Wednesday, July 05, 2006

Three Cheers for markets

Hurrah for markets!! The market works beautifully even if rains disrupt transportation in Mumbai. Read the article here. What would have happened if local vendors had demanded that government provide transportation for their goods? What about government vendors of produce and other commodities? Did they do likewise or were they buried under tons of paperwork? My guess would be the latter. Besides they would have had no incentive to make alternative arrangements to get the supplies. Even if the persishables had rot the government would pay them. The article mentions that prices did not go up, but if they had what if the government had stepped in and controlled prices? Would the private vendors have still had the incentive to take a taxi to fetch their produce? I guess several of them would have formed an informal group and fetched all their supplies together and shared the cost, and then the government would have cried that they were engaging in price gouging.
It still amazes me how wonderfully well markets work even under difficult circumstances. I guess for me the charm of markets and economics will never wear off.

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