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Monday, October 10, 2005
Solving scarcity
This seems like stating the obvious, but some fundamental truths of economics elude so many people, especially in the Indian government, that it is necessary to keep repeating them. Referring to the shortage of LPG, the Indian Express writes:
Is Mani Shankar Aiyar, the petroleum minister, listening? Unlikely. As this article states at the end, he has faith in the government solving the problem "through proper import management and inventory management."
Governments can't do that remotely as well as free markets, Mr Minister.
Cross-posted on The Indian Economy Blog.
Before the disease of price and quantity controls spreads to other sectors, the PM must step in and apply first principles of market economics to the sector. Anyone should be allowed to import, buy and sell, any petroleum product at any price without having to negotiate with the oil ministry. The ministry should have no role in the production, distribution or consumption of oil, no role in setting prices and no place in the export or import of oil products. The only way scarcities have been removed anywhere in the world is through the use of market determined prices.Also read the Financial Express's take on the problem.
Is Mani Shankar Aiyar, the petroleum minister, listening? Unlikely. As this article states at the end, he has faith in the government solving the problem "through proper import management and inventory management."
Governments can't do that remotely as well as free markets, Mr Minister.
Cross-posted on The Indian Economy Blog.
