21 May 2008

Agricultural Policy

Yesterday, Fixed Carbon mentioned an article in which the author says the poor (and hungry) were subsidizing the rich (and obese). That sounds familiar, I thought to myself. Where have I read about it recently? Oh, here's the passage that I read in the morning:
Statistics are frequently cited to show that agriculture is at a disadvantage because its per capita income is much lower than that of the industrial population. Aid to agriculture is therefore advocated on the basis of this information. When examined closely it will be found that agriculture is not a homogeneous industry. It consists of at least two entirely different sections: a commercial section in which incomes are reasonably comparable to those of industry and a subsistence section in which incomes are very low indeed. There is practically no justification therefore for aid to agriculture as a whole for the simple reason that agriculture is not a whole.


Unfortunately agricultural policy, designed to support prices, helps the rich farmer more than it does the poor farmer. Here is a curious deficiency in our information system. Agriculture has obtained a sympathetic hearing in its claims for support because of its low average incomes. The poor farmers, however, whose low incomes bring down the average, have benefited very little from the policies designed to raise agricultural incomes. Because we have thought of "helping agriculture" rather than of "helping the poor" we have actually used the poverty of the poor to justify policies which have in effect subsidized the rich.
That passage was written by Kenneth E. Boulding in his 1958 book The Skills of the Economist. Boulding, winner of the John Bates Clark Medal, is credited as the founder of evolutionary economics.

Yes, that's right. Top economists were saying fifty years ago* that agricultural policies benefit industrial farmers -- not the "poor farmers" that the USDA and politicians like to parade around when they are looking to increase the pork deliveries to their fat friends.

Bottom Line: Agricultural policies do not help the poor. They distort markets and destroy the environment merely to make the rich richer.

* My dissertation builds on perceptive work that Milliman did in 1955.