Government Micromanagement of...Everything

The USDA has a perfectly valid reason for enforcing such a policy.

In the twentieth century, growth in farm output so outstripped population growth that farm prices dropped through the basement floor, causing widespread poverty in the farm sector. The only way farmers could compensate for such a drop in prices, was to cultivate even more of their crops, which of course made the problem worse, since consumers can only eat so much no matter how cheap their food is. And, while farm prices were dropping so low that farmers could not meet their expenses, overcultivation was leeching nutrients from the soil, until nothing would grow on it at all. Result: a dust bowl and lots of homeless farmers.

The whole purpose of "set-asides" -- forcing or encouraging farmers to keep portions of their land out of production and fallow -- is, at least in theory, to create a regime where farmland is allowed to replenish itself and farm prices are high enough (due to this decrease in supply) that farmers can keep on farming. Furthermore, this regime has to be enforced by law, otherwise farmers will be forced by their curcumstances to cheat by growing more crops, thus returning the whole farm sector to the original problems.

May the almighty government save us from the scourge of cheap, abundant raisins!

Raging Bee-

And we can't trust the market to correct such a problem? If there is a glut and farmers can't make a living as a result, and farm output outstrips demand, then we have too many farmers and some of them are going to have to go do something else. Realities change. The government has no more business protecting the status quo in the agricultural markets than they would have had in demanding limits on the number of cars produced in the 1920s to protect the horseshoe manufacturing industry. Economic reality changes and the market adjusts. If it took 2 million farmers to supply enough food in 1975 but only 1.5 million farmers to do the job today because of technology, then half a million farmers need to find other work. Just like telegraph workers had to find other jobs when that industry waned. This happens in every single market at some point.

The problem Ed, is that the people that taken out of the business are the small operators. Now in this country we like to have the myth that our food is coming from uncle Jim's farm rather than Jim Corp. If you think Uncle Jim could survive a drop in the market price you are pretty much wrong. The problem is that these originally useful protection schemes are being used to entrench the large corporate farmers. The problem is that if you remove them, the large corporate farmer still wins, since they then have driven out the smaller producers. Pretty much a damned if you do damned if you don't thing.

The large corporate farms win regardless. We have had this kind of government regulation for 70 years and that is the time that corporate farms took over agriculture. The time of the little family farmer is gone. It was gone long ago. The government can't bring it back, nor should it try to.

Thsi is not about "protecting the status quo in the agricultural markets;" it's about maintaining the viability of the ag. sector overall, not to mention ensuring that our soil remains reasonably fertile. The former is a matter of national economic security. The latter is a matter of legitimate, compelling state interest just as much as waste-disposal, land-use, air and water pollution, etc.: an environmental and national-security matter.

Also, if oversupply leads to price-drops, which leads to overcultivation, which leads to more of the same, then ALL farmers will be screwed, not just a marginal few. And even if enough farmers give it up to reduce production, the remaining farmers will start the cycle all over again.

I'm not willing to say that a free market approach to agriculture is best in the sense of long-term stability of our nation's food supply.

Of course it's about maintaining the status quo. You said yourself that there's too much product on the market. Well that means we've got too many farmers, doesn't it? Some of them will have to go. Markets correct for such things automatically. And do you not think that farmers themselves have an interest in their soil remaining fertile? Do you think that farmers don't take measures like fallowing and three field cultivation to keep the soil fertile? Anyone who wants to stay a farmer makes sure the soil is protected. Those who don't have no business being farmers.

This entire regime of paying farmers not to grow food is insane. I have a friend here in Stanton who is paid not to grow crops that he had no intention of growing in the first place! He bought a 40 acre piece of property, primarily for hunting, and found out that there were farm subsidies attached to it to pay him not to grow food - he doesn't even own a tractor. He doesn't even have a garden, for crying out loud, and he wouldn't grow crops if you paid him to do it. But the government pays him not to grow crops that he wouldn't grow if you put a gun to his head. Welcome to government logic.

if oversupply leads to price-drops, which leads to overcultivation, which leads to more of the same, then ALL farmers will be screwed

Call me stupid, but if an oversupply of a product happened, I'd switch to growing something different - something that wasn't as oversupplied as opposed to more of the same. I don't know what irks me more, that we run all these protectionist schemes or that we run them in the name of protecting people from their own stupidity.

