The Chronicles of a Capitalist Lawyer

Today, I attended a public lecture by Catherine A. MacKinnon, a world-known feminist and also a professor of law from University of Michigan, on Trafficking, Prostitution, and Inequality. I consider this lecture as a very important event as it gave us a clear understanding on the negative effect of trafficking and prostitution. I'll first summarize MacKinnon's arguments and then I'll provide a Law and Economic style of analysis to support her arguments.

MacKinnon Arguments Against Prostitution

MacKinnon opened her argument by saying that there is an inconsistent way of thinking within the public regarding trafficking and prostitution. All people agree that trafficking, i.e. selling human beings to other humans by force, is bad in any way. However, the opinions are divided when we discuss about prostitution. Some people believe that prostitution is inherently bad, either from morality or gender equality points of view. While some other people believe that prostitution is a symbol of freedom and entrepreneurship of women, after all, it's about the freedom of women to use their body as they may like and prostitution is just another form of profession, hence, the term commercial sex worker.

For her, the term commercial sex worker is utterly ridiculous and she asked how could people consider prostitution as just another type of profession? Based on her own and several other empirical researches, prostitution is definitely not a decent profession, if not at all. A recent polling from several prostitutes showed that more than 89% of them wish to be able to leave the job. Most of prostitutes end up in prostitution not because of free will, but because of coercion (usually from trafficking) and bad financial condition.

Basically, these prostitutes enter the job because they don't have any better options. The working condition is harsh (in India, an average prostitute can handle around 8,000 men in a year! Not to mention that they are being required to satisfy all the needs of their customer, whatever that is, as long as the customer pays), they are prone to various sexual transmitted diseases and psychological trauma (MacKinnon found that the level of trauma within prostitutes is similar to those who have experienced war!), and they are also prone to harmful activities that may result in their death (various customers have different taste of sexual activities and it is not unusual to have customers who love violence for the sake of enjoying their sex). In short, it's not a good life. In fact, MacKinnon asked everyone in the room, would they ever consider to take that kind of job if they have a better option?

MacKinnon further argued that prostitution pretty much relates to gender inequality. Surely there are male prostitutes, but compared to female prostitutes, their numbers are miniscule. Moreover researches show that it is far easier for the male prostitutes to opt out from their profession compared to their female counterparts. Female prostitutes are usually treated as goods, objects. The inequality is even clearer when we see how society treats the customers very well, simply from the fact that they are called as customers, in other word, they are just simple buyer who wish to purchase sex with women as an object of satisfaction. No wonder MacKinnon refused to use the word customer, she named these group of guys as John.

MacKinnon also argued that it is absurd to consider that female prostitutes entered into the business of prostitution because they have already given their "consent" and therefore people should leave them alone and let the market does the job, i.e. voluntary transaction among the people. In reality, their consent is not real, their consent was given due to weak conditions and because of the payment that they receive from the Johns (and they don't even receive the payment in full, most of the payment will go to the pimp). Based on that understanding, MacKinnon stated that having sex with prostitutes is essentially a rape in another form.

So what's the solution for this problem? MacKinnon offered the Sweden System, where prostitution is being criminalized, but not for the female prostitutes, rather, the pimps and the customers. Various empirical researches showed that the result of this policy is quite effective, the prostitution rate is going down and more women can be released from the hell that they experience in the world of prostitution. The reason for adopting this policy is because there is already an inequality between the female prostitutes and the male customers and pimps. Imposing the same sanctions to the prostitutes increases the inequalities and misses the real villains who are responsible for the existence of prostitution.

MacKinnon also rejected the legalization of prostitution as a solution to fight the bad treatment that prostitutes receive in her job. In one of her researches, she found that even when there are legal prostitution center, some people still prefer to use the illegal prostitutes because they refuse to have their sexual activities and tastes being regulated. In the Dutch, one pimp complains that the regulation of having pillow in the room (which apparently is required in order to increase the level of comfortness of the customers) is bad, because some prostitutes were being killed by pillow. It's a weapon of murder. In other words, the Government is not a good law maker when dealing with prostitution because they don't understand the nature of this business.

An Economic Analysis of Prostitution

Simply speaking, I support MacKinnon arguments, and I will try to show that not only prostitution is bad from the perspective of morality and gender equality, but also from economics point of view. The standard economic analysis usually says that whenever there is a voluntary transaction between two parties, the government should not interfere since it is assumed that these people would never enter into the transaction if both are not better off as a result of the transaction. I agree with this notion. The problem is, some people assume that prostitutes sell their body voluntarily to other people and therefore the government should just leave them alone or even better, legalize the profession. They argue that legalization and calling these prostitutes as commercial sex worker will reduce the degradation that they receive, improve their quality of life and everyone will be better off.

