How to make the motorist behave?

According to Kompas, there are 575 death motorist during January to August 2008 period. In fact, there are 3,029 accidents occur during the same period. How to reduce this incidents for getting intensify?

Some people argued that it occurs due to lack of discipline among motorist as well as lack of particular infrastructure for motorcycle rider, i.e. special line for motorcycle. However, if we understand the behavior of motorist you maybe need to read and understand about Peltzman Effect. The key issue in Peltzman Effect as far as I understand is we need to compensate motorists lack of concern on risk of their bad behavior during riding motorcycle.

As we may seen recently, the technology and safety equipment for riding motorcycle are getting enhanced and sophisticated. All of those support system for making the motorist getting safer during ride make them feel secure and abandon the safety riding method during travel. In addition, the method to buy new motorcycle is getting easier with credit payment system. Combining those situation, we will see two simple fact about motorists and their motorcycle: 1) their population (motorists as well as their motorcycle) will increase sharply, 2) their behavior will become more "barbaric" and potentially increasing number of motorcycle related accidents.

Now, what is the effective solution to reduce that problem? My simple solution is raise the cost of admission for motorcycle licences (to get SIM C in Indonesia). In fact, if possible, we need to make that getting motorcycle licence (SIM C) should a lot more expensive than getting driving (car) licence (SIM A). Why? Higher price need to be established in motorcycle licence as signaling that riding motorcycle are having more risks than driving cars. With such policy, we will obtain two results:

1) reducing number of motorist
Of course, we will have "rich vs poor" motorist that potentially discriminate them on riding motorcycle. But, since the rich might be able to pay for the risk (of having accident) then it should make sense to give them more chance to ride motorcycle.

2) increasing discipline among motorist
Higher price of getting licence for riding motorcycle will make only selected and better-skill motorist that able to ride motorcycle. With extensive bribery activities in police department who issued such licences, higher price is the only way to maximize the objective to reduce number of accidents while facing lack of law enforcement in traffic.

What do you think, guys?

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.

Happy Constitution Day

While many remember than august 17 is the independence day ( and start the repetitive debate of whether Indonesia is free), only a few even remember that constitution is ratified today 63 years ago.

If one thing Indoensia need right now, is to focus on rule of law and designing a better law. There are certainly not lack of good Indonesian scholar or academic reference. The growing school of law and economics definitely worth more than a second look by indonesian legal and economic scholar.

Benjamin Franklin, one of the founding father of America, was asked what kind of government the Constitution instituted, responded "A republic if you can keep it."

I certainly hope we the Indonesian prove ourself worthy to keep our republican it.

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.