Do you think that farmers don't take measures like fallowing and three field cultivation to keep the soil fertile?

If the price of food is too low to offset their expenses, then they CAN'T take such measures -- they have to squeeze every cent out of their land that they can get to avoid foreclosure from one year to the next. Why do you think they didn't do it in the 1920s? Voluntary restrictions in the ag. sector don't work for the same reason that they don't work in industrial pollution control: the one or two farsighted guys who take on the extra expense, or forego the extra revenue, place themselves at a competitive disadvantage, and lose out to their less scrupulous competitors.

Except that farmers will go under, as they always have, when there is too much supply. And they should go under. When they do, the market is correcting itself and the glut is reduced.

If the farmers who remain in business face the same financial pressure and short-term incentives, then the glut will NOT be reduced. Even if prices do go back up temporarily, that will only encourage more people to go back into farming, using the same land the last bunch of losers abandoned, and the glut will begin again.

And there's still the environmental issue to contend with: however many farmers go under, continued overcultivation will still turn their land into desert. This is clearly a case where government regulation is needed to prevent short-term incentives from causing long-term national disaster.

Every single market faces exactly the same pressure at all times - high prices attract more producers, more producers means a glut and lower prices, that leads to producers leaving the market, reducing the glut, and on and on it goes. But it's the market that should decide what is the appropriate amount, not the government. If there are too many farmers producing too much food so that the glut kills the prices, then some of those farmers will go bankrupt and get out of the business, which will reduce the glut and boost the prices back up until a balance is reached.

The vast majority of food produced in this nation is produced by corporate farms and these kinds of programs only transfer money from our pockets to theirs. This has nothing to do with the local family farmer. We pay about $50 billion a year, 90% of it to huge agribusiness interests, and some of that money goes to pay them to grow more of one crop, while simultaneously paying them not to grow another crop. It's a beautiful little scam that such businesses have going, a massive amount of corporate welfare, but it does nothing at all except make sure we're paying more for certain types of produce than we otherwise would. And we're paying $50 billion a year for the right to pay more for our produce. This is insanity.

If there is one thing that we should have learned from communism around the world, it is that central planning of economies fails miserably. The Soviet Union collapsed not because of human rights issues or military issues, but because their economy could not sustain their empire because centrally planned economies never perform anywhere near as well as unplanned ones. They never have and they never will, because all government planning becomes captured by the moneyed interests and begins to work for them to prevent change. Markets must be dynamic or they fail.

If there is one thing that we should have learned from communism around the world, it is that central planning of economies fails miserably.

We're not talking about "central planning" of a whole economy here; we're talking about an environmental policy.

We're talking about central planning an entire sector of the economy, telling farmers what and how much to grow. Such a policy has never worked anywhere and has proven downright disasterous most of the time.

If your worried about the environment, then pass environmental regulations detailing the amount of various substances needed in the soil (nitrates, organic matter, whatever). Maybe some farmers decide to achieve that by not growing every 3rd year, but others chose another method.

sgent: that makes sense, but it seems to me it's a lot harder to verify compliance with such a law -- not to mention the nightmare of writing such regs correctly in the first place. With set-asides, one only has to look at a field at particular times of year and see what's growing on it.

My contention is also that the environmental issues play a very small role in the current farm regulations. Current growth restrictions would be much less onerous if they existed soley for the purpose of maintaining viable farm land. For instance, we have few (and no national) regulations if a farmer decides to turn the land into housing stock or a shopping center.

I don't see why having to send a soil sample to a testing lab once every 2-3 years is more onerous than tremendous restrictions on land use currently in place.

1. Yeah, it is fair to ask that a few small farmers submit to the pricing system in order to ensure a fair price to all farmers and keep all the mortgages paid instead of forcing 50% or more of the farmers into foreclosure. It's exactly the sort of compassionate socialism that makes this nation great. The case you want to read is Wickard v. Filburn, a 1941 case in which the Supreme Court finally okayed this practice. Farmer Filburn claimed that the federal government had no right to tell him he couldn't grow 115 bushels of wheat on his Ohio farm to feed his Ohio chickens on the same farm, not under the commerce clause or any other. The Supremes said, basically, that a fair pricing system that all farmers in the crop agreed to be bound by ought to be obeyed.