Seems correct? Absolutely not. First, you can't assume voluntary transactions exist just because people agree to sell their bodies for money. MacKinnon empirical data show that this is an illusion. The consent is not given properly, meaning that standard economic analysis cannot be applied. Instead, we must assume that without consent, we are imposing costs to the prostitutes by forcing them to do something that they don't prefer in the first place. We further know that the payment that they receive does not reflect the costs and risks that are being imposed to them and on top of that, they don't even have the flexibility to leave the job. It is clear then that in terms of causality, the pimps and the customers are harming the prostitutes. From tort law perspective, this should entitle the prostitutes to claim compensation from their customers and pimps.

In this case, the above reasoning is in line with MacKinnon's Sweden System. If the ones who inflict harm are the customers and the pimps, it does not make any sense at all if the prostitutes are being penalized. In fact, it would be even better that not only the pimps and customers are being criminalized, they must also be required to compensate the prostitutes for the harm that they inflict. In this case, the result will be efficient. First, there will be less incentive for pimps and customers to conduct their bad activities. Second, possibility of women being released from the brothel is increased and the fact that they can receive proper compensation is also a good way to provide them a fresh start for their life.

Now, some people argue that enforcing sanctions is costly, while legalizing action is profitable since the government can tax such action. In a sense that's true, but again economic is not a rigid science, it is flexible depending on the situation. And I can say that legalizing prostitution is simply a stupid idea. Yes, the government can tax the activities, but it means that the government strategically chooses to abandon their own citizens, i.e. the prostitutes, to live in misery, which of course is not efficient.

There is a better way, i.e. criminalizing the activities and target the pimps and the customers. The government doesn't need to always send these guys to prison. It can fine them to pay a huge amount of money to the government, where some are used to pay the legal enforcement costs and some are used to compensate the prostitutes in order to start a new life. This could be a cheaper solution and we know that pimps and customers have quite a lot of money. If not, pimps will not maintain prostitution business and guys will not choose to pay for sex if they can somehow get it for a cheaper price through other means.

To close this post, I would like to give an interesting definition of prostitution from Namibia (courtesy of MacKinnon of course), i.e. prostitution is any type of sexual activities that are being traded with commodities other than sex. This is deeply insightful, i.e. that sex should only be traded for the joy of sexual activities itself. Let us hope that someday we will be able to banish all type of prostitution in this world.

Pursuant to my post here, I manage to elaborate my arguments into a decent working paper. I'm planning to submit this paper to an Indonesian law journal, but I would like to hear first some useful comments from my readers that I can use to improve the paper. So if you have any comments, please don't hesitate to contact me, I would be grateful for that.

The legalization of same sex marriage will always be a controversial issue to be discussed as it encompasses many fundamental aspects of human life, including religion, morality, law and economics. In this post, I will focus on two issues that in my opinion are worthy to be discussed before we can consider the incorporation and legalization of same sex marriage into our law, i.e. (i) the problem of equal position in traditional heterosexual marriage, and (ii) the legal complexity that same sex marriage will impose to ordinary family law.

A. The Problem of Equal Position in Heterosexual Marriage

As you may be aware, even in the most developed nations, there is still a tendency for distribution of domestic tasks between the husband and wife. In general, the husband will be most likely responsible for providing the main family income while the wife will be responsible for maintaining the household chores, which usually includes the additional task of grooming and raising the children. I don't know whether this task distribution is incorporated into a law in other jurisdictions, but in Indonesia, the incorporation is pretty much clear. Under Law No. 1 of 1974 on Marriage, the husband is responsible for providing the living needs of the wife to the best of his ability (in his capacity as the head of family) and the wife is responsible for maintaining the household (in her capacity as the house wife).

Though seems simple, in reality, the effect of the above arrangement is significant and I dare to argue that such arrangement has already turned out into a baseline (see my discussion on baseline here). In countries and communities where economic activities are dominated by men, women position is generally weak and it affects their bargaining power within the marriage. It is true that by imposing the legal obligation on the husband to provide the main financial support for the family, it seems that the regulator is protecting the interest of the wife on the assumption that the wife is the weaker party. However, there is an inherent problem that might have been overlooked.

