank could help with a bit monetary tightening.

Somehow the public and newspaper overlook (again) that most people in Indonesia are public transportation user and food consumers that will bear the brunt of the price increase.

If the government need to step in to calm the irrational exuberance, so be it.

It's about increasing demand as well...

As incomes rise, economies use more energy for transport, heating and cooling and producing goods and services. A broad cross section of nearly 180 countries shows that doubling per capita income more than doubles per capita oil consumption (Chart 2). How much each country contributes to increases in global energy demand depends on its population and rate of income growth. Big nations moving quickly up the income ladder have huge implications for oil markets.

Crude Awakening: Behind the Surge in Oil Prices by Economist's View Blog

I am sick and tired with so many Indonesian experts and commentators that saying the recent fuel price hike should be canceled because Pertamina (Indonesia Oil Company) must be able to increase their oil production to meet domestic demand. Despite of inefficiency within Pertamina production strategy, does anybody aware that the 4th population rank in the world to some extent contribute to increasing demand of oil as well - at least at national level?

If we believe that economic activities in Indonesia still on going progress (in other words, Indonesian economy still growing), then it is quite certain that demand for energy also getting higher and higher. In addition to that fact, higher population also adding up the potential. This is the simple proof that pricing policy in oil sectors become ineffective. Why? Because higher demand for oil with wider price differential i.e. market price vis-à-vis subsidy price will creating potential greater market disequilibrium. In short, higher demand with great price differentiation will always distorting the market that cause the price constantly rising.

Then people will questioning, what should we do with such condition? There are only three solution in medium and long term. First, consume energy in efficient way. Second, please support and demand alternative energy, especially the renewable one. Third, keep consuming energy in efficient way no matter what energy source we consumed.

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.

The Economics of Just-Do-It

What is someone told you that the price your favorite candy (mine is Polo mint) will go up significantly in two week? Most candy-cholic will buy more and stock some of the candy. It is legal and the rational things to do.

But what if many people also want to stock the candy? And after a while the seller of the candy also stock and hoard the candy. That’s mean you can only buy a few or not at all.

So who benefit from the knowledge of upcoming price increase? Those with the most access and money to buy candy and sell it later. It is a sure profit since the price will be increased for sure. Not sound so pro-poor to me.

Sometime the best things to do are to just do it. Planned well and prepare all the administrative/organizational detail, then make the announcement. Information are not always best when they are disseminated early. Even Stiglitz will approve that asymmetric information in some cases make better output than (almost) perfectly symmetric information

Change candy to fuel (both are addictive and hard to live without). And you got to read things like this in the newspaper.