2. George Washington faced almost exactly the same issue in 1764 -- he didn't trust the "agents" in England to sell his tobacco at a fair price, take only a fair commission, and leave Washington in Virginia wondering how much he'd gotten for his crop, how soon it would come, or what prices might possibly be in London in 14 months. So George Washington, little-recognized for the economic genius and businessman that he was, got out of the tobacco business, and went into wheat instead. Wheat was not controlled by London, but by the market. Washington got wealthy going where the crowd wasn't.

Those Oregon farmers should study history. Farmer Filburn lost, the Supremes said the government can come between a farmer and his chickens, and George Washington got wealthy.

This is, perhaps, the farm crop-support system equivalent to eminent domain. In some sense we think it's unfair that the vast majority should be able to interfere in a small farmer's economic life like that. Look at it the other way: Why should those Oregon farmers be allowed to bankrupt hundreds of others? Why should they get privileges others do not have?

Mind you, the market solution is to give the farm to the bank and send the family to the county workhouse. Sometimes we should step in to moderate market actions. Keynes was, in the long run, right, as well as dead.

Ed-

Wickard was not just wrong, it was blatantly wrong. Easily one of the worst decisions in the the history of the Supreme Court. As for Washington, he merely demonstrated what smart farmers do - they adjust to go where the money is. He didn't just keep producing the same thing he couldn't make money on and then insist that the government give him someone else's tax dollars to compensate for their lack of business sense. If they can't do that, if they insist on all producing the same crop until it reaches a glut and they can't make money on it, they certainly do not have any right to take my tax dollars to make up for their lack of foresight. Those other farmers do not have any legitimate right to tell another farmer what he can and can't do with his own property so that they can avoid the negative consquences of their bad decisions.

Ed D. - And why should you be able to keep your extra kidney and lung if they could be used to save two lives - arguably a more important goal than preventing some farmers from having to find new lines of work? The gov't promises you just compensation, which is more than is granted to the farmers in Oregon...

Damn typekey ate a comment I worked quite a while on. Well I will leave off all the stuff that made my comment insightful and well informed and go to the summary.

I have little or no sympathy for these guys. They are scabs, nothing more. They are breaking a contract they had with a cooperative they are members of and have a vote in selecting the management. Instead of working for the common good they are wreaking the market for everyone.

"Call me stupid, but if an oversupply of a product happened, I'd switch to growing something different - something that wasn't as oversupplied as opposed to more of the same."

I don't think you're stupid, but I DO think you don't really understand farming economics.

Growing crops is becoming more and more specialized. You have certain VERY large ivestments of capital in equipment, seeds, pesticides, and even fertilizers which may not transfer to another crop.

You can't use grape equipment to harvest wheat--you can't use it to do anything other than pick grapes. Your workers (who pick your grapes) can't do wheat either. Your farm--which may be a high-value, small-acreage arrangement--may be well suited in terms of environment and location to a certain product (grapes) but poorly suited to most others

So even if you could somehow make the capital-investment problem go away; and could somehow acquire instant knowledge on how to grow, sell, and market a new crop; and somehow could set up a chain of suppliers for a new crop... your FARM might not be capable of producing it.

Farming. Is. Hard. That's why all the small farms go out of business.

If I were to believe that, for example, Brown v Board of Education was "Easily one of the worst decisions in the the history of the Supreme Court" would it be okay for me to ask my local school board to disregard it at well?

The market for raisens is currently, for whatever reason, regulated via a regulation of supply at the farm level. Marvin Horne wishes to sell his raisens at the regulated price, but does not wish to abide by the regulations that set that price. I cannot come up with any consistent argument that makes this acceptible. It's obviously not law abiding, and it is self-serving to Mr. Horne.

If one wishes to make the argument that agriculture should have no regulations (other than perhaps those that are somehow purely for environmental and safety reasons, though I can't see how one can easily make this distinction either) then that argument should be made. But to apply it to this single case, without considering its context, is to engage in a spectacular example of special pleading.

Special pleading is a special trap for libertarians and other types of utopians, because, in practice, you never get the whole package, and the particular package is often less suitable for liberty, and more in line with the wishes of the powerful.

James Killus wrote:

If I were to believe that, for example, Brown v Board of Education was "Easily one of the worst decisions in the the history of the Supreme Court" would it be okay for me to ask my local school board to disregard it at well?

