The Chronicles of a Capitalist Lawyer

I attended a national conference on the rule of law last week. At the conference, I presented my paper on the application of public choice theory into legislation system in Indonesia.

(Those interested to learn more about the subject can go to my website and search for the 'public choice' tags by clicking here)

It was a nice experience and a good chance to see how Indonesian legal scholars perceive the law and its normative values. Having a quick reading on various papers, it seemed that abstract normative analysis still conquers the Indonesian legal scholarship, at least from the conference attendees. In this context, abstract means vague principles or values that are difficult, if not impossible, to quantify.

For instance: the idea that law should promote the interests and happiness of the people, that law should promote justice and national interest etc. There is nothing wrong with promoting such ideas in terms of freedom of expression, but the problem is that abstract values usually stay vague in practice.

In one discussion, a participant raised a question that is addressed to me: "Should we quantify the law?"

I replied, "To some extent, of course, we should."

If we want to speak about normative legal issues, about what should be done through the law for the betterment of the society, quantifying the law is absolutely necessary. This is, after all, the essence of all of my law and economics discussion in this blog.

Normative law and economics uses terms like efficiency, costs and benefits analysis, and welfare maximization as tools to analyze quantitatively whether a law can really make a society better off after the enactment of such law, and whether a law will improve the welfare of the society or only imposing another unnecessary burden.

We all know that the law should be made by the people, of the people and for the people. Not the other way around. But how can we really know that a law is made for the sake of the people if we do not have any standard for measuring a successful law?

Therefore, how can we say that a law is good or bad if we are simply relying on abstract standards? Even worse, have any of you realize that politicians love those abstract standards because they can abuse them as a way of gaining votes or distracting public attention?

Anti-corruption law is a good example. Politicians play with people's moral values when they toss the idea of whether death penalty should be abolished for corruptors. The debates range from the protection of human rights, the moral cruelty of corruption, to deterrence effect of the death penalty (on the basis that death penalty is the ultimate punishment).

The notion of law and economics would criticize the above abstract discussion because frankly there is no way that we can resolve a conflict between those basic principles until the end of time. Some people still think from morality point of view that death penalty against human rights, while others think that it is fine if it is used to punish such a morally reprehensible act.

Instead, law and economics will ask the following questions:

1. Are there sufficient data supporting the claim that death penalty really reduces the rate of crime?

2. Is death penalty an efficient sanction for corruption? Or should we instead focus on something else, such as taking away the corruptors assets and preventing them to take any other official positions?

3. What would be the cost and benefits of having death penalty from procedural perspective? Is our criminal justice system ready to implement the higher standards of imposing death penalty?)

By proposing the above questions, we are, in a sense, quantifying the issues that need to be tackled in order to formulating a good law. We think how the current procedural problems in administering death penalty will affect the people, the innocent and the villains (the costs that will be imposed to them); the impact of solving such problem to our state budget; the incentives that we will create for current and future corruptors, etc.

Of course, quantifying the law might not be a perfect standard, but it would be better to have some concrete measures of success than none at all. And the above is just a really simple explanation. The same way of thinking can be used for analyzing any area of law, from criminal law to family law, and will be effective in analyzing controversial laws such as laws dealing with people's clothes.

Quick question, have we ever heard any of our politicians ask similar questions with the questions presented by law and economics? Most likely no.

Why bother asking the public to think critically about very important issues if nice rhetoric is enough to make the public confused or to vote for the most dramatic act of politicians?

The National Police Deputy Chief Nanan Sukarna on Thursday admits that there are corruption practices in his organization, as quoted by tempo.co. One of the many factors he cited was inadequate salary for police officers.

"How should we ask them to not stay clear of corruption if their salary is not enough to pay for their children's school?" he said.

From an economics perspective, this is an interesting topic. It is widely known by the public that being a police officer who only depends on salary will not make them rich or even survive day-to-day living. But despite such truth, why are there still many people apply to be one? If the job and payment are that bad, why do they pursue such career?

