THE CHRONICLES OF A CAPITALIST LAWYER

RANDOM THOUGHTS OF A CAPITALIST LAWYER ON LAW, ECONOMICS, AND EVERYTHING ELSE

  • Moral Violation and God's Punishment: The Missing Link


    The argument that moral violations invite God’s punishment (such as in the form of natural disaster) is a famous one. In a way, this argument is usually used by its proponents to support moral enforcement. Since God’s punishment will be very costly to all of us, it would be better if we spend our resources to maintain the good morality of society.

    The question is: Is this a plausible argument? The quick answer would be no. Some of the arguments against moral enforcement have already been set out in my previous article. This time around, we will try to take a look at this famous religious foundation of moral enforcement.   

    Saying that God might punish the people for misbehavior and moral violations is not necessarily incorrect. There are certain instances in the Holy Book that give us examples of God’s harsh punishment to those who oppose God’s rules. So we have some precedents here.

    But we need to dig deeper and try to understand the major aspects of those precedents, at least from Islamic point of view. All of those cases happen in the distant past where the prophets and their supporters are minorities, they involve a situation where the prophets have directly informed the people about the possible punishment from God, and there are also preliminary warnings from the nature indicating the coming of a disaster.    

    What can we derive from such cases? God practically works in accordance with modern legal conceptions, i.e. no law shall be enforced to the people without proper and timely public disclosure. By proper, I mean that the law has been disseminated in a way that is understandable to the public. After all, you cannot expect someone to follow your order if they do not have any capacity to understand such order.

    Of course this will be problematic for our modern age since the last prophet of Islam died more than 1,400 years ago. There are no longer direct messenger of God that can actually inform us precisely what God really wants.

    Now, some might argue that the existence of prophet is no longer necessary since the prophet has left us the Holy Book. That might be plausible but not sufficient. Based on the precedents provided by the Koran, God’s punishment was enforced to society where no record of systematic holy book was available. Interestingly, for societies that received a systematic holy book, there is also no record of direct punishment from God.   

    One then can argue that when a society have a systematic rules of moral values, God gives the chance to such society to settle their own problems. Whether they will follow such rules or whether they will prosper or not is simply another case.

    Notice also that once we discussed the history of Islam, we no longer see any threats of punishment from God and the history of Islamic civilization works in accordance with the laws of nature. Some existed for a long time and prospered, some were crushed. But at all time, the civilizations depend entirely on how good they cope with the situation and condition, including in this case, how they apply and enforce the rules.

    And I think this is the correct interpretation. In a world where a prophet still exists and can directly deliver the heavenly message to all of us, people can easily understand what God wants. Then it would be logical for the people to comply with God rules of morality and for God to gives punishment based on a fair warning mechanism.

    But without a prophet, rules become rationally indeterminate, namely that there are various ways to read the provisions of such rules and how to enforce them in practice (i.e. whether they should stay as moral rules or whether they should be formally turned into laws).

    Without any practical authority to determine the absolutely correct interpretation (since no one can speak on behalf of God), how can we expect a fair God to impose punishment in the form of disasters against indeterminate moral violations?          

    Furthermore, there is no way we can actually know whether a disaster is a part of God’s punishment. First, without any authority from God, making the claim that a disaster is a form of God’s punishment is as easy as making the claims that cats and dogs are spies from Mars.

    Second, we can actually say that in terms of fairness, the overall distribution of natural disaster might be fair enough, i.e. that no one in this planet is completely safe from the power of nature. This means that whether you are good or bad, disaster may always occur against you. So how should we interpret that?

    Thus, we should stick with such fact and accept the notion that there is indeed a missing link between moral violations and God’s punishment. Sure, you can always make your own claim, but it is not good enough to justify any moral enforcement attempt.
  • Human Capital and Neoliberalism


    Around two weeks ago, I had an opportunity to attend a debate on Neoliberalism Thought at the University of Chicago between Gary Becker (Professor of Economics at the University of Chicago), Bernard Harcourt (Professor of Law and Chair of the Political Science Department at the University of Chicago) and François Ewald (former assistant to Michael Foucault and Professor of Insurance at Conservatoire National des Arts et Métiers, Paris). I think the quality of the debate is very good and it would be a pity if I don't share the ideas raised in such debate in this blog.

    First of all, the debate spins on the idea of Homo Economicus or the Economic Rational Men by Gary Becker. Michael Foucault, a famous French philosopher and historians, believe that Gary Becker's idea on economics rationality provides the necessary theoretical foundation of Neoliberalism. This is interesting because usually Neoliberalism is more associated with political economic thoughts rather than pure theoretical economic thought.

