The Chronicles of a Capitalist Lawyer

In my post dated 26 August 2009, we have discussed the basic concepts of Libertarian Paternalism, introduction to better policy making, and examples of human errors with respect to daily economic activities. Today, we will discuss some useful guidelines in making better policies and how to implement such guidelines in actual life. The Six Guidelines of Better Policy Making According to Thaler and Sunstein, there are 6 basic guidelines for better policy making: Expect Error; Defaults; Understand Mappings; Give Feedback; Structure Complex Choices; and Incentives. Each will be further discussed below: 1. Expect Error I guess this is the first guideline to be considered by policy makers. Since most men make mistakes, a good policy will consider such fact and will ensure that the mistakes can be fixed in the easiest way. What is the actual implication of this guideline? While governments or private institutions can try their best to design a good policy, they must be

All right, this is indeed a hilarious post from Greg Mankiw. The statistics show that children from higher income families are getting higher average SAT scores, and some people claim that there is a correlation between income and better result of tests. However, Mr. Mankiw theorizes that the correlation is not on the income rate, but on the fact that smart people are making more money and these people pass their genes to their children, thus smart children comes from smart parents not from rich parents. Okay, I'm not a professional statistician, but when dealing with statistics, I always remember what David Hume, a Scottish philosopher, has taught us on making a conclusion from our experience: just because in your experience an act is always followed by the second act does not mean that there is a causality between the first act and second act. In Nassim Nicholas Taleb's wisdom (taken from his book "Fooled by Randomness"): " no amounts of observations of whit

Yes, according to Lucian Bebchuck , a law professor from Harvard Law School. A guaranteed bonus may, to certain extent, create distortion in determining the business risk of a company. By having the benefit to receive a guaranteed bonus no matter what the performance of the company, there would be a considerable pressure for the management to meet the company's business target or even exceed such target. As a result of this, the management may take unnecessary risks in doing the business just for the sake of getting better performance. We need to understand that in some cases, riskier business decisions may provide higher results, but they may also cause greater losses. When the results are losses, who would be the largest victim? The Company and also the shareholders. Further, Prof. Bebchuk theorizes that if the bonuses of the management were distributed based on the overall performance of the company, say after reaching a minimum amount of annual profit, the management will ha

To certain extent, the answer would be yes. Why? See here (it is in Indonesian language, but no worries, we will only discuss one article and I'll provide the translation below). On 9 July 2009, the Indonesian Government issued Law No. 24/2009 on the Flag, the Language, the National Emblem, and the National Anthem. The title says it all, so I don't expect to provide a summary of this Law in my blog. While I don't see the necessity to have this kind of regulation, I can understand that the Government is trying to increase Indonesia's profile, particularly the use of Indonesian language. Now, onward with the main theme for today, I have some concerns with the application of Article 31 Paragraph (1) of this Law, which states (unofficially translated): " The Indonesian Language must be used in any memorandum of understanding or agreements which involve state institutions, Indonesian government agencies, Indonesian private institutions, and Indonesian individuals

A Libertarian Paternalist is someone who believes in Libertarian Paternalism, but since I'm guessing that most people wouldn't even know the definition of Libertarian Paternalism, you can check the definition here . So, why are we discussing this issue? I have just finished reading a book titled " Nudge ," and a very interesting book it is. Made by Richard Thaler and Cass Sunstein (Professors of economics and law at the University of Chicago, respectively) this book introduces the movement of Libertarian Paternalism, a movement that supports governments and private institutions to adopt policies which can maintain or maximize people's free of choice while in the other hand influence those people to improve their life and important decisions, such as wealth, health, and happiness. The basic reasoning is quite logic, people make errors most all the time and in reality, there is no such a neutral design in making a policy, so why don't we maximize the possib

Related to my post on 18 August 2009 where I discussed how US lawyers and law professors make comments on a proposed regulation, after seeing another recommendations from several professors from Harvard Business School and Harvard Law School on the proposed amendment to an SEC Rule which would allow shareholders of publicly listed companies to have greater influence in deciding the composition of the board of directors and commissioners (" SEC Regulation "), I'm getting pretty interested with the actual content of this SEC Regulation. You can read the 250 pages of the SEC Regulation (which include the proposed amendments and a thorough review of such regulation from the SEC team complete with list of detailed questions asking for public comments) here , and if you are also interested to read the US lawyers' comments on that SEC Regulation for some additional insights, you may read the 40 pages comments here . Be warned however, considering the total pages of thos