A case like this offers several explanations. First, it might be possible that the majority of people who apply to become a police officer put more value on the authority attached to their position. This means that for these people, the fact that they gain such position is more valuable than getting a civilian job — even with higher salary. Thus, there is a trade-off between authority and money.

Second, it might also be possible that the applicants believe their comparative advantage is to become a police officer and they will not be able to compete with other people in doing their jobs. As a result, receiving low payment is a risk they must bear due to their own limitation.

Third, worst case scenario, the applicants might see a possibility of becoming rich in the future, provided they can use their power for their own benefits. Being underpaid can be considered as an investment that must be sacrificed in order to gain more money in the future.

Last but not least, it is always possible that there are some people out there who pick the career as a temporary job until they find a better job offering. These people might be clueless about their choice of life or simply see the police badge as a stepping stone into something bigger.

Based on the possibilities above, we have two complex issues to be solved if we want to reduce the level of corruption in the police body.

First of all, we don't know to what extent the trade-off between salary and authority will remain useful to control the behavior of the police. Will eventually the basic needs of life defeat the need to obtain power and respect in the society? I'd say yes.

Then, how does one control authority? Without any proper check and balance mechanism, the ability to abuse the authority would increase significantly. Thus, the fact that they can't get much money from their salary would be meaningless since they can get more money from abusing their authority anyway.

In solving the above issues, although its effect is limited, increasing the overall compensation of police officers might be a good start. It must be combined with good indoctrination on the intrinsic value of becoming a police officer and strict sanctions for violation of code of conduct.

Otherwise, increasing the salary would be useless since they can get higher income from doing side jobs and abusing their authority — and they have a lot of incentives to choose that way. In such case, we will end up wasting more money for paying higher compensation, but with worse results.

If we do choose to increase the overall compensation, there is a budgetary problem. Asking the government to simply increase their salary might be problematic if the government does not have enough fund. So, what if we sell certain services of the police to private parties but with different price tag?

Although this might be a good way to raise funds, it will also create discrimination of service. I fear that the costs of such discrimination might outweigh the intended benefits.

Once the police service can be legally bought by certain party with higher price, the police will have more incentives to act for a certain group instead of the society and thus they will no longer be different from private security officers or troops.

It would be nice if they have enough officers to satisfy the entire need of the society and the higher price for special services can be considered as a subsidy from the rich to the poor. But if the supply of police officers is limited, it will be counterproductive.

Another thing to be considered is to let criminals, especially those that are involved in financial crimes and corruption cases, to bear the costs of legal enforcement. This can be in the form of giving a portion of the recovered assets or fines for such crime to the police officers who successfully solve the criminal case.

Of course, the case must be legitimate and any abuse of authority in getting the additional benefits must be strictly punished (including taking back all of the profits made by the officers from such illegitimate case) to avoid any incentives to bring false claim to innocent people.

My final suggestion is to make the resignation process easier within the police corps. Considering the fact that the compensation is not high enough, it might be better to let officers leave as soon as possible once they feel that this is not the right job for them.

This might save a lot of money and reduce the incentives to corrupt from the very beginning. If you realize that being a police is not the right job for you and yet you have no way out, what would you do? Could you stay sane or would you succumb to the temptation of corruption?

Men are weak, so we should not put too much burden on them.

Suppose you believe in Religion X and A is your God, and someone comes to tell you that your belief is false — A is a mere human and therefore he is not worthy to be worshiped. Would you call the scenario as a blasphemy to your religion?

If the answer is yes, then we have a problem because in reality, most religions — if not all — claim other religions are false or misleading. As you can probably tell, the above scenario is about Jesus. In Christianity, Jesus is God. In Islam, Jesus is not God: He is a human, one of the prophets sent by the almighty God.

In my previous post, 'The Law and Economics of 'Innocence of Muslims,' I argued that defining religious blasphemy is very difficult from the perspective of freedom of speech. Now I would like to emphasize the logical problem of having anti-blasphemy laws when we have so many religions in this planet. Thus, another reason why we should not support the existence of such law.