You could ask them, of course, but they can't do it without getting slapped with a court order, which they could then challenge in court to try and get the precedent overturned. Teh difference, though, is that Wickard didn't mandate crop quotas, it just said that they weren't unconstitutional, whereas Brown mandated desegregation.

The market for raisens is currently, for whatever reason, regulated via a regulation of supply at the farm level. Marvin Horne wishes to sell his raisens at the regulated price, but does not wish to abide by the regulations that set that price. I cannot come up with any consistent argument that makes this acceptible. It's obviously not law abiding, and it is self-serving to Mr. Horne.

Of course it's not law abiding, but the only way to challenge the law is to break it. Just as someone in the Scopes trial had to get arrested in order to challenge the law, someone has to break this law in order to have it challenged. That's only seen as "self-serving" if you disagree with his goal. If you agreed with his goal, you'd likely see it as a selfless act to better society. Raich could not challenge the constitutionality of the law forbidding medical marijuana until she got arrested for it. Was she being selfish or was she helping to better society? How about both? Adn why would it matter anyway, as long as it leads to a good result?

If one wishes to make the argument that agriculture should have no regulations (other than perhaps those that are somehow purely for environmental and safety reasons, though I can't see how one can easily make this distinction either) then that argument should be made. But to apply it to this single case, without considering its context, is to engage in a spectacular example of special pleading.

But he wishes not only to make the case that we shouldn't have crop quotas, but that such quotas are unconstitutional. He can only make that argument in court and he can only get into court if he violates the law and is punished for it so that he has standing. Why you think this is special pleading is beyond me.

Were I to agree that Wickard was wrong, the fact remains it is the law of the land. The appropriate remedy is for farmer Horne to go to Congress to make a case to change the law. If he's facing such huge fines, he must be making sizable profits flouting the law, and my sympathies for the "small farmer" are concomitantly reduced. It's not ADM, but this Horne raisin operation is no small potatoes.

Is Wickard outdated -- or more to the point, are such crop price support programs outdated? A case can be made. Make it.

Ed-

He wants to make the case that the law is unconstitutional. In order to do that, he has to challenge the law. Congress isn't going to change it because the program isn't really about helping the family farmer, it's about transferring billions of dollars from taxpayers to corporate agribusiness interests that give millions to legislators to insure that those billions keep coming. And I think he's right on the legal issue. The government has no constitutional authority to tell a farmer how much he can grow or sell.

I'm sorry, but this misrepresents the program. Farmer Horne has a very simple solution to his problem...

STOP TAKING THE SUBSIDIES!

The program they are talking about involves government payments in return for the farmer leaving the field fallow. It isn't the government demanding that he not grow his crops, demanding that he not make money, feed his family, etc., this is about someone taking federal money in exchange for an agreement not to grow as much as he possibly could. He has opted to violate that agreement, he should face penalties that are in line with the money he and his friends received.

Should the government be paying farmers not to grow? Tough question. Do we want to save the family farm? Does it need to be saved? What about corporate farms, should they be denied the benefits of these programs? Can they be legally under the 14th amendment? What about the impact of higher prices on the poor and elderly ... tough questions...

dogmeat-

No, that's not the case here. This is not a subsidy, it's a quota program. He is being fined for not setting aside a certain amount of his crops and trying to sell them instead.

Ed D. - Since the commerce clause hasn't been amended since Wickard, it makes no sense to talk about whether the precident is outdated, but whether the precedent constitutes a correct interpretation of the Constitution. As Ed B. points out, in order to get standing, there needs to be an actual dispute - you can't just go in and ask the court to reconsider Wickard. Precidents aren't the "law of the land" - they're interpretations of laws and can be argued to be correct or incorrect, whereas applying those terms to laws doesn't make sense outside of very bizarre cases where legislatures have tried to legislate facts (see the bottom of here for an example). Violating an incorrect precedent is no more a violation of the "law of the land" than violating an unconstitutional law, since the higher legal authority is on your side.

As for agricultural price supports, anybody with a basic understanding of economics can tell you that they raise the price the public pays (either directly or indirectly via taxes for susidies or buying surpluses) to consume an smaller amount of the good, transfer that extra money into in the hands of a small minority of the population, undermine the development of the agricultural sectors in the developing world, and encourage inefficent land use.

