Thinking about the Anger

I posted this as a comment to Professor Schneider's original post. Upon reflection, it seems long enough for a post, with some further response from both Professor Schneider and myself:

My Comment:

The anger is a bit puzzling, if high food prices are the problem. Subsidies try to encourage overproduction (by eliminating some risks inherent in production and the market). That, in turn, was historically grounded on a cheap food policy (as well as others). The desire for cheap food seems to remain, but the tool used to achieve it is somewhat ineffective with increased demand. Assuming at some point that supply will catch up to demand at the current price (query if that is possible), then one way to decrease the price will be over-production. That will, in turn, be aided by subsidies.

Read the rest of this post . . . .

So I guess my puzzlement asks whether the subsidies must remain if the objection is high food prices.

Of course, one could say that the market should be let to operate free of farm-bill subsidies. But that is not a cheap-food argument. Indeed, energy subsidies, to the extent they are increasing demand for agricultural products, are a likely bigger culprit. If anything, the farm bill subsidies are keeping food prices lower than they might otherwise be (though that may be a bit of a stretch given current profit margins).

But if equity in payments is the real concern ("I don't get subsidies for making widgets, but farmers get it for making corn"), that is a different argument. Some problems with it may be the subsidies in many widget-production areas. And the answer to the quit-paying-when-prices-and-income-are-high quandary is a bit problematic. If they can be heard to argue for payments that are made when prices, production, or income are low, international obligations restrict the ability to structure payments in that way. We can't subsidize too much based on production and price. And there may be limits on our ability to subsidize based on price (regardless of production; i.e., CCP). That in turn, makes income supports problematic as well, when the trigger for payment is tied to market price. Given those limits, decoupled payments are used. Those, of course, have the tendency to inspire outrage on an equitable level in high times.

Very interesting, and, I think, more complicated than most of the editorials that I have seen let on.

Professor Scheider's response:

On the anger issue - I agree that it is not founded on economic analysis. But, my concern is that our favored treatment of farmers, i.e., our system of agricultural exceptionalism, has been based largely on the good will of the people (and their representatives in Congress). I see our farm policy chipping away at that. The way non-farm people feel about agriculture has changed so dramatically since I first started into all of this - and even me, as a third generation farmer (or at least farm owner) have to say that I am embarrassed by the largess. So much money going to such wealthy people.

Further thoughts from me:

I agree that farm policy is eroding good will. Or, it could be, that good will is eroding as people become more detached from agriculture. Three (somewhat related) thoughts come to mind on these issues.

1) one counter to eroding good will that is occasioned by a generational disconnect from rural areas may be a focus on food production (even if you are from an urban area, you care about food)

2) what I tend to call "energy agriculture" works against point #1 somewhat by leading the urban electorate to see agriculture as an energy provider (I'm thinking big oil)

3) deep thinking about what exactly we are subsidizing is in order. If we are subsidizing "worthy" farmers, then objections based on wealth levels are appropriate. But if we are subsidizing food (and energy) production to keep prices low, then it is harder to argue that the income level of producers ought to matter (and I call them "producers" for a reason here). It seems to me that this distinction was not as important as recently as 30 years ago. But now it is. And that may be because of consolidation, an increasingly rurally disconnected electorate, a perception of agriculture as a production industry, or some combination of those.

Finally, still in #3, food is a basic human need that cannot go unmet. That seems to justify subsidization for affordability's sake (think health care and affordable housing). Energy seems to also fall into the basic human need category, but to a dramatically lesser extent if we decry the lack of a push toward conservation or increased efficiency in our consumption. Then again, we may have some over-consumption concerns with food as well.

Interesting conversation.