Search

U.S. farm commodity support programs encompass nearly three quarters of a century and three quarters of a trillion taxpayer dollars. One dividend from that effort is to learn lessons. Farm commodity programs have steadfastly maintained a primary objective of supporting the incomes of a relatively few producers of a relatively few commodities. Nonetheless, farm programs have not been static but have adapted to changing economic and political parameters. Changes in agricultural policy tend to coincide with extremes in the food supply–demand balance. Farm program income transfers leak from their intended beneficiaries to other asset owners. Economic rents, once institutionalized, retain political momentum that sustains the rents. The rise of pressure from the World Trade Organization to provide only non-market-distorting payments may challenge the continued viability of these lessons; however, the lessons also caution against discounting the extant political influence of the farm lobby. [EconLit N500, Q180]. © 2008 Wiley Periodicals, Inc.

The recent trend towards a more market-oriented global economy has reduced public support to commodity programs and led to a decline in buffer stocks of food grains in several cereal-exporting countries. Countries have to look for alternative means to stabilize prices and consumption particularly when carrying buffer stocks is expensive and self-sufficiency is economically inefficient. In today's market place, any country has the option of consuming food that is produced domestically or imported. This paper shows that trade and buffer stocks are two principal means to reconcile the conflicting realities of unstable harvests and stable consumption needs.

For the new round of WTO multilateral trade liberalisation negotiations to be successful, the world will need to be more enthusiastic and flexible about opening markets. Partisans will need to submerge their self-interests, and the U.S. will need to take the initiative for more open markets. This paper makes the case that only modest changes in the U.S. domestic grain, oilseed, and cotton programmes are needed for compatibility with global free trade. The Federal Agricultural Improvement and Reform (FAIR) Act of 1996 and related policy changes in the 1990s brought fundamental reforms compatible with freer domestic and foreign markets. Chief among these were a shift from coupled deficiency payments to decoupled direct payments, an end to supply management, and less engagement of government in commodity stock accumulation and export subsidies. Converting commodity price support to recourse loans while ending all but administrative cost subsidies to crop insurance would go far to liberalise grain, oilseed, and cotton policies. Unilateral termination of commodity programmes including direct payments totalling 42 percent of net cash farm income in year 2000 would appear to be traumatic to producers. However, reduction of direct payments could be offset (for farm income) by rising farm commodity prices and receipts resulting from (1) less farm output attending lower loan rates and crop insurance subsidies, and (2) world farm commodity price-enhancement from freer global trade.

Philosophical systems influence how applied economists choose problems worthy of research, how they analyze those problems, and how they interpret results. Philosophical systems also influence how the other disciplines and the public define problems and assess the proper role for economists in addressing those problems. Western philosophy has followed two major branches or systems in the nineteenth and twentieth centuries. One is the analytical, modern, or Anglo-American tradition. The other is continental philosophy, out of which postmodernism has developed. As a general philosophy, the analytical school is best exemplified by the Enlightenment. It had origins in the philosophy of John Locke, emphasizing that the ideal world lies in a natural order of no collective restraints

This article outlines a food security synthesis: that food insecurity traces to poverty, that poverty must be addressed by economic development, and that economic development flows from application of the standard model that is now mainstream economics. Food-insecure countries do not follow the standard model; their policies for agriculture and other sectors deter development. Reasons lie in institutions such as government and in attitudes. The economics of food security is straightforward. The challenge of food security for our time is for economists to work with others regarding socioinstitutional changes essential for proven policies and practices to supply adequate diets.

This study examines the returns to U.S. agricultural research investments for the years 1930 through 1990 using a cointegration model. Time series data on agricultural productivity, public and private research investments, farmers’ education, terms of trade, and commodity programs were found to be nonstationary and cointegrated. The estimated internal rates of return are 27 percent for public research and 6 percent for private research. These estimates from the most comprehensive and timely data assembled to date indicate that returns to public agricultural research compare favorably to real returns on alternative long-run investments, but do not call for large increases in investments suggested by previous studies or for the drop in public research expenditures appropriated by the U.S. Congress in recent years.

The long-term impact of research, education, and various government support programs on U.S. agricultural productivity was analyzed using an error correction model. Results indicate that the proposed reduction in commodity program expenditures (e.g. 1996 Farm Bill) is unlikely to reduce agricultural productivity. Results suggest that shifting public funds from commodity programs to education and research would raise U.S. agricultural productivity. Our estimates of long-term rates of return to public research are lower than those from most previous, perhaps due to our improved model specification, but are high enough to justify continued public investments to raise productivity.

