Economics Lesson #1 for Arvind Kejriwal
Do you prefer Rs.20 to Rs.10?
Do you prefer to pay less for what you buy?
Do you prefer to get more for what you sell?
Of course.
But remember, everyone else does that, too!
So, when you fix prices for “essential commodities” (onions?)
and farmers are forced to lose money, will they like it?
No!
So what will the farmers do?
Farmers will stop producing onions.
So, Arvind, never interfere in the market’s natural, competitive
mechanism. That is the first lesson in economics.
Sanjeev Sabhlok. http://sabhlokcity.com/
Economics Lesson #1A for Arvind Kejriwal
“But the government can purchase onions from farmers and sell
through Mother Dairy at a low, fixed price!” (Arvind)
OK. So where will government get these funds from, Arvind?
From taxpayers.
So you’ll take Rs.100 crores at gun point (taxes are taken at gun
point), pay bureaucrats Rs.50 crores, and sell us “cheap” onions?
You’ve not only increased taxes but destroyed Rs.50 crores of
national value. And entirely destroyed farmers’ incentives!
So, Arvind, never interfere in the market’s natural, competitive
mechanism. That is the first lesson in economics.
Sanjeev Sabhlok. http://sabhlokcity.com/
Economics Lesson #1B for Arvind Kejriwal
“But if the government doesn’t buy the onions, won’t
middlemen hoard and sell onions at a high price?” (Arvind)
Well, you know that prices equilibrate demand and supply.
Remarkable! I never knew that! (Arvind, the economics illiterate)
With crop failure, supply of onions falls. What happens to prices?
Oh! I see now! Prices must rise.
So middleman aren’t “hoarding” onions. Prices adjust to changes
in supply and demand of onions.
So, Arvind, never interfere in the market’s natural, competitive
mechanism. That is the first lesson in economics.
Sanjeev Sabhlok. http://sabhlokcity.com/
Economics Lesson #1C for Arvind Kejriwal
“But isn’t hoarding a crime?” (Arvind)
You agree that the “hoarder” paid farmers for the onions, and
these onions now rightfully belong to him?
Yes.
Do you agree that everyone wants to buy cheap and sell high?
Yes.
So if I choose not to sell my onions cheaply why is it different
from “hoarding” my stocks or property and selling high?
So, Arvind, never interfere in the market’s natural, competitive
mechanism. That is the first lesson in economics.
Sanjeev Sabhlok. http://sabhlokcity.com/
Economics Lesson #1D for Arvind Kejriwal
“But isn’t the hoarder immoral (making money from onions)?”
All business has risks, Arvind.
• Sometimes, with a bumper crop I am forced to sell cheaper
than what I bought from farmers. And if I hoard for too long,
supply can increase and prices fall.
• I the “hoarder” can lose big money in many ways. It is my hard
earned money. Please let me decide what to buy and what to
sell - and at what price. Don’t second-guess my decisions.
So, Arvind, never interfere in the market’s natural, competitive
mechanism. That is the first lesson in economics.
Sanjeev Sabhlok. http://sabhlokcity.com/
Economics Lesson #1E for Arvind Kejriwal
“But doesn’t the poor man need onions at a cheap price”?
We must distinguish between markets and individuals’ needs.
Markets, like gravity, must be allowed to work unhindered. The
poor can then be directly dealt with.
• Let the government directly give money to the specific
(desperately) poor. See Breaking Free of Nehru for details.
• Once the desperately poor have received this top up (social
minimum), let them balance their needs like anyone else.
So, Arvind, never interfere in the market’s natural, competitive
mechanism. That is the first lesson in economics.
Sanjeev Sabhlok. http://sabhlokcity.com/
Economics Lesson #1F for Arvind Kejriwal
“But prices aren’t going up only because of scarcity!”
Yes, that’s because India’s socialist governments have borrowed
so much from abroad that they have destroyed the rupee.
• A thing that cost one rupee in 1947 now costs `100.
Government interventions require borrowing from abroad. You
are effectively asking government to borrow from China and USA
to subsidise onions. You are going to further destroy the rupee.
That’s why we need SOUND MONEY. But that’s another lesson.
So, Arvind, never interfere in the market’s natural, competitive
mechanism. That is the first lesson in economics.
Sanjeev Sabhlok. http://sabhlokcity.com/