    I think even most of the time, when Indonesian people talk about Neoliberalism, they think about the idea of excessive free market, non governmental intervention, injustices by corporations and dictators, etc. Of course, I heavily doubt that this is the correct interpretation of Neoliberalism since pure Capitalism does not support any crony capitalism, dictatorism, business without liabilities, and so on. See my previous post on this issue here.

    For now, let us return to Foucault ideas. He is a proponent of the idea that history is determined by the power relationship that controls men. Law and morality are things that are defined by those who have power and authority, and therefore they might be simply an illusion for the society. However, Foucault finds some consolations in Gary Becker's concept of Homo Economicus, which according to him is liberating.

    Gary Becker, which is also a Nobel Laureate, is the proponent of idea that the science of economics can be used as a powerful tool to analyze almost all, if not all, of human behavior and activities. He introduces the use of economic analysis on crime, family and discrimination and is also considered as a part of Law and Economics development at the University of Chicago.

    Within Becker's theory, human is viewed as a rational being that always wants to maximize his own interest. It does not mean that human has a perfect capacity of calculating the entire costs and benefits of his action. It simply means that when they are making their decision, they pay attention and respond to incentives, and thus, to certain extent, human behaviors are predictable.

    A separate note though, even Becker agrees with Foucault that a perfect rational men is a fictional concept. What matters is that the theory is useful to understand the world in an insightful way by taking certain aspects of human behavior and make a simple model. After all, all theories are fictions, and a good theory of fiction is the one that works the best among many other fictions.

    Then, why this kind of theory is liberating? According to Foucault, economists are seekers of truth, their analysis is not based on moral or legal issues, rather they focus on human behavior and incentives, and they also prioritize liberty (through free market concept). This is important for Foucault who sees the possibility of maintaining order without any coercion or doctrine as presupposed by laws and morality.

    But the Neoliberalism view of Gary Becker is not totally free from any problem. Although it may be a liberating theory it can also be used to suppress the people and here we are moving to Gary Becker theory of Human Capital which is an essential part of Neoliberalism. Becker believes that human capital is very important, i.e. investing in people, making them to be a better and more productive person which will contribute to the welfare of the society.

    The problem with that view, at least according to Harcourt and Foucault, is that once human is viewed as a part of capital, the government may favor certain group above other groups, discriminating and investing only in people who will produce the highest benefits and left the ones who are bad to suffer in the slumps. An example would be the case of mass incarcerations in the United States that target most of African Americans and poor people based on various criminal actions. Eugenics can also be a problem here since there was a time where the Government of US actually allow the sterilization of imbeciles and people with mental disorders.

    Furthermore, viewing human as only a part of capital production could be degrading, i.e. human is viewed like a machine with the sole purpose of producing more capital and whose value is solely determined on how much capital will be produced and accumulated by him in the long run. I take this as the modern critics of Neoliberalism and Capitalism in general.

    Becker's response was simple. His theory on human capital is established to liberate the people and while he agree that some aspects of economics theory on production and capital can be used to analyze issues on human capital, human capital is still a separate subject (and thus the reason why he makes a separate class on human capital in the University of Chicago).

    From any point of view, human cannot be fully compared with machines. We can put machine in the warehouses and easily disassemble them whenever we want, we can't do that with human. Furthermore, the theory put a lot of stress in building human capital so that everyone may reap the benefit of social welfare. It includes investment in education, on the job training, health, etc.

    The most interesting response from Becker is that his theory of human capital focuses on efficiency, but most of the time, things that are efficient, are also equitable. Through his theory, Becker want to show that human is the most important part of our capital. By investing in people, we hope that they can develop themselves and free to make their own life decisions without any interference. He also notes that there is an underinvestment in poor people and that is actually an inefficient thing to do, since better human capital always lead to better welfare maximization.

    I completely agree with Becker's notion. This is indeed the main purpose of introducing the concept of human capital, preserving freedom and reducing paternalism, finding the most efficient way to allocate resources among the people. And I think this should be the main idea of Neoliberalism. It is just too bad that politicians and even some academics are using this concept in such a misleading way that they confuse the original concept of Neoliberalism that focuses on liberation and freedom of the people with crony capitalism, dictatorism, and the freedom to do anything without any legal liabilities which are not even parts of original concept of Neoliberalism.      
  • The Impossibility of Moral Enforcement


    Let me start this post with the claim that I am a legal positivist, meaning that philosophically, I believe that the existence of law is based solely on social facts and that a legal system can validly exist without any moral basis. Note this, it doesn’t mean that the law cannot contain any moral values, it simply means that law can be separated from morality issues in order to exist.