The linear historic global crop yield trends found in this study, when extended, trace future rates of yield gain that are well below the recent growth in food demand. Fortunately for consumers, the population growth rates have also fallen after exponential growth, on average, for at least 2 centuries. Global food demand growth may exceed yield growth for several decades, bringing higher commodity prices that are necessary to draw land and other conventional resources into food production © 1998 John Wiley & Sons, Inc.

A quality-of-life index (QLI), a proxy measure of utility, is constructed by factor-weighted and simple-summation weighted aggregation of socio-psychological measures of well-being. The socio-psychological measures were constructed from quality of life domains taken from selected years of the General Social Surveys [General Social Surveys, 1972–1993: Cumulative Code Book. Principal Investigator, James A. Davis; Director and Co-Principal Investigator, Tom W. Smith — Chicago: National Opinion Research Center, 1993. (National Data Program for the Social Sciences Series, no. 13).]. The Quality of Life Indices (QLI) indices are regressed on selected socio-demographic variables using quadratic, Cobb-Douglas, square root, and semilog functional forms. QLI is much influenced by income, education, and health. As measured here, QLI is not much influenced by year of measurement, sector, or by region of residence. Much variability in the QLI is unique to individuals, and our results are suited to predict group, rather than individual well-being. Practitioners computing the benefit-cost ratio for a public program, project, or policy can weight dollars by income groups with marginal utilities derived from this study. That methodology will matter: even the ‘conservative’ quadratic equation indicates that the marginal utility of income (MUI) for families with very low incomes is half as large as for families with median incomes.

Empirical studies have noted that relatively small changes in farm management practices can significantly reduce emissions of agricultural effluents (Johnson, Adams, and Perry; Taylor, Adams, and Miller; Moxey and White). Farmers may voluntarily adopt these practices because they require few adjustments and have little or no cost. Total reliance on voluntary measures to control agricultural emissions, however, has been criticized because they are unable to lower emissions to acceptable levels (General Accounting Office; Malik, Larson, and Ribaudo). Hence, regulations such as emission standards, taxes on inputs, and taxes on estimated effluents have been suggested. One aim of these policies is to change farmers' management practices which would then lead to declines in emissions of

This paper briefly outlines a topology of small farms and then considers the role of the government versus the market in key public policies such as commodity income support, environment, stability, research, and rural development. A number of options are explored for public policy to better serve small farms, including drastic alternatives such as graduated property taxes on farmland, with exemptions or lower rates for small farms. These and other alternatives are not necessarily recommended. Improved extension education and human resource development offer some of the most promising public policy opportunities to help small farmers.

Domestic and international linkages in speculative stockholdings and trade of wheat are analyzed using a dynamic rational expectations model of the world wheat market dominated by the U.S. and the EU. The results demonstrate the importance of endogenizing both storage and trade in studying commodity markets and suggest that past government stockholdings have not followed efficient market outcomes. Results indicate that elimination of the Export Enhancement Program by the U.S. and of export restitution payments by the EU are unlikely to have a major impact on wheat exports from the two regions but will save millions of tax dollars in both regions. Copyright 1996, Oxford University Press.

This study views multilateral trade negotiations as a strategic game among nations or regions, including taxpayer, consumer, and producer components. Payoffs are calculated from an intermediate-run international trade model initialized with 1989 data. For the public at large, the Nash equilibrium and socially optimal outcome is liberalization of trade - unilateral or multilateral. Maintenance of the status quo of market distortions costing the world billions of dollars each year is rational only if producer payoffs are sovereign so that strategies optimal for producers are considered optimal for nations. Remedial policies are discussed, including opportunities for economic education, political system reform, and less incentives for producers to scuttle multilateral trade negotiations.

Even a successful Uruguay Round might capture just one-tenth of the potential global economic benefits from free agricultural trade. With only modest liberalization expected from multilateralism for a decade after the Uruguay Round, the alternatives to realize the large remaining gains from trade are unilateralism (such as revival of "super 301"), bilateralism (such as the voluntary export restraint agreements), and regionalism. One reason for the appeal of regionalism is the lack of promise in the alternatives. The objective of this paper is to appraise the future of regionalism for American agriculture. The paper addresses origins, prospects, advantages, and disadvantages of regionalism. It dispels some myths, and gauges the potential impact of selected regional liberalization on American agriculture. Regionalism is defined here as formation of political groupings or "blocs" of countries for the purpose of promoting intra-regional trade.

The economic impact of rural community size on retail sales is analyzed using a multicommunity approach. The Conservation Reserve Program is used to illustrate how farm policy initiatives which change personal farm income affect community retail sales in different sized communities. Regression coefficients are estimated and hypotheses tested which help interpret the interdependent nature of the retail sector within multicommunity clusters. The approach provides a framework which helps explain why some communities are becoming retail growth centers while the retail sector in other adjacent communities is stagnating or declining. An increased understanding of the consumer processes occurring between adjacent communities may help local leaders develop strategies for coping with future changes in local economies.

