British Airways: No Longer Safety First?

Several posts ago, I mentioned about the different ways airlines allocate emergency seats. I pointed out that British Airways seems to put more emphasis on safety as compared to some airlines who view those seats as business opportunities instead. I am disappointed to find out that BA has also started to charge for those so called 'premium' seats. I hope they will change their mind but looking at the fact that most airlines are trying to boost its balance sheet, it is unlikely that they will reverse their decision

Should the Current System of Charging Taxi Rentals be Changed?

While reading Economic Naturalist by Robert Frank, I came across a section that talked about why few taxis can be seen roaming the streets during rainy days. The reason seems simple. Taxi rentals are charged daily and during rainy days, drivers are able to meet their daily targets earlier and therefore, can pack up and go home earlier.

Since this is the case, wouldn’t it be better for taxi rentals to be charged weekly or even monthly if taxi companies want to have more taxis on the roads in rainy days and hence receive fewer complaints from the public. At first sight, this appears to be a very good idea but when we look deeper into the possibility of implementing it, it isn’t as good as we thought because this idea, just like the current system has its own weakness as well.

While the weakness of the current system is that few taxis can be seen roaming the streets during rainy days, the weakness of charging taxi rentals weekly or monthly is that after raking in fortunes on the few rainy days of the month, drivers may decide to just rest at home for the rest of the week or month. This will result in fewer taxis roaming the streets even during non-rainy days.

With the current system, drivers will be forced to work everyday because rentals will be collected at the end of each day. Then again, more intelligent drivers who decide to work extremely hard on rainy days can still overcome the system. But such drivers are probably not many since according to the article, results of a survey showed that drivers would pack up once they reached their daily targets

After Healthcare, it is now the Financial Industry's Turn

A statement made by President Obama, clearly indicating that things are not going to be the same anymore for the financial industry:

“I want them to hear my words. We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses.”

Germany's Eccentric Electoral Rules

I came across an interesting article on Germany’s upcoming election in the Economist yesterday. It appears that state election in Germany is divided into 2 stages: the first one is to elect individual representatives while the second one is to elect parties to represent the state. The interesting part is that if a candidate loses in the first stage, he/she may still be able to enter Bundestag (Germany’s Parliament) if 1) his/her party win the second stage and 2) he/she is high enough in the party hierarchy at the state level.

With such kind of electoral rules, I am worried that candidates affliated to popular parties will not do their best to connect with voters in the first stage because in any case, they will still be elected in the second stage due to their party affliations. Consequently, this will result in representatives that do not really represent their constituents in the Bundestag because they are elected by virtue of their party affliations, but not by how well they can identify with the constituents’ issues.

Clearly, something must be done about these electoral rules. As a start, perhaps the relevant authorities can prevent the same candidate from taking part in both stages so as to remove the possibility of a first-stage loser from being elected in the second stage.

Leadership Pointers from Nelson Mandela

"It is better to lead from behind and to put others in front, especially when you celebrate victory when nice things occur. You take the front line when there is danger. Then people will appreciate your leadership."

Alternative Way for Sen. Baucus to Protect Middle-Income People

In the current health care debate, opponents of the Baucus plan are saying that the Senator’s intention to tax Cadillac-insurance plans will end up hurting middle-income people due to the effect of inflation on insurance premium. To blunt the tax effect, Senator Baucus is expected to amend the existing bill so as to provide more subsidies to middle-income people.

Instead of doing it this way, why not increase the taxable level by the average inflation rate annually? This will ensure that the insurance premium of most middle-income people will always be below the taxable level. Administratively, this will be easier to manage as well. And for those who say that this is radical, I don’t think so because this is not the first time that governments, in particular US government, has worked with inflation issue. In fact, many governments are already issuing bonds that take into account inflation.

Where are the Alternative Routes?

In anticipation of the heavy traffic as people leave Jakarta for their hometown for the week-long Hari Raya holidays, the Indonesian police has identified several alternative routes that road-users can consider using. However without erecting the proper road signs, it becomes very difficult for road-users to find these alternative routes. In the end, they still prefer to use the main route which they know better.

Give, Not Take!

A Quote from Rainbow Troops The Movie:
"In your life, give as much as you can and not take as much as you want."

Why Healthcare Issue Must Be Resolved ASAP?

A quote by Senator Edward M. Kennedy to underscore the importance of health care issue to the nation as a whole:

"Health care was above all a moral issue; at stake are not just the details of policy, but fundamental principles of social justice and the character of our country.”

Finding the Right Policy

When we formulate and implement a policy, there will certainly be 2 groups of people, those that support the policy and those that are against the policy. Each group will state their reasons and often supplement them with studies done by various institutions. It is then the duty of policy formulators to look into these, decide which path to take with regards to a particular policy and staunchly defend their choice.