    This separation is crucial to understand why I take the position that pure moral enforcement would be an impossible attempt. I will also use the concept of separation of moral and legal issues in Islamic law to support my argument in this post.

    As you may be aware, this world is full with people who believe that the morality of a society must be upheld and enforced even when there is no legal rules relating to such matter. Take the example of Lady Gaga’s concert in Jakarta.

    I am not talking about the thugs who demand the concert to be cancelled since based on the facts on their usual practices, I don’t think that they are motivated by morality issues. It would be more accurate if we explain their motivation from pure economics issues.

    What I am talking here are people who take the issue at face value and believe from an internal point of view that Lady Gaga’s concert adversely affects the morality of our nation and thus encourage the legal authorities to conduct morality enforcement by prohibiting the concert even when the legal basis is ambiguous or even non existent. 

    Suppose that no legal rules exist concerning such matter. Can morality be simply enforced within such condition? The answer would be no.

    First, different with legal rules which are usually accessible to the public and have more certainties with respect to their contents, moral rules do not have clear standards and authorities to which one can ask for a final judgment.

    Second, legal rules exist in order to coordinate the behavior of the people. They exist as a response to social net loss caused by certain actions. While morality rules deal with decencies, things that are good to be followed by a person, where breaching such rules might cause disagreement from other people but not strong enough to justify enforcement (which would always involve costs).

    Here are some examples from Islamic law provisions. Eating pork and drinking alcoholic drinks are both prohibited, yet penal sanctions exist only for being drunk. Why?

    A simplified explanation would be: Because the net social loss of eating pork is questionable and might only affect people in a personal level while drinking problem creates social loss, especially in terms of accidents. Even the United States admits that drinking is indeed a social problem.

    Another example would be the law on adultery. To accuse someone for adultery, you must provide 4 male witnesses with the highest standard of human being. Failure to do this would cause the other witnesses to be deemed of giving false testimony and there is a harsh penalty for that action.

    Interestingly, the privacy rule in Islamic law is also very tight. Not only that you are forbidden to enter into someone’s private property, you are also forbidden to even spying at someone’s house. Breaching such rule will allow the home owner to hit you in the eyes.

    In other words, the entire legal rules on adultery is structured to deal with adultery cases practiced in the public and those that fall under the scope of privacy will be considered as a moral issue. Notice this: Islamic morality will never deem adultery as a permissible act (you are still responsible to God for your personal action), but legal enforcement will only be conducted when clear social loss is established, say due to the public act.   

    This brings us to the third issue. It is possible that moral enforcers might still argue that although breach of moral rules do not cause clear social losses, it still causes losses, at least to the people whose moral values are being harassed by such act.

    I agree, this can be considered as a loss. But since the losses are pretty much subjective and solely related to the moral enforcer’s taste of decency, it is absolutely necessary that these moral enforcers adhere to the strictest standards of good human being. Why?

    You can’t claim that you experience losses because some people are breaching the values that you perceive so highly when you don’t take such values seriously either. So this is a completely different issue with legal enforcement where such standard is not necessary as I argued in my previous article.

    Now the final question for these moral enforcers is: Can you really adhere to your own principles?

    Remember, God hates hypocrites more than people who consciously breach moral rules and admit that they are wrong.  

  • Fairness Versus Efficiency in Law Enforcement


    A recent blog post has caught my attention. It describes another usual day in Jakarta, complete with major traffic jams and motorcycle drivers using the curb lane. The writer, a pedestrian, says he was in a fight with a motorcycle driver who wanted to pass him and kept asking him to step aside.

    Of course, the request was ridiculous. The lane has always been reserved for pedestrians, and they don’t have any legal obligation to let motorcycle drivers use it. Just when the fight was about to turn physical, a police officer came to break things up.

    At first the officer scolded the driver, saying he was violating the law and could be fined. The driver simply replied that he would accept the punishment as long as the officer also fined other motorcycle drivers using the curb lane, and there are many of them.

    Upon hearing that, the officer turned and instead scolded the pedestrian for his refusal to let the driver use the lane. It was a perverse result, showing that the officer was regrettably taken by the driver’s misleading argument.   

    We hear this kind of argument for fairness all the time. If you want to punish me, you should also punish the other people who are involved in the same crime. Or if you want to punish me, you should show that you’ve never done the same thing yourself. Is this argument valid when we’re talking about law enforcement?

    The answer is no. From a legal perspective, I’ve never seen any serious legal philosophers who support the idea that in order to make a valid legal enforcement, legal enforcers must be saints and ensure that all people who commit the same crime will be punished at the same time.    

    From an economics point of view, it would simply be inefficient to have that kind of rule. Imagine the costs if we had to ensure that all legal enforcers possessed the moral capacities of a prophet, being a perfect person who absolutely adheres to the highest standard of moral and religious principles. Where can we find such a great  person?