Logically, if you are financially dependent to a person, you will need to comply with such person's demand to the extent that it is necessary to maintain the benefit that you receive. Even when the law says that husband and wife have the same rights, it is nothing more than dead letters in front of economic reality, i.e. those who have better economic power within a marriage tends to control the relationship within such marriage (and in worst cases, the control issue can turn the marriage into an abusive relationship).

In my opinion, imposing a legal distribution of domestic tasks might create the wrong incentive (though in the case of Indonesia, I would say that our culture and religion hold the bigger portion).First, it forces the husband to always become the family's financial backbone even though in some cases he does not have enough capability. Second, it creates an impression to the wife that working outside the family household is a bad thing, forcing them to believe that stay at home housewife is the best option for them. Would not it be better if a couple can determine by themselves how they will regulate their family relationship, including on getting family income, maintaining assets and raising children? Further research will be needed to answer this problem.

Unfortunately, the notion of distribution of job has been deeply embedded into our subconscious, making a considerably slow progress in creating equal position within a marriage. Even nowadays when women position has already getting better in marriage due to their higher involvement in the job market, it is not uncommon to find women who will trade their economic power for the sake of raising the children in the family.

So what's the connection between the issue of equal position and same sex marriage? To answer that question, we need to understand first whether the traditional distribution of task is also applicable in same sex marriage. Since this is a marriage between same sexes, there are no husband and wife, no head of family and housewife, and therefore, I would assume that the distribution of role within such family will need to be agreed between the couple themselves instead of relying on any particular standard. In other words, to accept same sex marriage in our law is to revolutionize the entire concept of equal position in a marriage.

The grand question is: can we accept same sex marriage if we have not even reached the state of equal position in heterosexual marriage? It would be questionable to legalize same sex marriage without even reforming laws on ordinary heterosexual marriage and redefining the position of husband and wife in such marriage. In the end it's a whole package.

B. Family Law Complexity

Another major issue that is sometimes overlooked when dealing with same sex marriage is the complexity that it will create toward traditional family law. Legalizing such marriage does not mean that we can just simply give the right to marry to same sex couple and everyone would have a happy ending, further revisions must also be done the the overall body of family law which may include: child status, inheritance, divorce requirements, and joint assets (which may also cover tax issues). And revising those provisions would be a major challenge.

1. Child Status

Child status will be the first to be caught under the complexity. The problem is clear, same sex couple cannot produce children without the help of other sexes. So what would be the status of the children produced from the offspring of unmarried biological parents? Should it go to the father or the mother or to the ones who have established a family, i.e. the same sex couple? The current default rule is that a child produced by unmarried couple can only be claimed by the mother. In short, it is impossible to authorize same sex marriage, without revolutionize the concept of a legitimate child.

Imagine also when each of the couple want to produce a child. If successful, it would mean that a same sex family might have two completely separated by blood children, and these kids are not prohibited from marrying each other since they don't have any blood relationship anyway. So that would be an interesting form of family. I won't give a moral assessment for this kind of family, but I am quite certain that it would be more complicated. Thus, I would say that for same sex couple, adopting an unrelated child might be easier than having a child from their own flesh and blood.

2. Inheritance

Further, the complexities caused by the child status will directly affect inheritance. One thing for sure, by default, only one person in the same sex marriage will have family relationship with the child (in case they choose to use their own offspring). Assuming that they have two separate children, one will inherit based on blood relationship, the other one will only be able to inherit through a testament in case one of the parents died. Again, another complexity.

It would also be interesting to learn about how the couple in same sex marriage will inherit each other assets especially in a regime where there are differences of inheritance portion for husband and wife (such as in Islamic law). Or should the law create a different set of inheritance system for same sex marriage? What would be the efficient inheritance system?

3. Divorce and Child Care

The process of divorce in same sex marriage will need to be amended in case there are differences in the procedures for husband and wife. Furthermore, in such divorce, who will be responsible for the child custody? Can we sue for a husband alimony payment as in the usual heterosexual marriage? Although I doubt that can happen if there is no distinction. Should alimony be imposed upon the party having better financial conditions? Or if there is no blood relationship with the child, can we actually impose alimony payment?