Why do we have so many religions? If it is true that all religions are the same, surely we have already converged all of them into a single faith a long time ago. But no, we know that will never happen because each religion claims the truth for itself.

Even in case where a religion accepts the possibility of having truth from other religions, it does not change the fact that such religion still claims the truth of its own teaching. I dare say that the policy of recognizing the truth of other religions is just a way to maintain stability rather than an actual confession of faith.

Why? Because it is simply illogical. A Christian can't say Jesus is God and at the same time accept the possibility that Muslim's claim that Jesus is not a god is true.

Or you may want to say that at the basic level, all religions teach the same things despite the differences of gods. But that would be another problem. Why bother having religion if the concept of God no longer matters?

The most important thing I want to show here is that there will always be a friction between different religions. It might be slight, but it might also be very sharp. Combine that with religion followers who have low tolerance level and we would have a great recipe for disaster.

Would anti-blasphemy law help? It depends. If we are talking about a law that will punish people who are considered as blasphemers, such law will not help at all. Even worse, it might be counterproductive.

An easy example would be the story of early Islam development. Prophet Muhammad must had spent years of his life in Mecca teaching Islam in the underground because his teaching was considered as a blasphemy among the Arabs at that time.

If not, why bother migrated from Mecca to Medina? Because Medina's citizen was more tolerant? Because it did not have the crazy people who will kill you because you are considered as a blasphemer?

How many early Muslims were killed arbitrarily in Mecca? How many of the killers were judged and deemed criminal for killing the early Muslims? We are quite lucky that the history changed and later on Islam became the religion of the majority in the Middle East.

Nowadays, Muslims can easily claim that those Arabs who worshiped stone gods are stupid and irrational. But the main reason why we can safely make that claim is because we are in the majority, not because we are absolutely correct or because those stone worshippers were indeed really stupid. That's the harsh truth.

This is why I don't support anti-blasphemy laws, because it brings us back precisely to the jahiliyyah era or pre-Islamic period. As long as you are in the majority, you will be fine. But not when you are in the minority.

Furthermore, there is no guarantee that we will always be in the majority nor that we will always be able to protect our minority brothers and sisters out there in case the other majority group decides to retaliate against them.

My suggestion is still the same. Don't waste our time fighting due to badmouthing. We can simply avoid conflicts by letting people choose what they want to believe and what they want to share with everyone else, provided that no elements of violence is involved during the process.

If in the end you are still suggesting people to fight back all bad mouthing using violence, then I'm afraid we have not evolved to be better men during the last 1,500 years.

I'll admit it: I have not watched "Innocence of Muslims," the anti-Islam film that has been blamed for causing ruckus around the world. Why? Well, I have more important things to do, one of them involves an amateur cooking competition with my friends.

Personally, in terms of importance, such movie sits in the category of "absolutely not important that even staring at the wall for 2 hours would still be better." The problem is, not everyone shares the same view. But before we discuss why Muslims are against the film, we should first study why some people are still trying to make a movie like this.

From economics perspective, the reason might be very simple: because with such a minimum cost, the movie can maximize the damages caused to the world, which I assume will also maximize the makers' own pleasure or benefit.

Why are the costs so low? Based on the comments of those who have seen it, "Innocence of Muslims" was a low-budget movie (bad editing, amateur actors, etc). And it is unlikely that the filmmaker - who, according to Wikipedia, resides in California - will face legal penalty in the United States.

The first reason might be the protection of free speech, though this is debatable. The second reason might be the fact that the United States does not want to show any weaknesses toward the demand of the Muslim worlds, including the terror they received in Libya which caused the death of the US ambassador and three other Americans.

On the first reason, the protection of free speech is indeed complicated. People may argue the movie is a hate speech. But what would be the correct standard? I mean, I've seen a lot of movies and jokes harassing Jesus in such a really bad way and yet, I have not heard any case in the United States sanctioning the makers. Should we measure hate speech from objective or subjective requirements?