    Pakistan would be good case study. Pakistani legal officials, who believe they act in accordance with the correct version of Islamic law (unfortunately, it’s not correct), have established a strict rule for becoming a witness in homicide cases. People can only be witnesses if they have certain moral qualities, which include, among others, praying five times a day, never lying and maintaining good hygiene.

    The result? No one has ever been punished for murder under Pakistani Islamic law. Thankfully, that does not mean murderers can run away from their liabilities, because Pakistani legal officials still use the witness standards established under the English law, which is also applicable in Pakistan. But you see the point.

    When police officers are dealing with cases like the one I describe above, they should realize that they can in fact punish a motorcycle driver even if they don’t do the same to other violators. By punishing one driver, they can set an example that they’re going to enforce the law, even if it’s in a random or selective way.

    And such enforcement would be efficient. There are costs for law enforcement, and the optimum crime level might not actually be zero because at certain point, the cost for law enforcement might outweigh the benefits that we expect from reduced crime. This is called diminishing marginal returns.

    Of course, there are situations where we might be required to increase the law enforcement costs for specific crimes (say, corruption). But for traffic violations? Having random or selective enforcement in this case would be sufficient to give the correct signal to violators.

    Sometimes, uncertainty is effective to deter crimes. If you don’t enforce the law at all for traffic violators, they’ll think it’s fine to commit a violation as long as everyone else does, too. But if they know they might be punished, even if it’s just a possibility and not 100 percent guaranteed, they will think again.

    Such uncertain law enforcement will increase the costs of violation and make people more likely to comply with the rules. That’s why law enforcement is still necessary, even when the process is random or selective. So next time a police officer faces a similar case, he should just fine the guy and say to him: “Well, tough luck, sir!”
  • Labor Welfare and the Law of Supply and Demand


    Discussion on labor welfare and how capitalism abuses them is always a controversial issue. Some people argue that the existence of capitalism has usurped the quality of labor life, forcing them to live below standards, all for the sake of maximizing the profits. But is this claim correct? Does free market economy impose a significant burden to labor? My answer is no and we can explain this problem though the lens of the Law of Supply and Demand.

    The basic economic concept that we must understand here is that whenever the supply of a product is rising but the demand is stagnant or cannot follow such supply, price tends to fall. The reason is simple, if we have a oversupply of products in the market while the demand is minimum, the seller will be pushed to reduce the products price in order to induce more buyers to purchase the products. Similar thing is happening in Indonesia when we talk about the supply of labor, especially the blue collar workers having low education level.

    Consider this fact, Indonesia is the fourth largest country in the world in terms of population. From such a huge amount of population, how many people had the opportunity to get high education? How many industries that can absorb a huge numbers of population as their labor? Theoretically, if the number of labor intensive industries are not big enough, assuming that the amount of blue collar workers are huge, the labor salaries will be pushed down.

    From the industry perspective, why bother paying the labor much as long as they can find easy replacement of the labor and to the extent that they can find many workers who are willing to work for a cheap cost in the market. Consider the example in the market for lawyers in big corporate law firms. This line of job offers a lot of compensation (of course in accordance with the level of work difficulties and intensity).

    How could that happen? First, the resources for high quality lawyers are limited. Second, there is a huge competition between big law firms to get and retain the best talent. Since the demand is high while the supply is limited, we can easily conclude that the price of the product, i.e. the salary of corporate lawyers will increase substantially.

    Now we turn to the main problem in this article. How could we increase the welfare of the labor? The short term solutions have already been done in Indonesia through its labor regulations. We have minimum wage laws and our labor position is quite protected in a sense that companies cannot fire their employees easily. Such policy limits the ability of the companies to find new cheap talents and will force them to invest more in the existing workers.

    But such policy is not without any consequences. The fact that there are minimum wages and job protection is good for people who have secured a job. For people who have not secure a job, these so called "protections" will turn out to be problematic for them. Forcing a minimum wage might not be in line with the companies budget and they may compensate such problem by taking less workers. Furthermore, since they cannot easily fire a worker and find a replacement, they have more incentives to ensure that the current worker will stay with them, decreasing the level of taking new labors unless the companies are planning to increase their output by making new investments.

    That is why we need a long term policy that will work for the future. There are two ways to affect the price of a product. We can adjust the demand side, or we can adjust the supply side. In terms of supply, it is imperative that we pursue the policy of having an effective birth control. Like it or not, birth control is very important. If we talk about mere products, we can simply put the excess products in the warehouse, but we can't do that with human.