4. Joint Assets and Tax Problems

Revising the concept of joint assets for same sex couple would be easy to the extent that we only need to change the definition of marriage. But there might be some problems from tax perspective, especially for the tax relief usually given to married couple. Is that something that the tax department will ever give? Of course if the amount is not that big, the same sex married couple might renounce such right for the sake of legalization (there is always a trade off). But if the amount is high, would these couple agree or will they claim that there is a discrimination? That would be an interesting case. I heard though in the US that same sex couple are fighting for this kind of tax equalization. One thing for sure, even getting a tax equalization for a booming industry in the biggest muslim populated country such as Islamic finance is very difficult, so I wonder whether that kind of equalization will be granted to a controversial arrangement like same sex marriage.

5. Conclusion

Like I said in the first portion of this post, accepting same sex marriage means that some radical changes must also be done toward heterosexual marriages main concepts. The same is also applicable to the laws surrounding the marriage. Again, it's a single package. An additional thought, with all of these complexities, would it be better for same sex couple to govern their relationship purely through agreement/contract instead of waiting the government to regulate the structure of same sex marriage?

Now, I will not offer any solution here nor any endorsement on what would be the best concept of marriage, the analysis within this post is purely positive, not normative. However, if you are interested to read further on this issue, you may download this paper from Harvard Journal of Law and Public Policy, titled: "What is Marriage?" Happy reading!

Good Samaritan liability basically means imposing a legal obligation to a bystander (to the extent he has the capacity to help) to save a person in need of help. Thus, in case the bystander fails to save the person in need, and such person is harmed, the bystander will be liable. This is one of the interesting issues discussed in law and economics of torts. The case that inspires me is the Chinese toddler case (you can read the details here), where a Chinese toddler was being struck by a car, and no one helped her for quite a long time until a second car hit her again. When someone actually helped her, it was already too late, and she died in the hospital. If only the bystanders around the toddler helped her immediately, she might be saved and the story will be a happy ending one. Unfortunately, that's not the case here.

I asked some of my LLM Chinese friends in University of Chicago about this case and they confirmed that there was a case in the Supreme Court of China where a person is being penalized for helping an old woman from an accident. The facts of the case were never clear and people make their own conclusions, one of them is that helping other people may cause problem to you, especially when you don't know whether the people are really in need or they are just trying to put a scam on you (apparently, there are also cases where some swindlers trick people by pretending as accident victims and then blame anyone who nice enough to help them).

This is a serious matter, especially under the basic principle that people respond to incentives. If people can't determine whether their altruism as bystanders would be beneficial to all parties or at least don't cause them into any unwarranted trouble, their best rational choice is actually not to help anyone. And that is really bad to the society because it imposes a huge social costs to people in need. They can be helped with small costs, but because people fear that they will be in trouble if they try to help, these people in need end up with nothing or even bigger losses.

Now I remember that one of the comments that I see in Twitter is why not imposing a Good Samaritan liability? We impose liability to bystanders to help those in need in case those bystanders have the capacity to do so and the costs for doing such action would be low and lesser than the losses imposed to the victim due to the inflicted harm. Example: you're trying to cross the street and suddenly a car in full speed is about to hit you. I can easily save you by holding your hand and thus prevent you from being hit by the car. Doing that will not cause any additional risks to me (the car will not hit me) and if I don't do that minor action you'll die or at least be significantly injured.

Some people argue that liability should be imposed to me in this case based on the least cost avoider principle under the famous Hand's Formula (if you want to know more about Judge Learned Hand, see here). The principle basically says that a person should only be liable for torts in case the costs to avoid such harm (taking precautions) is lower than the loss imposed to the victim multiplied by the probability of the occurrence of such losses. Using standard economic approach, it's difficult to resist the strength of this argument, after all, the costs are lower than the benefits, surely, we should impose such duty to give the correct incentive for people to help other people.

However, I find this kind of approach as simply perverse. Not from morality point of view, but from an advance economic analysis. First of all, there is a problem of causation. It's easier to pinpoint a causation effect from an action rather from omission (as a caveat, I would like to emphasize that it's easier not easy). The standard of proof would be very expensive to prove causation in a case of omission. There is no solid evidence that even when I hold your hand, I can save you from a significant injury, after all it's an "ïf only"case. If you can't impose causation, how can you hold responsibility in economic terms? An easier solution for my hypothetical case is to impose liability to the car driver, because he is the one who hits you. In reality, if you survive, you will most likely sue him. If not, your family will sue him. And that would be easier for all parties.