The second reason is even more problematic. The movie undoubtedly triggers heavy protests from Muslim communities around the world. And within the protesters, some of them may use the event to promote their own idea of violence and war. Perfect timing indeed.

If the United States penalizes the filmmaker, it can be assumed by terrorists and war mongers that the United States is bowing down to their threat and thus, in the future, it would be easier for them to demand things from the United States as long as they kill certain US citizens.

In other words, the United States would also have difficulties in punishing the stupid filmmaker based on political reasons. I borrow this analysis from Prof. Eugene Volokh, a law professor from UCLA, and I agree with the basic premise.

If the filmmaker realizes the above facts (and I assume he was not stupid enough to bring the video online without thinking the consequences), it would be rational for him to actually publish the video since his own personal benefits outweigh his costs.

Unfortunately, this is inefficient and bad to the overall welfare of the society. Currently, triggering protests from the Muslim world using cheap tactics (such as this movie) has a success rate of almost 100 percent - if not 100 percent. And it is most likely that the protest can turn into a riot.

This is completely different if the movie is directed to, say, Christians. As I've said above, there are so many jokes and movies depicting Jesus in such a bad way that I am certain if you change the character into Muhammad, the makers will not live long enough to see another day. Heck, we even have a Jesus parody in Twitter.

Why do Muslims and Christians have such a different approach in handling these kind of issues? Could it be that it has something to do with education and living standards?

But as long as most Muslims continue to retaliate, I believe the cycle would never end. The supply of people similar to the above filmmaker might be endless and they will definitely take the advantages they currently have, i.e. free speech protection and political reasons.

The most efficient solution is of course ignoring these buffoons. After all an ant can't cause harm to a blue whale. The problem is, it will take a long time to reach that stage (if ever).

I can only hope the majority of Muslims will follow the Prophet basic rule in dealing with bad mouthing: Just ignore those people. Good for your health, good for your image, and less trouble for all of us. We still have many urgent matters which are more important than a stupid movie.

Someone said on Twitter that corruption will never be effectively banished if people are still violating traffic regulations, including the three-in-one rule by using the jockeys service.

Three-in-one policy requires vehicles to have at least three passengers on busy roads at peak hours. The jockeys are hitchhikers who are paid to ride in a car when passing the main roads.

I won't discuss whether such rule is valid under the current hierarchy of laws, but or the sake of this discussion, let's just assume the three-in-one rule is legally valid and binding.

What I mainly disagree with the above statement is that using the service of jockeys is a violation of law that will somehow induce the people to corrupt - using a logic that if you can't be trusted for small matters, you can't be trusted for huge and important matters.

First of all, the rule only says that people who want to travel within the restricted roads must have at least 3 passengers inside their car. It doesn't stipulate that the people in the car must come from specific place or go to specific directions. Nor does the rule say that only certain type of people who really intend to use the car for traveling purposes might be considered as a legitimate passenger.

Having such condition would be an enforcement nightmare as finding the proof of violation and checking the overall background of all passengers would be very difficult, if not impossible. Not to mention the vagueness of the rule itself with respect to conditions for being considered a passenger.

Nevertheless, some people still think that the three-in-one rule is enforced in order to reduce the traffic jam, and using the service of jockeys will defeat such purpose. In other words, the use of three-in-one jockeys is a form of legal avoidance and should actually be prohibited.

The concept of legal avoidance is indeed confusing. On the one hand, it seems that you already comply with the prevailing laws. But on the other hand, you are deemed using the law to escape the consequences of your action which may violate the law's purpose or essence. Thus, your action will be deemed invalid.

To be honest, I refuse to admit the existence of legal avoidance concept. It is either you comply with the law or you violate the law. If there is no strict rule saying that you are violating the law, what would be the basis for some people to come and say that you are violating the law when you are still complying with the law? That would be absurd.

To follow the logic of people who support the existence of legal avoidance, take the three-in-one rule as an example. Bringing the jockeys in your car will let you satisfy the three-in-one rule. But because taking such jockeys somehow defeat the purpose of three-in-one rule, i.e. reducing traffic jam, you are already violating the law. The problem is, says who?