    Another thing that can be done is of course to invest more in human capital, increasing the education level of the population with a hope that this policy will reduce the number of cheap labors in the long run. I will not discuss though in this article what would be the best way to increase investment in human capital and how to finance the education costs as I already write the basic ideas here.

    From the demand side, we can try to give more incentives to entrepreneurs and capital owners to invest in labor-intensive industries (at least in the short run). This brings us to the idea that the government should invest more in building infrastructure and reduce the costs of doing business in Indonesia. Through this policy, we hope that the level of demand can be increased to absorb the labors up to a level where companies are competing to get talents. As I discussed in the case of corporate lawyers, competition of getting the best talents will be beneficial for labor. But this will not happen if the education level is low and the industries scale is not big enough.

    I believe that the most efficient way to improve the labor welfare is through the free market process. Government can surely help us in achieving that goal, but in order to do so, it should use the correct method and policy. Asking companies to pay more without any justification is simply a bad idea. It gives the wrong incentives and we cannot expect that such policy will actually improve the welfare of the society in the long run. Instead, we should pursue a policy that will work well with the Law of Supply and Demand. So the final question is: what will we choose?
  • Impoverishing Corruptors, Why Not?


    The idea of impoverishing corruptors is not a new one. In fact our Anti-Corruption Law allows the state to confiscate the assets of convicted corruptors and requires them to prove that their assets are not the product of corruption in order to get them back. But this idea has been generally accepted with mixed feelings. 

    Some people believe that seizing the assets of corrupt individuals that were not actually acquired through corruption is a violation of human rights, especially when the state takes those assets for good. For them, the state should only take assets of corruption. I think this is a ridiculous idea, and I will tell you why. 

    Sanctions are sanctions. Why do we have sanctions? Because we want to impose costs on the criminals, we want to let them fully understand the notion that crime does not pay. Because if crime pays, people will have more incentive to commit crimes.

    To achieve that, we must ensure that whatever benefits criminals receive, the state will take it back, and impose additional costs on them, making clear that the costs of criminal activities will always outweigh the benefits.

    Furthermore, the lower the probability of getting caught, the higher the sanctions should be. Why? This is to compensate for the fact that some people might not get caught and therefore will suffer no costs for their crimes. Of course, we need to take into account this probability and let people know that if they get caught they will receive a higher punishment. 

    Having said that, I will argue that a prison sentence is not a cost-efficient type of sanction. The benefits of sending criminals to prison are highly questionable. The costs are very clear. First, taxpayer money is being used to pay for these criminal lives in the prisons. Second, there is no guarantee that prisons will change them into better people (at least in the current conditions in Indonesia). Third, there is always a possibility that richer inmates can bribe prison guards for their own benefit, simply because being a prison guard is not a well-paid job.

    People should also understand that sending people to prison is actually a violation of human rights; you restrict the freedom of the criminals. Now if you can agree with prison sanctions, how could you say that taking the assets of criminals is against human rights? That does not make any sense.

    I think this is the right time to think carefully about what type of sanctions we should develop in Indonesia and how we can utilize each type of sanction to deal with various types of crimes. Using prison and fines as the main sanctions is no longer enough. After all, all crimes have their own characteristics and underlying incentives.

    The incentives that lead people to corruption might be entirely different from the incentives that lead people to, say, murder or rape. Understanding the incentives of these different crimes will help us in designing effective and efficient sanctions.

    So let us return to the case of impoverishing corruptors. Money and other types of valuable assets are the bloodline of corruptions. Based on a simple economic analysis, we can say that people engage in corruption because they perceive that the benefits of doing so will be higher than the costs.

    Suppose the value of your corruption assets is $20 million. Assuming that the costs of the sanctions multiplied by the probability of being caught is still lower than $20 million, economic analysis dictates that rational bad men will engage in corruption. This means that even getting back the whole $20 million would not be enough!

    In addition, the people who argue against impoverishing corruptors say that the state should just recover the stolen assets. Again, this is clearly not enough. For each batch of stolen assets there are various opportunity costs for the government where the government could have invested those assets to generate more revenue. There are also costs for recovering those stolen assets. The law  enforcement system is not free.

    Thus, it makes sense that the state should not only recover the stolen assets, but also the expected profits and interest that it would have received if those assets could have been used by the government in the first place, plus the whole cost of the criminal proceedings. Meaning that if a corruptor takes $20 million, he must be required to repay a lot more than that.