Second, if we apply the notion that we are legally obliged to help other people whenever we are the least cost avoider (and there will be sanctions for failure to do so), it would be a disaster. Let us use an extreme case, imagine that there is a hungry child in front of you (you don't know him at all). Without food, he will not survive. You don't help him even though you are able to do so and he died shortly. Should you be liable in this case? My answer is no and it's for good reason. It will impose an enormous costs to everyone to always be aware whether there are people in need around them. Furthermore, the costs for enforcement will also be humongous. People will start to sue other people if they don't get help in case they think that they can be helped by bystanders. It can turn out to be a lucrative business for lawyers, but for great expenses to the society.

One solution to this, which has already been incorporated in our penal code, is to impose liability only to specific people who have clear legal duties to take care of such people in need. Example: duty of care by parents to their child. This can be an efficient rule if the duty is strictly imposed to people who have control over the people in need and therefore are in a better position to understand the need of such people.

Another solution is to protect bystanders from any liability in case they try to help. You don't need to give additional benefits to altruists, after all for these guys, helping other people has already increased their utility. But you may want to protect them from liability imposed by their good intentional action. The problem with this rule is again standard of proof in causation. Like I said above, in case of omission, it is harder to perceive the causation. But once an action has been done, that action can be placed in the causation analysis.

A no liability rule for all helpers might not be efficient in cases where bystanders don't actually help and instead cause additional problems. So another set of rule can be added, i.e. the no liability rule will only be applicable for bystanders who can show good faith in his actions and have the minimum reasonable skills to help. In this case, hopefully, people having no capabilities to help will stay away from helping other people in need and therefore they can avoid unnecessary problems. It's not a perfect system, some people who think that they are reasonably well to help other people may end up liable for reckless help but it is better than creating a system where everyone is not liable and thus there are less incentives to be careful in helping other people.

Today is my 28th birthday and I guess it would be nice to start a-once-in-a-year reflection in my blog (started it in 2009, but completely forgot to follow up in 2010, typical). I will not make any reflection about my life (nothing to reflect, it's a damn good life anyway), so for this year, I'll reflect the development of my own legal thoughts.

I started my formal legal education in 2001 without knowing a thing about the law, I didn't know whether I will be interested with it or what I will do after I graduated. My primary reasons at that time? Just following my intuition plus chasing my dream of being admitted at the University of Indonesia (my second choice was UI's Political Science, don't ask me why I picked that, cause I can't answer that even until today). So yes, it's more about getting into UI rather than picking a subject that I really like. Fortunately, I was lucky. By the second semester I knew for sure that I love this subject!

At first, my primary choice of specialization was constitutional law. 2001 was the time where many constitutional law professors secured high positions within Indonesian government. It was a transition era in the Republic and constitutional scholars were needed to guide the process. However, a fated encounter with a really weird lecturer caused me to change my mind entirely. It was so bad that I said to myself, "all the good professors are in the government now and we're stuck with these buffoons. Like hell I will take constitutional laws." So I decided to specialize in other fields: procedural and business laws. Again, I am a lucky guy. Turns out it's a correct decision, as now I work as a corporate lawyer, a profession that I literally enjoy not only professionally, but also academically.

But those things only affect my professional skills. What really affects and shapes my legal thoughts is a whole different subject of law that I accidentally learned during my law school days, i.e. Islamic legal theory. It started with a challenge from my best friend, saying that I will never master Islamic law, because I can't differentiate the type of waters that you could use to purify yourself (wudhu). Of course, knowing how predictable I am, I took that challenge and soon I regularly went to UI's mosque's library. Although I planned to start with the library's classical Islamic law books collection, I ended up with Islamic legal theories first. And I was impressed, by the 9th century, Islamic legal scholars have already developed a concise legal theory that will put common law and civil law scholars at that time to shame.

Granted, the current development of Islamic legal theory is pretty much gloomy (no new development), but I learned something from my personal study, the existence of a theory called Istislah or Maslahah Mursalah, which basically states that legal scholars, in the absence of clear legal rules, should take the welfare maximization of the society as a prime concern in deciding cases. The concept is simple, but the insight is very deep. Such insight helped me to think for the first time about what constitutes a good law.

During my early years, I got an impression that my faculty only taught its students to become technical masters of law. We know the laws, we can easily apply them into concrete cases, and we are proud with that. The famous motto in my faculty, "If you're a law student, always talk with a legal basis." It's nice, but something is missing here. Being a technical master means that you are only acting as a spokesman of the law. You don't care whether it's good or not, heck, that's not even important. This is what I call as an abuse to Hans Kelsen's Pure Theory of Law (See my discussion on Kelsen at here, here, and here).