I think I could literally write a passable introductory microeconomics textbook using some aspect of the stupidity of this policy for every single example in the book (the only thing I can think of off the top of my head that I couldn't use it for is substitution). Essentially, the set-aside contracts the domestic supply to raise prices, which is what monopolies and cartels do. This increases the cartel members profits at the expense of consumers since they get to chose the most favorable location on the demand curve. However, the first party to break with the cartel will be able to grab a larger share of the market by offering lower prices, thus making more money while charging consumers less. Once one defection occurs, the other cartel members will follow suit and the market will eventually settle at the intersect of the supply and demand curves with a higher level of production and a lower price, but still acceptably profitable for the raisin growers who stay in the market.

It appears part of the set-aside is dumped in the international market for below domestic market price, since it can't be sold domestically, undermining foreign raisin growers who may have a comparative advatage (this results in non-Praeto efficient use of resources), by being able to sell at the international market price, which may be potentially less than the average production cost as long but still profitable due to the extra domestic cartel profits and economies of scale lowering the marginal production cost. Overall, I'd guess it produces results like 2-tier price discrimination would. Essentially, everybody gets screwed for the benefit of the cartel.

None of analysis would have changed from when the policy was implemented. It isn't outdated - it was ALWAYS a bad idea.

Ed, I'd rather see the legislation, the actual text. I seriously doubt that the government would implement a quota with no compensation. It makes absolutely no sense for a piece of New Deal legislation that would have been shot down by the same supreme court that shot down the AAA. Also it seems highly unlikely that they would implement a program that would take money away from one of the most heavily hit segments of the population during the Great Depression. The last thing they wanted to do was take money out of the hands of people who might by something (anything).

1. If we decide to leave the market a free hand in agriculture, we are going to be left with large-scale farming, which is detrimental to the environment and very, very cruel to animals (you wouldn't like to work in a large-scale pig, hen or cattle farm, I assure you). The traditional way of growing food is a value in itself, the quality is just so much higher.
2. There is also such thing like landscape conservation. Many nice things in our rural landscape exist because of the traditional farming. If the farmers go under, we lose something of value. I think it pays for the society to help them not to go under. Maybe in the USA the city population is so removed from the villages that it's not an issue, but in Europe this is one of the motivating factors for the EU Common Agricultural Policy (apart from stuffing farmer lobby's pockets, that is)
3. The problem with unregulated food production causing drastic price drops is real. We can debate whether the problem would be better solved by government intervention or by voluntary production controls, like farmers joining into cartels. If every farmer will want to increase maximally his output, we have a recipe for disaster.

Roman:

1. While industrial livestock operations do have a big yuck factor (been there, done that, almost threw up), the same really doesn't hold for plants. If anything organic is yuckier because the nitrates come from manure. Environmentally, the footprint is different for different methods and different implementations of those methods, so consequence-based regulation rather than method-based makes more sense from the environmental perspective. In my experience, it seems that you can get high quality food out of either, but it's expensive, whereas cheap, low-quality food requires industrial methods. Overall, the industrial vs traditional distinction (I don't say large-scale since it's the method not the size that matters, although industrial does scale up better) doesn't really capture the key enviromental and quality distinctions - both can be done well and both can be done poorly.

2. As far as landscape goes, since I'd rather see less farm (I live in Wisconsin and I see a lot of farm) and more wilderness, I'd favor higher-density production, but it is a personal preference thing.

3. Drops and spikes in commodity prices are expected. Futures are used to even things out a bit in the USA (and I'm guessing most other developed countries), but it is an intrinsicly volatile industry (I'm guessing largely due to weather), so risk comes with the territory. The situation is harsher in the developing world, but cartelization of developed countries agricultural markets only makes it worse. What gives farmers in developed nations a right to protection from economic risk to at the expense of everyone else?

dogmeatIB - It sounds like the set-aside can be sold domestically in subsequent years or exported, but even without this, the cartel can still profit from constricting the suppply by throwing out the excess. For example, if the market would normally equilibriate at 7 units for 4 cost each, the gross income for producing 7 units and selling them all is 28 and the net is 0. If by constricting the supply to 3 units they will sell for 10 each, even if the cartel produced 7 and threw 4 away, they'd be better off than if they sold all 7, since they'd have a gross income of 30 and a net of 2. Ideally, the cartel would want to produce only 3 units and pocket money that would have been required to produce the extra 4, but political concerns probably prevented a law allowing them from exercising collusion over production (you can't screw the consumers too badly and still expect to get reelected based on support from the raisin producers), so they had to collude by limiting the units sold when additional profits could be realized by it.