Although it sounds simple, it is not in reality because the case brought forward by each group is usually very credible and convincing. When this happens, policy formulators really have to rely on their own knowledge of economics to decide on the right path.

A very good example is the policy that involves providing monetary support for people who are willing to further their studies. Supporters of this policy state that it will improve the literacy rate and hence increase the average wage rate of the country. Opponents state that it will only benefit certain segments of the society and left out people who are not academically inclined. They are afraid that it will widen the wage gap between those that are highly educated and those that are not.

At first sight, both views are rational but when a deeper analysis is done using Cobb-Douglas equation, it is discovered that the opponents’ worry is unfounded. The implementation of this policy will not at anytime widen the wage gap. Instead, it will serve to push up the average wage rate such that those that don’t benefit directly from the monetary support will also end up receiving higher wage.

Which Case is Correct?

In response to the financial crisis, the US government decides to give monetary support worth US$8,000 per family to encourage them to buy their own property. Supporters of the policy say that it will help the housing industry to recover while opponents say that it is a waste of government resources because those buyers will make their purchase even without government support.

Purpose of Stimulus: Simple and Clear

"The purpose of stimulus is, first and foremost, to mitigate unemployment. The fact that the economy may be technically in recovery is irrelevant." - Paul Krugman

Why Cheap Steaks are not Served in Comfortable Environment?

I went to eat cheap steaks with my brother yesterday night. As I tucked into my well-done steak, I wondered why the owner doesn’t bother to install air-cons in the premise because besides providing better dining experience for the existing customers, it might attract new customers. The answer turns out to be quite simple. For its business model of providing steaks at affordable price to succeed, 2 requirements must be met: 1) the stall must have a large customer base and 2) the customer turnover must be very high.

Making the premises more comfortable will encourage customers to stay longer and this means fewer seats available for the newly arriving customers. Faced with the hassle of queuing, they will soon decide not to patronize the stall anymore and in dong so, reduce the customer turnover. To compensate for the loss of revenues, the stall will need to charge more for each steak it sells and this will subsequently result in even more customers deciding to move elsewhere for cheap steaks. When that happens, the fate of the stall will be in a limbo.

Revision of Weekend-Car Scheme in Singapore

Singapore revised its weekend-car scheme recently with the intention of encouraging more car users to switch from the normal to the weekend-car scheme. The relevant authority believes that the new scheme can reduce traffic if implemented successfully. My question is if the new weekend-car scheme appeals so much to people, wouldn’t it also encourage non-owners to consider owning private cars? Under such situation, wouldn’t the scheme result in more crowded roads instead?

Alternative Ways to Encourage Public Transport Drivers to Change Their Behavior

While analyzing the traffic problem in Jakarta, the behavior of public transport drivers is never far from my mind, in fact from every Jakartan’s mind. Whenever there is a traffic jam, people unconsciously blame it on the public buses and minivans that are notorious for stopping anywhere as and when they want to. Consequently, I always believe that a stronger enforcement system will act as a deterrent to prevent these drivers from continuing with their irresponsible actions. However will the implementation of this policy really make situation better. Well, I used to think so but an experience last week made me doubt that.

When taking public bus from my house to the wet market, I found out that the bus fare is only 2000 rupiah (US$0.20) regardless of distance. With cost of living on the rise and yet bus fare remains unchanged, it is not a wonder that drivers are willing to break the law in order to get more passengers. This tendency is further amplified by the fact that the earning of each driver is solely dependent on the number of passengers he picks up along the route.

With all these reasons, drivers will just continue breaking the law even if the relevant authority decides to mete out more severe penalties. To improve the situation, besides putting in place stronger enforcement system, drivers’ compensation package must also be revised. 2 potential ways can be explored: 1) increase the bus fare to a level that drivers will find it not worthwhile to break the law and 2) give each driver a fixed monthly income, i.e removing the link between driver’s income and the number of passengers he picks up.

President Obama and Healthcare

President Obama showing his resolve in solving the healthcare issue once and for all:

"I am not the first president to take up this cause but I am determined to be the last."

Something worth reflecting: The link between Hari Raya and Pawnshops.

A phenomenon that can only be seen in places where many people are still living below the average poverty level. As Hari Raya approaches, pawnshops in Jakarta seems to be stocking up on electronic goods, particularly mobile phones because many people who will be celebrating do not have enough money and need to pawn their assets to obtain some hard cash to purchase Hari Raya goods. When they come back from their weeklong celebration and start working again, hopefully their future earnings will be enough to buy back the goods they pawn.

Indonesia's MPs: Elected by the people for the people?

