Indian Prime Minister Dr. Manmohan Singh has decided to take stern measures against double digit food inflation by reducing minimum support prices for rice and wheat by epsilon, which is an arbitrarily small positive quantity.
“I just had to take stock of my life and wonder what the role of Economics was in it. And the answer was quite clear: it was about the same as my current role in the government. I’m there and I seem important but it would be unfair to say I did a terrible lot. So I decided to make a change.”
Economic theory often postulates that changing the parameters of the existing equilibrium by epsilon will upset the balance and lead to another dynamic adjustment process, something most economists prefer to wave their hands through or draw confusing arrows all over the place to describe.
Waving his left hand as he spoke and drawing an upward arrow on a hypothetical approval ratings sheet with his right, Dr. Singh explained that he expects the new equilibrium to be established at a healthy 5 percent level of inflation. When asked how he thought epsilon could effect this change, he said, “It’s pretty powerful.”
No comments:
Post a Comment