Read my article The Human Cost Of Zoning on FEE.org. I hope zoning in the third-world gets more attention with essays like this. I am glad that Financial Times, Bryan Caplan, Tyler Cowen, Alex Tabarrok, ACI Scholarly Blog Index, Orange County Register, Freakonometrics, Urbanomics and economist Ajay Shah blogged about this article. Government Of South Australia, Quartz shared it, and NYU Stern School Of Business’ Urbanization Project, Marron Institute, and Brandon Fuller tweeted it.
Farming is considered a patriotic enterprise, and nearly half of India’s labor force is engaged in agriculture and allied activities. Almost everyone believes that in the election season, political parties should pledge to aid this patriotic endeavor to feed the nation.
After the Indian independence, the annual production of agricultural goods has risen many folds. At the same time, the prices of agricultural products have risen many folds too. In surveys, inflation is on the top of the list of the scourges that anger the Indian voters. Except for a short period in the early 2000s, inflation in independent India has always been high. How could agricultural productivity and prices rise simultaneously, year after year? It is surprising that such obvious questions have not occurred to the policy analysts who take such claims at face value. The prices rise when there is more money chasing fewer goods. Remember that even in 2008, when the then President Bush complained about rising global food prices, the average inflation in the United States was only 3.8 percentage. This was the highest in that decade. If this were fueled by the global economic crisis, it would have affected other countries too. But, in the countries were central banks are independent and have an inflation target, the inflation rates were often ridiculously low. India would not have found an inflation of 3.8 percentage worth losing sleep over. In its history, India has almost never seen such low levels of inflation.
But, if so many people produce so little as they claim, perhaps not many people should engage in farming. A short evening on a farm might have convinced the panegyrists of the past that the farmers themselves might not agree with their romantic view of the farmer.
Read my column in DNA.
As usual, inflation targeting began in the United States. In 1971, the US cut the link between the dollar and the Gold. Soon other countries followed suit. Inflation started rising to unprecedented levels in the US and the other industrial nations. Like in today’s India, the inflation of the 70’s was blamed on the rising oil prices, and various external factors. Like in today’s India, many economists had believed that with rising inflation unemployment would fall. Low growth was also associated with high inflation. But, in the 70s, with high inflation, growth fell and unemployment rose.
In 1979, the Fed decided to have monthly target rates for the growth rate of M1. (M1 consists of the public’s holdings of currency and the checking account deposits in banks and other depository institutions) In 1971-81 period, the inflation in the US was in double digits, but, something changed after that.For close to three decades, inflation in the US was steady, but historically low. Fluctuations were mild till the ongoing global slow down. This is historically unprecedented. In the 70’s and 80’s, inflation in New Zealand was higher than in other OECD countries. In 1988, the CPI inflation in New Zealand was 9%. Inflation targeting began in 1990, and by 1991, the inflation was down to 2%. Inflation and output volatility declined. By 1994, New Zealand was among the fastest growing OECD countries. In the financial year 2012-13, prices fell in New Zealand, month after month. It was so remarkably successful.
Read the whole article in the Business Standard.