While browsing the newspaper, I came across an article about Indonesian MPs that kind of intrigued me. As many of you probably know, Indonesia had recently completed the legislative as well as Presidential election. The days of the current Parliament are numbered and will soon be replaced by the newly elected and re-elected MPs.

Regardless of whether one is re-elected or not, I think it’s a moral obligation to do one’s job until the end, i.e until one completes his/her tour of duty. This is particularly so considering that one is a representative elected by the people for the people. I thus find it outrageous that some of these MPs have started to “take leave” and disappear altogether from the Parliament, practicing what Gandhi called politics without principle in his 7 deadly sins. As a result of their irresponsible actions, the Parliament does not meet its quorum and has to call off the sessions. This effectively turns the Parliament into nothing but a lame-duck institution, incapable of carrying out its duties, some of which requires its immediate attention.

What surprises me further is that those absentees include re-elected MPs. I can’t figure out their reasons for doing this but one thing is sure to me: they are people who shouldn’t run for election, let alone be elected if they can’t even meet the fundamental requirement of an MP.

This brings me to another issue, which is how these MPs can get elected in the first place. Clearly, there’s something wrong with the election process and these include money politics and lack of time for people to really know their representatives. A major overhaul of the process is no longer a choice, but a necessity for Indonesia.

The Importance of Looking Beyond Mistakes

An excellent answer by Senator Edward M. Kennedy in his memoir on why we shouldn't sideline a person just because he has committed mistakes:

"Some people make mistakes and try to learn from them and do better. Our sins don’t define the whole picture of who we are."

How Far a Book Title Tells You About a Politician?

While browsing books at a local bookshop in Jakarta, I came across a book about Jusuf Kalla titled “Ambon is peaceful and Aceh is safe due to his magnanimity.” For those of you who don’t have any background information, here’s a summary. Jusuf Kalla is the current Vice-President of Indonesia. He took part in the recently concluded Presidential election as one of the Presidential candidates for the period 2010-2014 but lost the election to his current boss, SBY. Jusuf Kalla’s support base is outside Java, particularly the 2 regions mentioned in the title of this book.

Personally, I find the title of this book inappropriate because it seems to give the impression that he could have mobilized the masses in those regions and causes political turmoil in Indonesia if he wanted to. And Indonesians ought to be thankful that he didn’t do it. As a respected politician and current holder of the 2nd highest position in the land, being magnanimous is a fundamental requirement, not a choice and hence, there is really no need for one to promote that he has the trait. Actions speak louder than words.

If this title is indeed given the go-ahead by Jusuf Kalla before publication, then we should really ask if he is suitable to be a public-office holder because the title of this book is nothing less than a threat and a tool to self-promote his magnanimity. Any politician who truly cares for the people would not have agreed to the use of such title.

Slow Down, G20!

I am amazed that in the G20 meeting last week, leaders of some countries such as France and Germany were proposing that participants started to explore some exit strategies with regards to the stimulus package put in place in response to the financial crisis. Although France and Germany are officially out of recession and may have better use for the resources previously allocated as part of the stimulus package, I think they should slow down and review more indicators before making such bold proposal.

2 main reasons justify my view that such proposal is unwise. Firstly, although green shoots have started to appear in some economies, they are, as the name suggests, still “young”. Policies which are ambiguous in nature may cause these shoots to wither, resulting in another round of recession. Under such circumstances, recovery will most likely be W-shaped rather than V or U. Secondly, there are after-effects of recession such as unemployment which must be taken care of. Critics may say that as global economy recovers, all these will self-correct. I agree with this statement but I believe it is the responsibility of every government to make sure that this self-correcting period is as short and as painless as possible to the people. Without government intervention or more appropriately, government aid, the self-correcting period may be longer and more painful.

In view of these 2 reasons, I will advise leaders not to think about exit strategies at the moment. There are still many things to do before exit strategies should become a main discussion point. Currently, policies should remain expansionary and confidence-boosting. Any opposite moves will greatly blunt all the efforts that have been put into ending this crisis.

China's Miraculous Economy

I have always been wondering about the great accuracy of China’s prediction of its economic growth. While there are often differences between the predicted and actual economic growth made by various countries, China has always been spot-on. If the Chinese Government says that economic growth for the next quarter is predicted to be 10 % for example, it is guaranteed that the actual economic growth will be 10% if not more.

I find this phenomenon intriguing because numerous factors such as consumption, investment, government expenditure and net exports contribute to the measure of economic growth. No matter how capable a Government is, it is near impossible to control the actual numbers that reflect these factors because it is the behavior of the individuals that ultimately churn out those numbers. Unless we live in a machinistic society, it is highly costly and hence ineffective to monitor every single person to ensure that he/she fully abide by the rules that have been set by the Government.

