From: jwh@citi.umich.edu (Jim Howe)
Subject: Re: Ignorance - Was Re: VOTE, BABY, VOTE!
Date: Mon, 16 Nov 92 11:12:24 EST
Organization: IFS Project, University of Michigan
Reply-To: jwh@citi.umich.edu

In article <1992Nov14.101828.14937@smds.com>, rh@smds.com (Richard Harter) writes:
|> In article <NxC=Q#C@engin.umich.edu> jwh@citi.umich.edu writes:
|> >In article <1992Nov13.075605.8167@smds.com>, rh@smds.com (Richard Harter) writes:
|> >|> In article <gYC=9HB@engin.umich.edu> jwh@citi.umich.edu writes:
|> 
|> >|> >This is already happening.  Efficient farming depends on economies
|> >|> >of scale.  What is wrong with large farms?  I repeat, farming is
|> >|> >a business and as such should meet the same criteria as any other
|> >|> >business.  If it can't succeed without government aid, it shouldn't
|> >|> >be operating....
|> 
|> >|> Would it shock you to be told that you know almost nothing about the
|> >|> economics of agriculture and that most of what you do know is wrong?
|> 
|> >Perhaps you can enlighten us all.
|> 
|> Probably not.  That's not a slam, just an admission of incapity.
|> 
|> However here are a few items for thought.  First of all, the statement
|> that efficient farming depends on economies of scale is not generally
|> true -- it depends on what your are raising and what your criteria for
|> efficiency is.  Let me give some examples:
|> 
|> Rice:  The Californian rice fields are leveled absolutely flat using lasers.
|> Production is highly mechanized.  Californian rice is cheaper than Japanese
|> rice.  More efficient?  Yes and no.  Japan has a substantially higher rate
|> of production per unit land area.  Japanese production is labor intensive;
|> Californian rice production depends on irrigation -- ultimately on water
|> resources that are literally being drained.
|> 

Rice growers are benefiting from subsidized water.  Who would grow rice
in the desert?  Only someone who can get a cheap supply of water.  I
personally don't believe that giving California rice farmers a water
subsidy is in the best interest of this nation, do you?  It's a perfect
example of how government subsidies screw up resource allocation.

|> Fruits and Veggies: The big producers are again Californian.  Successful
|> production is strongly dependent on cheap migrant labor.  The "plantation"
|> farm is economically more successful than the family unit because of
|> reduced labor costs; the origin of those reduced labor costs are due to
|> social policy rather than efficiency of production.
|> 
|> Corn: The most efficient producer is the highly mechanized family owned
|> operation.

Then they shouldn't need subsidies, should they?

|> 
|> Wheat: The biggest producers are corporations who go into the business
|> for tax loss reasons.  Again the most efficient producers are family
|> owned units.
|> 
|> Farming is not "just a business".  There are a whole host of social policy
|> issues that impact farming, e.g. long term land usage policy, land tax
|> issues, water usage issues, migrant labor policies, import/export policies.
|> 

You can make that claim about any business or industry.  It is no 
justification for subsidizing the activity.

|> There are farming practices that are profitable in the short run that
|> destroy the productivity of the land in the long run.  To what extent is
|> the farmer a businessman seeking immediate profit and to what extent is
|> he a custodian of a natural renewal resource?

Businesses generally manage resources better than the government.  
Businesses waste resources only where government gives them incentives
to do so.

|> 
|> As a general rule, the family owned and operated farm is the most efficient
|> agricultural unit.  [With notable exceptions for certain products.]  The
|> de facto policy in this country has been to liquidate the family owned
|> farm.  The origins of this policy are varied.  For example, in the 50's
|> and 60's this was deliberate USDA policy.  This country has not had a long
|> range land and water resources usages policy; the economics of factory
|> farming favor "resource mining".  The end result of US agricultural policy
|> is to subsidize the US food consumer at the expense of the agricultural
|> producer; US cost of food per capita is low compared to the rest of the
|> world.  [The farmer's share of what the consumer spends is also very low.]
|> 

Explain to me how price supports constitute a subsidy of the consumer.
How is paying more for sugar because of tarrifs a subsidy for the
consumer?  How is paying more for milk because of some arbitrary
calculation based on the distance from Eau Claire, Wisconsin a
subsidy for the consumer?  How is paying a farmer *not* to grow
a crop a subsidy for the consumer?  Governments are inherenly poor
at managing the economy or aspects of it.  The price system is the
best way to deliver the signals necessary to properly allocate
resources.  Government meddling with the price system in agriculture
(through various subsidies and regulations) simply distorts the
system and results in resource misallocation (like growing rice
in a desert).


James W. Howe                  internet: jwh@citi.umich.edu
University of Michigan             uucp: uunet!mailrus!citi.umich.edu!jwh
Ann Arbor, MI   48103-4943         

Newsgroups: ne.politics