In any way, despite your choice of action, the three-in-one rule will most likely reduce the traffic all the time. Why? Because it creates additional costs for drivers to use the road during the three-in-one period. Either you take two more of your friends/colleagues or you pay for the service of jockeys.

The first type requires the costs of maintaining friendship, or maybe time, because you don't always have the same schedule with your friends. The second type requires the costs of paying jockeys or reduced level of security - after all, you are taking strangers into your car.

Thus, you can consider three-in-one rule as another form of tax or levy for the sole purpose of giving less incentives for people to travel within the three-in-one periods. If that's the case, then using jockey is not even a legal avoidance - assuming such concept exist - because you are still complying with the so called purpose of the rule, albeit in a different form.

This kind of act is completely different from mere traffic violation, such as trespassing the traffic lights. There is no doubt that such act is a violation because it directly breaches the rule. Under our criminal law principles, an act of criminal will always be considered as a criminal unless the defendant has a valid excuse - such as in case of force majeure or self defense.

Hopefully, you can see the difference. The key would always be whether there is a direct violation of a rule or not.

Next time, I would like to discuss whether there is a correlation between violating small rules with one's tendency to violate bigger rules, including corruption. Stay tuned.

The verdict for drunk driver Afriani Susanti has been issued earlier this week: 15 years in prison for killing nine pedestrians in an infamous traffic accident. She was deemed guilty not of intentional murder, but of reckless and fatal driving.

I won't discuss the verdict from legal perspective here. 15 years in prison is the maximum sanction she can get if she is deemed guilty of intentional murder. What I am more curious about is the way to find the proper penal sanctions for various criminal activities.

In my January 2012 article about Afriani, I argued she must receive higher penalty — by categorizing her crime as an intentional murder — in order to reduce the incentives for other drivers to drive recklessly.

At that time however, I did not think deeply about the most efficient sanction for her crime. I only followed standard Law and Economics doctrine that a sanction of multiple crimes should always be clearly differentiated with a single crime, simply because we want to give less incentive for criminals to commit more crimes.

As an example, if the sanction for rape plus murder is equal to the sanction for rape only, a rapist will have more incentives to kill his victim because he will receive the same sanction. But the costs of him to hide his crime would be lower.

In reality, however, differentiating the sanctions for multiple crimes is difficult. And the case would be even harder for differentiating sanctions for various types of crimes, especially when we focus our sanctions in the form of prison and fines.

What would be the proper sanction for thievery, corruption, rape, murder, fraud, violence, genocide, etc? How would we properly differentiate the sanction of a killer of one person and a mass murderer?

Judges often become the victim of this absurdity. On the one hand, our legislators are not that creative in designing penal sanctions. On the other hand, the general public often have obscure ideas about justice and how justice should be served for these criminals. In the end, judges will be blamed for making the "wrong" decision.

What I would like to propose is to analyze each type of crime, to study the incentives of each criminal in conducting the relevant crime, and to design a sanction which will defeat the purpose of doing such crime and maximize the welfare of the society.

Further consideration should also be given to the cost of law enforcement, the compensation to be given to the victim as a result of the crime (if any), and the probability to prevent the same crime from occurring again (recidivism).

In Afriani case, she drove while she was being intoxicated. It is a very dangerous behavior, indeed. But would 15 years in prison serve her (and any other person committing the same act) right? How about we give her a sanction in the form of a lifetime ban from driving, a huge fine as a compensation for the victim, and countless hours of social service?

Then when she fails to obey the above sanctions and commits similar crime in the future, we send her to prison for a lifetime simply because she is too dangerous to exist in the society.

Why do I design the sanction in the above form? First, we know she is a very reckless driver. I doubt putting her in prison will fix that. And maybe 15 years after, she will still do the same thing. What is really necessary is to ban her from driving infinitely.