I finally obtained my answer when I read an article in The Business Times titled “China’s growth – economic or accounting miracle?” In the article, the writer shared that Dr John Makin, a visiting scholar in the American Enterprise Institute had written in another article that China’s economic statistics are based on recorded production activity rather than expenditure growth which is made up of the factors I mentioned above. This means that things such as disbursal of funds and shipments to retailers rather than funds actually being used and actual sales by retailers to ultimate consumers respectively are recorded as GDP growth.

With such accounting methods, it is not a wonder or a miracle that China always achieves the target that it has set.

The Interesting Relationships between China, Taiwan and Dalai Lama

For as long as I can remember, China has always strike hard on countries or unclassified entities that appear to show support to those it labeled as enemies of the state. Actions taken by the Chinese Government range from those categorized as the norms in the diplomatic world to those branded as young kids throwing tantrums. Regardless of the actions chosen by the Chinese, we must say that they do strike sufficient fear on the would-be recipients that they usually back down from their initial stance. And such reactions are expected to become more pronounced considering China’s rising political and economic clout.

Occasionally though, there will be those who try to show that they are not under the Chinese thumbs. President Nikolas Sarkozy of France is one such man. He decided to proceed with his arranged dialogue session with Dalai Lama despite knowing full well the potential repercussions by the Chinese in response to his actions.

If you think of Sarkozy as a brave man, you will definitely agree with me that President Ma Yingjeou of Republic of China (the official name of Taiwan) is an even braver man. Unlike France, which is obviously not considered as a breakaway province by Communist China, Taiwan is and the successful visit by Dalai Lama to Taiwan could be clearly regarded as an embarrassment to the Chinese Government because it would send a signal that if the Chinese can’t even control what it regards as domestic affairs, how can it request to be given more say in international affairs.

One would expect a very strong response from the Chinese but so far, response has been surprisingly mild. Besides making some statements to show its displeasure to the visit, there have not been massive military exercises. There have not been clawback or annulment of agreements made by the 2 sides. The main reason, I am guessing, is China’s hesitance to take away the punch bowl in the midst of the party. Since his election, President Ma has made good his promise to build better relationships with Mainland China. A handful of agreements have been signed. Numerous more are in progress. Throwing tantrums will only mean falling into the trap set up by the opposition DPP, giving them the opportunity to badmouth the KMT and hence, prolonging the timeline for eventual reunification, a case of shooting its own legs.

In addition, the relevant parties have also been mature enough not to politicize the visit. President Ma and senior government officials have mentioned that they will not be meeting the Dalai Lama during his visit. The Dalai Lama himself has said clearly that his purpose for coming to Taiwan is to pray and give support to victims of Typhoon Morakot. He has also cancelled the press conference that he is supposed to participate in. It seems that the China-Taiwan relationship has indeed reached a higher level, thought impossible in not too distant past.

The Virtue of Farsightedness in Policy Formulation

When it comes to policy formulation, a recent article by New York Times has taught me an important virtue: farsightedness. In summary, the article talked about the existing state of Florida that is not very rosy. The State has always depended a lot on migration flows (a 1924 constitutional amendment banned a state income tax, relies heavily on sales and property taxes, which are more closely linked with population growth). With foreclosures and employment, things are now going the other way and have put the Sunshine State in a difficult position as it means that the State Government now has trouble collecting sufficient taxes to sustain State spending. Changing the policies now to start collecting income taxes will help to replenish State coffers but it will at the same time, induces even more people to migrate out of the State.

Here’s the morale of the story. Although it is true and imperative that policies reflect the current needs of the society of interest, policy makers should also place special attention on the possibility of the need to rectify/ remove existing policies and craft new policies in response to changing needs of the society over mid to long-term.

Policies that are out of sync will have negative impacts on various stakeholders of the society. For changes that are popular among the masses, effecting the changes when it is relatively late may not be so bad afterall because the fact that it is popular means it can blunt the negative impacts generated prior to the changes. An example of such policy change is a cut in income taxes. However, for changes that are likely to be unpopular among the masses, effecting the changes late may serve to augment the negative impacts that are already in motion. An obvious example is a rise in income taxes.

When changes are unpopular, it is better to enact it when negative impacts of existing policies have not set in because then, it will be like pricking one with a needle as compared to piercing one with an arrow/ a spear. And to do that, tools such as rigorous scenario analysis may be extremely useful. It involves modeling different potential scenarios based on various parameters and testing how policies can respond to the respective scenarios. I am not very sure if this has been taken into consideration but the timing policies are effected is an integral part that should not be put aside, less we have a repeat of Florida.