MattXIV:

1. Organic yuckier? I think it is easier do overdose artificial fertilizers than to overdose manure... of course you're right that you can get high-quality food with industrial methods... and you're right that the problem is with scale, not with the method; however, if everyone is using industrial methods, then the bigger player wins.
2. this perhaps reflects a difference between Europe and the USA: Europe has almost no "wilderness", so what is left of the nature is the almost always a result of centuries of agriculture. Thus it makes sense to conserve traditional agriculture in Europe, seemingly more than in the USA. The is also something like the cultural tradition, like hedges around fields. It's nice to keep it the way it was in the past.
3. Ideally, state intervention in agriculture should serve to defend the environment, landscape and all those nice traditions, not to stuff farmers' pocket or make life easier for them than for other businessmen.

Roman wrote:

Ideally, state intervention in agriculture should serve to defend the environment, landscape and all those nice traditions, not to stuff farmers' pocket or make life easier for them than for other businessmen.

I totally agree. But let's be realistic here: whatever regulation a government writes, whatever its intent, however smart, sincere or good-hearted the regulators are, there will always be someone who benefits unfairly from it. No law or administrative reg. is ever perfect, and neither are the people involved in its making and implementation. No regs at all? Same problem!

Unfair benefits or burdens are always a cause for concern; but they're not, in themselves, a good argument against regulation for the common good.

I actually agree when it comes to the higher quality of non-corporate farms. I buy most of my meat from an organic farm for precisely that reason, and pay more for it as a result. But folks, corporate farms were inevitable and they became a reality a long time ago. It's what has allowed the rate of per capita food production to increase rather than decrease and helped us avoid food shortages. There's little point in complaining about it because it simply isn't going to change. But at the very least, we should not be handing them billions of dollars every year from the Federal treasury. 80% of all these farm subsidies in their various forms go to those farms.

I've read the news stories on this, and I can't find anything in them that suggests that Horne was engaging in civil disobedience in order to make a test case to challenge the constitutionality of the law. I have considerable sympathy for someone who breaks a law out of desperation, but the fact remains that, were he to succeed in his goal, the market fluctuations in the price of raisen grapes would drive him (and the other desperate farmers who use his shed for washing and drying) out of business faster than would playing by the current rules.

This is a dreadful case on which to try to make a libertarian point. In essence, it requires one to believe that doctrine trumps economics, because the theory of price elasticity is "just a theory." Where have I heard that before?

But at the very least, we should not be handing them billions of dollars every year from the Federal treasury. 80% of all these farm subsidies in their various forms go to those farms.

If that's what it takes to prevent our farmland from becoming desert as a result of intensive overcultivation, why not?

I'm no expert on farm policy, so there may be a better policy I've not heard about...but I haven't heard it yet...

Well, why should overcultivation occur? If the farms produce too much food, they loose money. Next year, they'll grow less food.

The role of the state should be limited to helping farmers in dire need, for example when there is draught or flood, and to caring about the common good: environment, landscape, tradition.

Small farms can organize themselves into communities and sell their products together, thus obtaining better prices.

Roman - Unfortuantely, stuffing pockets of the businesses is all the subsidies end up doing in the long run. As long as agribusinesses are more efficient that small farms, they'll continue to pick up market share, price controls or not.

James Killus - Sorry, but economists have been on the side of libertarians on this one from Adam Smith on. Please check out what such imfamous libertarians as Paul Krugman, Brad DeLong, and John Meynard Keynes have to say about agricultural price controls. I don't understand how elasticity supports your position, and to be honest, I don't think you do either.

Raging Bee - Subsidies encourage production, so if anything they'd make overcultivation worse. Overcultivation can be a problem, but price supports won't do anything about it. If overcultivation was a problem, then plausible regulatory policies would be soil quality regulations like sgent proposes or manditory crop rotation, but you can't affect the changes you would need by price floors, subsidies, or cartels.

MattXIV,

Yes, economists do decry agricultural subsidies -- for the nation as a whole. But I have yet to read an economist who has written that eliminating agricultural price support policies would be good for small, marginal farmers, for the simple reason that it would not be good for them.