This story is hilarious, particularly because people have many different views on whether a 19 years smart young girl should really go to a law school. Okay, I understand that in the United States, a law school is designed as a grad school, means that you need to at least have a college degree before you can enter into such law school. And, since I've never gone into a US law school, I don't know whether the education there is really hard or not. However, in Indonesia, you can go straight to a faculty of law of an university after being graduated from your high school. I join my faculty of law when I'm still 17 years old, and already start my career as a lawyer when I'm 21 years old. And that's very usual in Indonesia. I've seen many good young lawyers, they can do a decent job and will be even better with more experience from years to come. So what's wrong if a 19 years old girl chooses to go to a law school? I say, the younger the better. I believe that

This article is inspired from my discussion with Rob Baiton related to his post, Fatwa and Terrorism . The problem of terrorism is always an interesting theme for me, particularly because I absolutely hate terrorism (for whatever reasons) and because I wrote my thesis on the retroactive implementation of the Indonesian Terrorism Law to the 2002 Bali Bomb Case. In this case, retroactive implementation means that a law is being implemented to a case that occurred prior to the enactment of such law. In my thesis, I analyzed the Constitutional Court decision which annul the above retroactive implementation, and after conducting an in-depth research including on the historical background of the non-retroactive principle of criminal law, I disagreed with such annulment. To cut it short, for me, when we are dealing with extraordinary crimes, we should also use extraordinary actions to combat them. This is not a place for someone to say something like: "then what would be the diffe

I'm quite amazed with how lawyers and law professors in the United States involved in the discussion on a new draft of securities regulation. Based on the fact that 7 big law firms would cooperate to produce a 40 page of comments, I can safely assume that the US Securities and Exchange Commission (SEC), the equivalent of Bapepam-LK, the Indonesian Capital Market and Financial Institutions Supervisory Agency, is really paying attention to the comments of practitioners. Because if they don't care, I'm certain that those law firms would not even think to waste their precious billable hours for making such comments. Or, might this be a sign that those firms have some leisure time due to the decline of their jobs? Now, I wonder when would we do the same? I know that Bapepam-LK has already started to ask for public comments before they issue a new regulation, but I haven't seen any notably public comments to such draft regulation.

Have you ever wished for immortality? Do you want to live forever and ever, having the luxury of doing whatever you want without any time constraint? I do, but I guess that the chance for achieving such immortality is too slim to be even considered by any rational being. However, other than any mythological creatures out there, there is an entity in this world that might actually have the capacity to achieve immortality. By this, I refer to corporations. What Are Limited Liability Companies? While the definition of corporations might slightly differ between various legal jurisdictions, it has several basic characteristics, i.e.: corporations are legal entities established under the prevailing laws which have jurisdiction over such corporations (the domicile where such corporations were firstly originated); corporations are able to maintain their own assets and liabilities, and to conduct various transactions with other parties; corporations are "owned" by the sharehold

A short and very good story on the application of economic principles in day to day life from Greg Mankiw's blog. If you ask me Mr. Mankiw, my reply would be that the price in the private pier will go down based on the following reasoning: the increase price of the town pier will reduce the competitors for getting slots in the town pier; as long as such price is still cheaper than the price of slots at the private pier, those who are currently using the private pier will most probably move to the town's pier as right now there would be less competitors and therefore their chance to obtain a slot there is increased; thus, to maintain its clients, the private pier should provide a competitive price by lowering its own price.

In Part I of my article, we have discussed two of the major challenges that are being currently faced by the Indonesian Islamic banking industry, the taxation and regulatory issues. In this article, we will discuss the remaining two challenges, i.e the risk management issues and the segmentation and marketing issues. 1. Risk Management Issues We will start our discussion by asking this question: "Why murabahah financing sits at the top of Islamic banking financing products in Indonesia?" As of June 2009, the murabahah financing which involves a sale and purchase of assets between an Islamic bank and its customers with a deferred payments mechanism plus margin is the queen of all Indonesian Islamic financing products, comprising of approximately 57% of the total Islamic financing products. Meanwhile, the mudharabah financing (revenue sharing financing) and the musyarakah financing (joint venture financing) only comprise 21.6% and 14.5%, respectively, of the total Islamic

1. Introduction For quite a long time, it is very common for us to hear critics saying that the Indonesian Islamic banking industry has failed to capture a bigger market share in Indonesia despite the fact that Indonesia is the biggest moslem country in the world. To certain extent, this might be true. If we compare the total assets of Islamic banks (based on Bank Indonesia's Islamic Banking Statistic per June 2009, the amount of which is approximately Rp.55 trillion) with the assets of commercial banks (based on Bank Indonesia's General Banking Statistic per June 2009, the amount of which is approximately Rp.2,028 trillion), we will found out that Islamic banks' assets only represent 2.64% of the total assets of Indonesian banking Industry (excluding rural credit banks). True, that if we compare the current data with 2005's data, Islamic banks' assets have increased around 250%, but that is not significant enough if we see the total cumulative assets of the Indones