So for me, this is non sense. This kind of education reduces the profession of lawyers into simple craftsmanship. Lawyers should be able to do more than that, they should be able to work as policy makers, they should analyze the quality of laws and propose a better version if they think that the current ones suck. Istislah theory helped me to see that error earlier and I am thankful for that.

Now, when we're eventually getting into the question of what constitutes a good law, there are various methods to determine the standards. I started with the believe that a good law should reflect the society's sense of justice, local wisdom. But that belief didn't last long. Why? I come to realize that there is no standard for reflecting the society's sense of justice. In the end, it will always be a matter of preference. Suppose the society deems honor killing as a part of their justice system, would we still agree to enforce it in the name of local wisdom?

Logically, I move forward to a standard which seems to be universal and applicable in every situation and condition. So I turned out to legal principles established by religious belief, i.e. Islamic law. Yet, it didn't satisfy me. Years of researches show that other than the agreement among Islamic scholars on the mandatory prayer, fasting, zakat and hajj, there is no unity of opinion in Islamic laws. Cultures or 'urf have a great impact on how scholars interpret the laws and there is a never ending debate on what standards that are deemed applicable for eternity and that are subject to changes. As a result, there isn't any production of worthy new ideas within Islamic law, it's just a repetition of the old ideas and debates that ended in the 15th century. Thus, I concluded that similar to the notion of society's sense of justice, Islamic law is not that reliable for providing a clear standard on what constitutes a good law. FYI, the use of Istislah itself is still controversial within Islamic legal scholars, so that could explain why its development has been halted for a very long time.

Finally, I end up with the law and economics movement. It's ideas of welfare maximization and promotion of efficiency as guidelines for determining a good law really captivate me. First, I see law and economics as the modern interpretation of Istislah theory, its spiritual successor. Second, since it is a combination with economics, it is easier to assess the standards to determine whether they really work or not (empirical research is very encouraged in this field and I think it is very helpful). Furthermore, economics is a science that can be applied to almost every aspect of human life, so applying such science into legal conceptions prove to be an eye opening of things that we have already taken as granted. The notion that incentives matters still amaze me on how we can use different incentives to structure a law that will work efficiently and to explain the behavior of the people in facing the law and legal enforcement.

When I choose law and economics as my primary tool for assessing the quality of laws, I don't close the opportunity of using other helpful methods. No tool is perfect, and maybe in the future, we will develop an even better method for analyzing the law. But until that day comes, I'll stick for a while with law and economics.

A couple of days ago, I received an interesting comment from @tirtasusilo on my latest post. His question is: "How would you persuade someone who is against vote buying because he/she considers voting a duty, not a commodity?" First of all, a rational person should not consider voting as merely a duty as I argue here. But surely, giving that kind of answer would be cheap. So I'll try to answer that question through this post.

What would a person think about his vote if he considers it as a duty? My assumption: he takes voting as a way to do the right thing. He votes because he believes that he does something for the betterment of society. Consequently, voting should never be traded. You don't trade what is right only for money. While his notion might be tempting for a lot of people, I'm afraid I have to say that it is this notion that persuades political parties to use vote buying to get what they want.

First of all, we cannot effectively prevent people from picking their own preferences, whether they want to protect the integrity of their votes or they think that voting is a crap mechanism which means nothing, or that voting is a valuable item that can be traded for a good price, etc. The fact that there are many preferences means that sly politicians can use different methods of persuasion for getting as many support as possible from the voters, including building an image as good politicians in front the media to get votes from the duty oriented guys and using tricky methods (including money and political promises) to gain additional votes from the commodity oriented guys. In this case, we are not maximizing the utility of the duty oriented guys, we're maximizing the utility of politicians and commodity oriented guys.

Now, if duty oriented guys really want to maximize their interest, i.e. preventing politicians from vote buying, they should agree with the system that I proposed, i.e. legalizing vote buying with certain conditions. The reason is simple, such system is created for the sole purpose of reducing vote buying, it is created not to let people trade their votes like crazy but to keep people from buying and selling their votes. Think it as a more efficient solution that basically satisfies the interest of the voters (for getting a better election in term of fairness and quality) and imposes significant additional burden to politicians who dare to use money in getting their support.