Demand inelasticity (which applies to all commodities), says that when supply increases by a certain fraction, the price paid for said commodity goes down by a greater fraction, thereby reducing the total amount paid to all producers of that commodity. Farmer Horne and his fellows are marginal producers; if the amount paid to all producers decreases, they go out of business. In fact, Horne is quoted as saying that he is breaking the rules because otherwise he would go out of business. If the rules are abolished, he will go out of business anyway.

You go try to find an economist who says otherwise. By all means give us a quote or two. And before you get snarky with phrases like "such imfamous libertarians as Paul Krugman, Brad DeLong, and John Meynard Keynes," you might try reading an introductory text in economics. Even Samuelson will do. He has a pretty good section on demand elasticity.

James -

I don't think government policy should serve a minority at the expense of the nation as a whole, so I'm going to keep decrying farm subsides for the obvious reasons.

I'm familiar with demand elasticity, as it is intrinsic to the explaination for how cartels increase prices I posted above. Since you're familiar with it too, here's my detailed analysis of Horne's situation:

If he doesn't defect from the cartel, he'll end up selling his farm quicker, so the cartel is useless for Horne - he will want to sell the farm if he stays in, he will want to sell the farm if he defects. But if he defects, he gets extra market share until the cartel disolves, so he comes out ahead. Since Horne says he'll go out of business if he stays in the cartel, his average cost of production must be higher than the average sale price he can obtain in the cartel system.

Horne et al face a multiround game. While the cartel is intact, if he doesn't defect, he loses some money, if he does defect, he make some money. If the rest of the cartel isn't intact, he loses money. Alternately, he can sell his farm (or change crops, etc) and he doesn't have to play the game in that our any subsequent rounds.

The other members of the cartel face a game where if Horne (or anybody else) hasn't defected and they keep the cartel they make a lot of money, if Horne has defected and keep the cartel they lose money, since Horne can undersell them, and if they dissolve the cartel, they make a little bit of money (or sell their farms if they're not profitable at the equilibrium price), irregardless of if Horne has defected or not. So it makes sense for them to preserve the cartel until someone defects.

Sooo... Horne's optimal strategy is to defect until the cartel breaks up, then sell his farm. He'll have to sell it sooner or later - the only case where it makes sense for him to keep it is if he defects from the cartel but it never dissolves, and that's unlikely to happen since they lose money from sticking with it once he defects.

I suppose it would only be fair for me to say that misunderstood what you were getting at in your previous post a bit and I take back my snarkiness. I still stand my determination that it makes sense for Horne to defect.

James Killus:

But I have yet to read an economist who has written that eliminating agricultural price support policies would be good for small, marginal farmers, for the simple reason that it would not be good for them.

Any subsidy/quota that benefits small, marginal farmers is going to benefit the large corporates even more, so the corporates will have an even larger incentive for displacing smaller farmers. Likewise any other risks that this scheme does not alleviate will send these small, marginal farmers to the wall first. This is unavoidable, so why play Canute & try to hold back the tide by fiat?

If the real beneficiary was meant to be small, marginal farmers then some sort of per-farm subsidy would make more sense. But in reality, the small, marginal farmers are just window-dressing for the corrupt practice of taking money out of the pockets of consumers and tax-payers and putting them into the pockets of the large corporates who make large political donations. Plutocracy disguised as democracy.

I don't feel that I know enough to sort this issue out, but government policies that save land are an exception. The vast glut of subsidies encourage overproduction, poor land use, and monoculture, which is environmentally damaging. My area of study is small farms and most of these have not benefited from government handouts. They have been forced to either shut down or enter niche markets such as organics. I doubt anything will ever increase their market share to previous levels.

My hope would be that cutting off government subsidies would encourage wise land use and lead to some crop diversification. If there are farm subsidies, I'd rather have them divorced from output and more contingent on land health. There are short run incentives to devastate the environment and those do need to be addressed, but the current system is not the solution. In fact, government has never done a very good job with agriculture. The Homestead Act directly encouraged people to farm on marginal land.

The stupidity of the current problem is demonstrated by the uncoupling of payment from specific crops in 1995, which ideally should have encouraged diversification and rotation, but the farm lobby managed to prohibit farmers already growing subsidized grain to collect subsidies for other commodities. Besides that, programs like the Conservation Reserve Program provide little incentive for setting land aside or engaging in decent land use.