India’s Farm Laws Are a Global Problem

Kaushik Basu in Project Syndicate:

I had long felt that India’s existing farm laws needed changing, and that the country’s food grain market needed to be more open. The new laws, among other things, permit farmers to sell grain outside designated state-regulated areas called mandis in states where they previously were not allowed to do so. The government appears to be giving farmers more choice. Why should anyone object to that?

Then I read the fine print of the legislation. With their uncanny grassroots intuition, the farmers had realized something that many economists, including me, had missed.

If the government permitted farmers to sell their products outside the mandi, the farmers would surely benefit, even if the market outside the mandi was unregulated. With all else remaining constant, they would simply be gaining an additional option. But belief in the ceteris paribus condition – that all other conditions will remain unchanged – requires farmers to trust the government. They clearly don’t – and, on closer examination, with good reason.

More here.