    I do not see any good reason why we should not impoverish corruptors. Sending them to prison without taking their assets would only add a burden to the state budget, and is not efficient or maximizing welfare. It’s time to think like economists when dealing with pricey legal issues.
  • Why The Constitutional Court is Wrong on the Cigarette Case


    The latest Constitutional Court decision on the Health Law is very surprising. It holds that public places must provide special places to smoke on the basis that people have the human right to smoke. I find this idea as simply preposterous and I am deeply confused on how come the Constitutional Court could make such decision. There are two main issues regarding the decision. First, whether smoking can be considered as a part of human right that is guaranteed by the constitution. Second, whether private parties can be forced by the state to provide facilities for smokers.

    Let us begin with the first issue. Smoking is bad for health. No doubt about that. Many countries have already banned the sale of cigarette or heavily taxed the sale, giving less incentives to people to smoke. Even further, many countries have also banned smoking in closed public areas. If you want to smoke, you do it outside, be it in a hot summer or a freezing winter. Even in the United States I can confirm that it is very rare to see people smoke, even in opened areas.

    Having said that, it is puzzling that the Constitutional Court can say that smoking should be considered as an inherent part of human rights. Since when? I do see the right to live, but the right to kill yourself slowly? Well that's a new thing. Constitutional Court can of course interpret the constitution, but it does not mean that they can develop a new right out of nowhere. Every junior law students would understand that the basic texts of the laws should be respected as they are unless there is a very strong reason to deviate from using such texts.

    The Constitutional Court further argues that because the law has not deemed smoking as an illegal activity, it means that smoking is a right. This is completely wrong and illogical. Saying that an act is not prohibited does not automatically mean that such act becomes an inherent right of human being. If the law says that a dangerous activity is temporarily permitted, it does not mean that the law say that people have the absolute right to do such activity all the time. Instead, it should be considered as a special case, an exemption.

    People know that cigarette industry contributes a lot of incomes to the state. However it is not clear whether the benefits of having the industry outweigh the costs imposed to the citizens health and the opportunity costs in case the money used to buy cigarettes can be directed to other useful means. That will not be the focus of this article, but I can say that it can shed some lights on why smoking is still permitted in Indonesia. There are too many stakeholders involved.

    Furthermore, if we can develop a right to hurt ourselves, I do not see why the law should prohibit people to use drugs or to perform euthanasia? As long as they agree to do so, why punish them. In case of euthanasia, why the criminal code punishes people who assist someone in their suicide attempt? Saying that the right does not exist because the laws deem these acts as illegal will not make any sense. If the Constitution says that the right to die or to hurt yourself exists, the Constitutional Court should declare that the above laws illegal for contravening the constitution. As simple as that. I wonder though whether the Constitutional Court will be brave enough to do that.

    Now some people argue that actually smoking is not dangerous to our health, that it is a part of a bigger conspiracy, and therefore the argument that approving smoking is the same with approving the right to hurt yourself should be rejected. Again, I don't see any good reason why there should be a conspiracy for banning cigarettes. Basic economic analysis can show the flaws of this conspiracy theorist.

    In a capitalistic world, profit is the most important thing. People can even produce hazardous materials for the sake of profits, as long as they compensate the victims for hurting them (due to the hazardous materials). In law and economic terms, we call this as the liability rule. If that's the case, why many developed states should bother with the cigarette industry? As long as they can compensate the victims, who cares. Furthermore, as long as they can pay a huge amount of money to the state in the form of excise tax, why restrict them from selling the cigarettes?

    The answer is quite simple. From economic points of view, these states deem that the costs of having the cigarettes industry in their countries outweigh the benefits. Cigarette companies are not stupid, they have a very strong lobbying power, and yet, as an interest group, they fail to induce the developed countries to maintain their existence. This means that the costs of having them in such countries are so high that even the benefits that they provide cannot justify their existence. Each countries might have different views on this issue, but you can see the point.

    Now, let us move to the second point. Can the state forces private parties to provide special places to smokers? I am a defender of people's freedom and I will clearly say this: the state should only be permitted to force private parties and its citizens to provide something for other people in special cases where the benefits are clear and outweigh the costs, and the provisions of such facilities are highly important for the sake of the people. None of these points are satisfied by the recent decision of the Constitutional Court.

    And I find this fact as deeply problematic. How could we let the state force us to provide something without clear benefits? It's already perverse enough that we must acknowledge the right to smoke as a basic human right, and now the Constitutional Court says that we should also provide the facilities for the smokers? I mean, like really?

    Some people say that since the majority of Indonesian people are smokers, it is fine if the state should provide facilities for them and that other non smokers should respect that. Well if you agree that the majority opinion should dictate anything in this country no matter what, you should not protest if we see cases where people using their status as a majority to oppress the minorities (like in the case of minor religious sects or LGBT groups). Hey, we're the majorities anyway, it's your task to respect us, and we should be free to do what we want since we are the majorities. You do realize that adhering to such principle would be a disaster.

