The preceding scenario is important in explaining the financial plight today of many farmers who purchased land in the late 1970s when agricultural product prices were high. Owners of farm assets generally received transitional gains during this period because of the government's inflationary monetary and fiscal policies. In the heady economic environment of the late 1970s, farmers and other investors recklessly bid up prices of land and other farm assets because of expected favorable product prices and continued increases in prices of farm real estate. As the rate of inflation plummeted during the early 1980s, prices of farm land, buildings - and other specialized agricultural resources also decreased dramatically. Once inflationary expectations are incorporated into higher resource prices, government policies that reduce inflation expectations impose windfall losses on owners of specialized resources, just as do reductions in price supports.
Farm programs affect farm asset owners and farm operators differently.
Owners of farm assets receive short-run gains either if farm programs are implemented or if benefit levels are increased. However, farmers in their roles as farm operators or farm laborers receive little or no long-run benefits from farm programs. The benefits to farm operators are offset by increased costs. Farm programs also have little effect on returns to farm labor because farm labor readily moves in and out of agriculture. Two reasons have been discussed as to why regulators cannot regulate prices effectively.