Sure, we can always resort to the old school style, such as making vote buying as an illegal act and enforcing heavy punishments against violators of vote buying restriction. The question is: will that be efficient in Indonesia case? How much money do you think that we have spent for the entire national and regional election? These costs include campaign costs, the "hidden" vote buying costs, candidates disputes costs, enforcement costs, etc. Not only that these costs are damn expensive, we still end up with buffoons as our leaders. And being rational, these buffoons will most likely try to do anything to recoup all of their costs during the election. After all, no sane people will go and spend most of his fortunes for securing a position if he don't expect some benefits from getting that position. What could be even worse than that?

So, considering the above argument, if these duty oriented guys really care about doing the right thing, would they pick the "right" method that will produce the "not right" results, or would they pick the seemingly "not right" method that will produce the "right" results?

A week ago, I wrote about using vote buying mechanism to prevent political parties from buying our votes. You can see the article here. Furthermore, there is also an article from Greg Mankiw and Michael Sandel in 2007 on why vote buying should not be allowed. Before I update my proposal, I'll give some comments to Mankiw and Sandel's ideas.

The Inherent Problem of Mankiw and Sandel Cases

The main argument of Mankiw is that vote buying can produce externalities to third parties. I guess there's a grain of truth in his idea, but unfortunately, his example does not make any sense at all. I reproduce his case here for ease or reference:

"Suppose three voters are deciding whether to provide a public good that costs $9, which would be financed by a $3 tax on each voter. Andy values the public good at $8, while Ben and Carl do not value it at all. Under majority voting, Ben and Carl vote against, and the public good does not get provided, which is the efficient outcome.

Suppose, however, that Andy could buy Ben's vote for $4. He could then ensure the project gets passed. Andy is better off by $1 (the $8 benefit minus the $3 tax and the $4 price of the vote), Ben is better off by $1 (the $4 price of the vote minus the $3 tax), and Carl is worse off by $3 (the $3 tax). The Andy-Ben vote deal has negative externalities on Carl."

What's the main problem of his case above that can be answered by public choice theory? His case stops at the fact that Carl is worse off by $3. If Carl is a rational person, what would he do? He can also offer to purchase Ben's votes for $2, after all, losing $2 dollar is better than losing $3 and for Ben, receiving $2 is surely more attractive than receiving a net benefit of $1 from Andy.

Then what will Andy do? He can choose to increase his offer to $5 for Ben's vote and therefore receives no benefit from the policy. At this point, Andy's marginal cost equals his marginal benefit, it's the point where he should stop because any further increase on the price of Ben's vote will cause losses to him. What would be the proper response of Carl? He can stop, or he can also choose to offer $3 dollar for Ben's vote. It's the same for him both ways, if he stops, he will lose $3 anyway, so he still has the incentive to offer such $3 (marginal cost equals marginal benefit). Now, if Andy is rational, he will stop, because he knows that proceeding with the vote buying battle will only end up with further losses. How about Carl, should he pay Ben? No, because his offer is basically only valid when Andy still wants to buy Ben's vote. There is no need for him to pay Ben if in the end Carl cancels his plan. Of course you can say that under this circumstance, Andy will come again to offer Ben to sell his votes. True, but then Carl can also do the same and a problem of cycling will be created.

Sandel's argument is more persuasive, he shows that it is possible for Andy to actually persuade Ben to establish a value for the proposal and therefore he will vote in favor of Andy's proposal without having Andy to buy Ben's vote. In this case, Sandel argues that the end result will be the same for both cases (involving vote buying or not), there will be some costs imposed to Carl. However, even in this case, Carl can always offer to buy Ben's vote for a price.

Sandel says that suppose Ben values the proposal for $4 after hearing Andy's persuasion, meaning that he will reap a benefit of $1 if he vote for the proposal. What can Carl do? Of course, he will offer Ben $2. What will then Andy do? He can offer a price of $5 to buy Ben's vote and then Carl will offer Ben a price of $3, and Andy will face the same problem again. Another cycling will be made in Sandel's case.

The simple problems created by Mankiw and Sandel actually resemble the real political life. It's a case of battle between interest groups where benefits will be spread to the majority by imposing costs to a group (wide spread benefit vs narrow cost). Of course, the group will not just sit and wait for the impeding doom. They will fight for their right and if they have to lose something, they will make sure that at least it shouldn't exceed their total expected costs should the problematic policy is promulgated. I'll deal with this issue in another post. Now, let's return to my further elaborated proposal.

The Elaborated Proposal for Vote Buying

Since I'm still in favor of vote buying for Indonesia, I'll try to elaborate more my original proposal in this post. Further comments and questions will be much appreciated.