    Every aspiring law students realize that absolute power tends to corrupt absolutely. That is why we need a check and balance mechanism. People are not angels, and if we always let the majority to decide anything without proper counter measures, that would be a perfect recipe for oppression. In short, the latest Constitutional Court decision is regrettable. Making a wrong policy is one thing, after all not all judges are equipped with such skills. But making a wrong legal interpretation that every first year law student should know? That is absolutely unacceptable. Well, the fight is still going on. Let us see how the central and regional governments will deal with such issues.
  • The Law and Economics of Family Management


    I wonder how many people are aware of this, but our Legislative Board (DPR) is currently in the process of drafting a law on gender equality. I take this news as a positive, development and I hope that the law can be soon promulgated.

    What concerns me are the various critiques made against such laws based on the notion that women’s and men’s rights and obligations are not the same, especially in the family. Thus, these critics urge that the state should instead maintain a division of tasks between men and women in a family, which of course has been stipulated under the marriage law.

    This is indeed a pity since there are two major misconceptions relating to the above notion. First, people may believe what they want to believe, but it’s outrageous to ask the state to regulate how people should manage their family matters.

    While Islam provides certain guidelines on how husbands and wives should interact and how they should manage their family, from a legal perspective, Islamic law does not provide any penal sanctions to a couple who chooses to use a different method of family management.

    This is in line with my thesis that Islamic law is efficient (research that I currently pursue). That is, while Islamic law provides moral guidance, it will only provide penal sanctions when there are clear net social losses caused by an act.

    A good example is this: There is a penal sanction for being drunk, but there is no sanction for eating pork, even though both are prohibited under Islamic law. Being drunk can produce a net loss to the society — even the United States acknowledges their drinking problem.

    But eating pork? While some might argue that the prohibition is related to health problems, in general, it’s a personal choice to either eat it or not. In short, it is your own responsibility to assess the costs and benefits of eating pork, including its effect on your own health. But that’s it,  there are no clear social losses caused by eating pork.

    I think the same view is also adapted by the current marriage law. While the law still tries to make a division of labor in the family, there is no sanction for those who do not comply with such a rule, meaning that people are generally free to choose what they want to do with their family management.

    This brings us to the second argument. From an economics perspective, it would be more efficient for a couple to decide by themselves on how they will manage family matters, simply because they know best about their own affairs. You can’t expect the state to be an all-knowing entity that can determine what is best for a person.

    I am not against women being housewives, but I am also not against women having a career outside the house. What really matters to me is that whatever the choice is, it should be made consensually between the husband and the wife. And to achieve such purpose, of course, they should have equal position.

    Imagine this, suppose you think that you want to become an engineer, and you are currently pursuing an engineering education. Suddenly, the government tells you that after further deliberation, they’ve determined that you are not suited to become an engineer, and that you should be a singer instead. Even worse, the government forces you to be a singer. Would you agree to be treated like that?

    I will say this: If the government has the capacity of God, is able to know everything up to the sub-atomic level and can predict the future with 100 percent certainty, I will support the idea that the government should determine what we should become — it should select only the best of the best, and those untalented people should just work as blue-collar laborers.

    Fortunately, the government does not have such capacity, and even we know that God does not force a person to follow certain paths simply because God respects human individuality. Various Islamic sources confirm this, such as the case of Noah’s son who refused to hear his father’s plea, and died during the great flood.

    Even a prophet cannot bring his own son to follow him. How come? Because each man is responsible for his own deeds, and God lets people decide how they will assess the costs and benefits of their own actions. That’s further evidence of the notions of efficiency in Islamic law. So let the family decide by themselves. Remember, you can preach, but you can’t force. It’s as simple as that.
  • The Age of Information Overload?


    A recent article in Gizmodo attracted my attention. The author told us that he lost his faith in humanity upon finding the fact that some kids actually thought that Titanic is only a fictional story. While I understand that the author was exaggerating his point. It still raises a fundamental question. Is this the age of information overload? Is this a good thing or a bad thing?

    The above story reminds me of a scene in Slumdog Millionaire where Jamal, the main character, was interrogated by the police officer on how he could answer the various difficult questions in Who Wants to be Millionaire Quiz when he does not even have a clue on who Gandhi was. And Jamal's answer was sensational, "I might not know who Gandhi was, but do you know the bicycle thief on the road in front of this police office?". In short, Jamal explains to us precisely that each person simply has his or her own niche in terms of general knowledge.

    And I guess in this age, having such niche is very important. You can't judge the knowledge of a common person only by the level of his general knowledge on certain events. Yes, it seems foolish that the kids do not know about Titanic. But consider this. Suppose you, a city dweller, go to a village where the farmers know how to produce milk and crops. You watch them do their work and then you are amazed when you finally understand for the first time how your milk and rice are produced.