Second, putting her in prison is another costs to be paid by us taxpayers (not to mention that the costs of prison will include all reckless drivers involved in similar cases, albeit having different degree of crime). Why not focusing on giving compensation to the victim instead of wasting taxpayers' money?

Third, forcing her to do social service might be more useful than putting her in the prison. At least we can expect her to give more contribution to the society rather than paying her cost of life in jail.

And if all fails and she breaches her obligations above, we can justify the decision to put her behind the bars indefinitely, i.e. she is dangerous to the society.

Of course, if we know that Afriani intentionally kills those victims because she likes it, we can directly put her in prison or send her to the death penalty squad. In other words, incentives of the criminals matter.

As you can see, discussing the proper sanction for a single criminal act like reckless driving is already quite complicated, but this is necessary. If our government and legislators really care about legal enforcement, they should think carefully before they criminalize an act.

A single law can have a great impact to the overall society. So let us ensure such great impact does not affect us in a negative way.

Don't you just hate the fact that many politicians seem very inconsistent in making their political choices? Supporting candidate A today, B the next day.

I still vividly remember a politician who was criticizing one of the independent candidates in July's Jakarta gubernatorial election for the candidate's lack of experience, and then changed his position to be a firm supporter of that candidate once his own candidate failed to join the election process.

We see similar things happening now when some political parties, who previously attacked the incumbent candidate, decided to support the incumbent after tragically losing the first round of the election.

Is this really a bad behavior? Should we condemn such act? I don’t think so. Far from being a reckless act, the change in political choices made by these politicians is simply rational. They would be stupid if they did otherwise. Why?

Surviving in the business of politics requires similar skills that you need in order to survive the world of commercial business. Politicians must realize, while their wants are unlimited, their resources and choices are limited, including the number of voters that will support their cause.

In the real world, you can't always get what you want. If you can't get your best choice, you should strive for the second best and so on, to the extent that you still can achieve your end goals, or at least a part of such goals.

The last US presidential election can be a good example. When I was in the United States, I once encountered a political campaign ad from Mitt Romney showing a video record of Hillary Clinton accusing Obama a liar. That was a very strong choice of word.

Obviously, the video was made before Obama defeated her in the presidential nomination race of the Democratic Party in 2008. Afterwards, Hillary became a firm supporter of Obama and now she holds the Secretary of the State position in Obama's administration.

I think that is how the political world works. Politicians use strong words in order to attract voters and to differentiate themselves from other candidates. If you say that all candidates are good, why bother having the expensive election in the first place. We can't settle everything using lotteries.

Thus, it is not a good idea to measure politicians' consistency based solely on what they say during election process or how they change their support from one cause or candidate to other cause/candidate in a short term.

Instead, it would be better for us to measure their consistency from how close they stay true with their basic objectives (assuming that the party itself has such objectives) in a long term.

This means that we need to know to what extent they will compromise their original best plan for getting the second best plan (and so on) in case they don’t have the necessary vote. And knowing the extent of their compromise is much more difficult than reading the bombastic campaign in various medias.

As an example, every media can cover a story of a politician who changes his position from A to B. But why stop there, why not ask more, like the politician's reasons for changing his standing, or how much has been compromised in order to change the vote from A to B, and so forth?

In one of my previous articles, "The Economic Problem of Choosing the Best Leader," I argue how we might create a vicious circle if we let bad politicians rule the game. One of the solutions for us to fight back is to pay more attention to the track record of those politicians.

But in order to understand their overall track record, we cannot rely on insufficient data. Sure, change of political support would be a major news and a good source for political bashing by political rivals. The problem is, everyone is doing the same and people will soon forget the case.

What we really need is a media who records the development of a political party or politician for years and then share the information to the general public. I don’t think that is difficult in this modern age and I bet the information would be more helpful to all of us compared to the usual critics that we now have.

If we really care about how politics shape our life, at least try to make people understand the issues correctly. The battle for image is absolutely necessary for political campaign and it might be impossible to ask those politicians to completely let such practice go.

Surely we can ask the independent parties, i.e. the media, to provide the needed check and balance in our political system, can't we?