The basic principle is that in a general election, voting is the commodity, people are the sellers, and political parties are buyers. Now, what's the main reason for political parties to buy our votes? Assuming that these guys are rational, I would say that they buy our votes on the basis that the expected benefits that they will reap after they secure a position are still bigger than the total expected costs that they will incur during the election. The costs can include campaign costs and any penal sanctions that may be imposed to them if they're caught (vote buying is still illegal in Indonesia).

However, as I've said numerous times, you can't separate law from the legal enforcement. In our country, it is safe to assume that the probability of being caught and sentenced for vote buying is quite slim, meaning the costs of getting caught is not that big and therefore there is less incentive for complying with the law. In this case my proposal would be: vote buying should be legalized, any political parties are allowed to actually come to us and offer a price for our vote. This is the basic proposal, but to ensure that it can work, I'll add some additional rules.

1. Minimum Price Cap

There should be a minimum price cap for our votes which reflects the expected benefits of the political parties should they win the election. I would say though that since the number of Indonesian citizens are very huge, increasing a little bit of the price of our votes would have significant financial impact to our political parties in case we can't assess their expected benefits (so at least we impose higher costs to them). Say that the current market price of our vote is around Rp50,000 per vote and then we increase that to Rp55,000 per vote. Assuming that there will be at least 100 million voters, an increase of Rp5,000 per vote is equal to an additional total costs of Rp500,000,000,000 or around US$55,000,000.

2. Bidding System

We can choose two systems to sell our votes. The first is by using the rule of Tullock Auction (Gordon Tullock is a famous public choice theorist), where all political parties can bid for our votes and the highest bidder will win all of our votes, however, the ones who lose the bid will also be required to actually pay the amount that they have offered during the bid process to us.

Second, we can use a system where each political party can bid for our votes by paying us directly, but: (i) they are required to disclose the amount publicly (or we can ask the media to do that), (ii) they are required to deposit a non-refundable minimum amount to us for their offering (say 10-15% of the offer price); (iii) there would be no legal guarantee that the voter will vote in accordance with the bid winner, meaning, the winning political party can't go to the court to enforce their right to be voted by us, and (iv) the political parties can always change their offering to us until the date we walk to the election booth and set our vote.

You may say that the above system is crazy, no one would like to enter into this kind of arrangement where the seller position is absolute. But that is precisely why we need to adapt this kind of system. In the current system, it is very hard to prove that political parties are involved in money politics. Have you ever considered the costs imposed to us for all of these hidden money politics and also the total costs of the national and general elections (all of those disputes in the Constitutional Court and the re-elections)? Not only it's a waste of tax payers money, it also does not provide us with the best candidates to lead our country.

Under my proposed system, there would be less incentives for political parties to buy our votes. Why? First, we eliminate small parties by this system, leaving all the major parties in a competition to rule us all. Second, unless there is a super political party with infinite source of funds, no one will ever win the vote bidding.

Let me tell you how this will work in practice by using an assumption that there are 3 parties, A, B, and C and that each party has more or less the same financial condition. Each of A, B, and C would have the incentives to win the election because they know that they can win the election by money and that the losing party will most likely lose everything. Since they all know the other party prices, they will continuously try to outbid the other party until they exhaust all of their money, creating a cycling problem. Of course in this case, A can make a coalition with B to defeat C in the vote bidding, but C can also offer B to instead cooperate with it and defeat A. Another infinite cycling will also be created here.

Furthermore, since there is no guarantee that people will vote for they who pay the most, there are incentives for these parties to offer things other than money to induce people to vote them and I'm quite certain that there would be no case where we end up with an absolute winner after the vote bidding fight just because it pay the most.

Their only solution is to actually agree to stop using money and induce voters to vote them for other reasons. True that under this regime, there would always be an incentive to betray such agreement, but since it will create another cycling problem, they will be forced to comply. Suppose A, B and C agree that they will not use money to buy our votes. Then, B realizes since it is still legal to buy our votes, they can try to buy our votes behind A and C. A and C, fearing something might happen behind their back, will start to have the same incentives and will also return to money politics. You see where this is going? So the conclusion is clear: stop using money to buy our votes or end up being caught in an infinite vicious cycle.

Of course this is not a bullet proof mechanism, if A, B, and C have a very stable coalition, we would be in big trouble. But I guess that would not happen in Indonesia, after all , no groups of robbers will ever have a stable coalition since each of them would try to maximize their own benefits on the expense of others. For further readings, try searching in Google for Arrow's Impossibility Theorem.