    Now these farmers would probably think that you are an idiot based on their standards of knowledge. From the farmers' perspective they will say something like this: "come on, how come a man does not know how to take milk from a cow? It's common knowledge anyway". Though I doubt that they will lose their faith on humanity simply because you don't know how to get milk from the cows.

    An Economist, Thomas Sowell, once said that the best sign of modern development is the fact that modern people need less knowledge in order to maintain a good quality of life. In the past, in order to survive the world, a man must have different set of skills, he must understand the nature, how animals behave, how to produce crops, how to cook meat, how to build houses, etc. How about now? I bet that most of us don't know a damn thing about how to survive in the wilderness or how to produce our own foods and clothes from scratch.

    We simply depend on other people with better comparative advantages to produce those things for us and we do what we think are best for us in accordance with our own skills. And this is in line with economics rationality. Why bother spending our resources on something that can be better done by other people? Unless the benefits of doing so exceed the costs, we would most probably choose to do something else.

    And the law also works under the same logic. When we are trying to impose certain liabilities to certain people for negligence, judges are required to adopt a standard that is common to such people under their respective categorization. You can't impose a professional's standard to an ordinary guy in doing their job. Everyone should be judged based on his reasonable skills. Only then we can produce an efficient result.

    Even when we are talking about the standards of knowledge for professionals, we cannot expect them to know everything. As an example, I am quite confident with my knowledge on securities laws, corporate laws, and Islamic laws, but I am not an expert on say, intellectual property and real estate laws. And it would be foolish if I push my luck on those fields by giving formal advice to my clients without proper preparation. In fact, based on comparative advantages, it would be better if I just assign those intellectual property cases to other lawyers who are more knowledgeable than me (which is also encouraged under lawyers code of ethics).

    If we want to be concerned with our generation, I say it's not about the amount of knowledge that a normal person should have, rather we should put more effort on understanding and improving how people think. This is an age where knowing a lot of things is good, but knowing how to effectively find the sources of knowledge is better. What is really important is how people will utilize such knowledge in order to maximize the welfare of the society and produce efficient results.

    Thus, teaching people how to think should be the priority. How to analyze things, how to have a healthy skepticism on various issues and beliefs, how to induce people to think creatively and to focus on solution-oriented thoughts. These are the things that will redefine our society for many years to come. It would be useless if we have a lot of people who know a lot of things but don't even have a single clue on how to utilize such knowledge.

    So, forget about the Titanic issue. Whether it is based on true story or not might not be highly relevant anymore in the future. Instead, we should teach those kids to understand that people should do their best in reducing the level of human error in the transportation business in order to avoid a case like Titanic and how we can formulate a good policy to reduce such type of accident. One thing for sure, I still have a lot of faith in humanity.

  • The Protection of Criminal Suspects in Law and Economics Perspective

    Forthcoming in Jurnal Teropong Edisi RUU KUHAP 2015 | 23 Pages | Posted: 10 May 2015 | Date Written: April 28, 2015

    Public Choice Theory and its Application in Indonesian Legislation System

    24 Pages | Posted: 8 Oct 2012 | Last revised: 8 Nov 2014 | Date Written: October 8, 2012

    Special Purpose Vehicle in Law and Economics Perspective

    Forthcoming in Journal of Indonesia Corruption Watch, 'Pemberantasan Kejahatan Korupsi dan Pencucian Uang yang Dilakukan Korporasi di Sektor Kehutanan', 2013 | 15 Pages | Posted: 22 Aug 2013 | Date Written: August 18, 2013

    Legal Positivism and Law and Economics -- A Defense

    Third Indonesian National Conference of Legal Philosophy, 27-28 August 2013 | 17 Pages | Posted: 22 Aug 2013 | Last revised: 3 Sep 2013 | Date Written: August 22, 2013

    Economic Analysis of Rape Crime: An Introduction

    Jurnal Hukum Jentera Vol 22, No 7 (2012) Januari-April | 14 Pages | Posted: 12 Nov 2011 | Last revised: 8 Oct 2012 | Date Written: May 7, 2012

    DISCLAIMER

    As the author of this site, I am not intending to provide any legal service or establish any client-attorney relationship through this site. Any article in this site represents my sole personal opinion, and cannot be considered as a legal advice in any circumstances. No one may use or reproduce by any means the articles in this blog without clearly states publicly that those articles are the products of and therefore belong to Pramudya A. Oktavinanda. By visiting this site, you acknowledge that you fully understand this disclaimer and agree to fully comply with its provisions.