Holmes & Meier, 30 Irving Place, New York, NY 10003 1990 • 258 pages • $39.50 cloth, $19.95 paper
Federal agricultural programs cost American taxpayers billions of dollars a year, and add hundreds of dollars to the average family’s food bill. Yet few people are more than vaguely aware of these programs, and almost no one outside academia has a real handle on how they work. Now, however, E. C. Pasour, Jr., a professor of economics at North Carolina State University, has produced a superb analysis of U.S. agricultural policy that is scholarly yet readily accessible to the lay reader.
Pasour begins with a fundamental question: What is the role of economic theory in agricultural policy analysis? The answer, he says, depends on how you view economics. If you try to measure real-world agricultural markets against the norm of perfect competition, they will be found woefully lacking because “perfect competition” is an idealized, artificial construct. If, however, you view competition in terms of market processes—as competitors trying to outdo one another—then economics can tell you a lot more about the merits of free markets versus centrally planned systems.
Pasour then turns to public choice theory, the study of how economic principles explain political decisions. He shows that there is a bias in the political process in favor of programs where benefits are immediate and concentrated on a special-interest group, and costs are deferred and spread over the general public. A classic example is the sugar program, which yields enormous gains for a few thousand U.S. producers, while spreading the costs over 250 million U.S. consumers.
It is much the same with other agricultural programs. Tobacco growers and peanut farmers, for example, have their marketing quotas. Farmers who grow wheat, cotton, peanuts, tobacco, rice, feed grains, milk, soybeans, wool, mohair, or honey have price supports. The list is seemingly endless. if you (or your father or grandfather) got in at the right time, you probably are doing very well.
But many farmers aren’t doing especially well. For every farmer who has an acreage allotment, there are farmers who are legally locked out by the system. Each increase in price supports encourages more intensive farming, which drives up costs, misallocates resources, and depletes the soil. What value is it to a poor farmer if support prices are capitalized into the price of farmland, so he can’t afford to buy or even rent land? Tobacco price supports, for example, have raised some yearly rents by over $1,000 an acre.
Of course, the federal government has an alphabet soup of credit agencies ready to “help” farmers. But when a farmer can’t get a loan in the private sector, and has to turn to government-subsidized credit, doesn’t that say something about his ability to repay a loan? Is the government doing a farmer a favor when it encourages him to expand beyond his means, as many farmers were encouraged in the 1970s?
Pasour covers these and just about every other economic aspect of U.S. farm policy, including an excellent chapter on international trade and one discussing the merits of private versus government-subsidized crop insurance schemes. However, although his analyses clearly lead him to the free market position, he limits his policy prescriptions to a few comments. For this type of book, where the message is in the analysis, this is ideal.
Mr. Summers is a Senior Editor of The Freeman