Rausser and Foster (1990) rightly note the importance for policy analysis of the link between a government's choice of economic policies and the welfare possibilities those policies generate. The authors envision a world where national-welfare-enhancing agricultural policies (PERTs) and national-welfarereducing agricultural transfer policies (PESTs) operate in tandem. "PEST policies, while typically thought of as welfare transferring and efficiency decreasing, can be welfare increasing when combined with PERT policies which, by themselves, may be impossible to implement" (p. 642). The theme unifying the Rausser and Foster paper, and the example that they revisit repeatedly, sees PEST commodity programs, and the transfers to agricultural producers that they bring about, as compensation for losses to producers from PERT investments in science and technology. However, we contend that this trade-off does not occur, and for two reasons. First, and primarily, extant evidence indicates that publicly funded agricultural research has been beneficial, not detrimental, to agriculture in general and to farmers in particular. Second, if the PERT-PEST dichotomy is to inform policy debate in anything but a parochial sense, then it should be transportable to settings other then the United States policy arena. We provide evidence that in general it is not.

Existine literature has orovided a wide ranee of estimates for supply elasticities. This study reviews agricultural supply response in developed and developing countries. The main obiective is to provide an understanding of the causal factors accounthg for the diversity of estimates. It is discussed that the estimated elasticities vary depending on the methodology used, the time period the cover, the definition of price variable, and the type of data utilized: The various methodologies employed to estimate supply elasticities are discussed. Finally, some conclusions are derived which are supported by the theory and the weight of the evidence.

Past empirical evidence on supply response by size of farm in the U.S.A. provides no clear basis to conclude that supply elasticities vary systematically with farm size. In this paper, the central hypothesis that no systematic relationship exists between production response to price and size of farm is rejected. U.S. farms are disaggregated into nine economic size categories and own-price supply elasticities are measured for per farm and total agricultural output. Empirical results from this study suggest that supply response does vary systematically by farm size, with smaller farms exhibiting greater elasticities than mid-sized farms.

I have contended for some years that the principal economic problem facing commercial agriculture is instability (Tweeten, 1989). It threatens not only farmers’ financial viability but also consumers’ food security, given consumer desire for stable food availability in the face of intermittently unstable food production.

Kuch and Ogg praise the 1996 farm bill for its cost effectiveness, geographical targeting, riparian protection, and termination of cost-ineffective practices such as ACP cost sharing for liming. Praise is appropriate. But remaining troublesome environmental issues and competition from the ambitious 1985 farm bill argue against calling the 1996 farm bill "...a major piece of environmental legislation." Environmental programs have at least three shortcomings which the new farm bill will not correct. One is that commodity programs are inadequate delivery vehicles for environmental programs. The second is sacrifice of economic benefits from land in the Conservation Reserve

The authors in this session recognize that the future of our profession depends on the economic education and analysis we are willing and able to supply and on the information demanded by our clientele. However, the authors could have devoted more attention to factors underlying the demand for our services and to our ability to translate supply and demand for our services into essential professional resources. Brandt and Ahearn focus mainly on the supply side-the changing composition of the profession. They note that over half of the young men and three-fourths of the young women in the profession do not have farm backgrounds. Most of those professionals are not working on commercial farm marketing and production economics. This is quite a departure for a profession once comprised mostly of white males with farm backgrounds working on commercial farm marketing and production economics. Brandt and Ahearn call for recruitment of more nonwhites and females into the profession. I have no problem with that as long as we continue to pursue excellence. "Cultural diversity" becomes another name for racism or sexism when it is defined as setting a (suitably low) qualification hurdle and then giving preference to minorities or women from the list who qualify. Brandt and Ahearn failed to mention the sharply rising proportion of foreign graduate students. American graduate student numbers are likely to continue to slip. Consequently, I anticipate increased hiring of foreign PhDs. to fill domestic faculty vacancies. In their brief conclusion, Brandt and Ahearn say that they expect current emphasis on peer review and disciplinary orientation to give way to multidisciplinary research responding to user views. They give few clues why this will happen, but hint that a supply of culturally diverse professionals might create their own demand. My observation is that the profession trains and rewards ever narrower disciplinary specialists, less and less willing or able to solve real world problems and effectively communicate the results to the public. These magnificent disciplinary specialists write mostly for each other. Unn vehr addresses demand-side issues, especially suburbanization, the skewed distribution of income, and the declining importance of farms. Offutt also notes the influence of suburbanization on our future. I feel that the future of o r profession depends on how well we serve the interests of students, food producers and consumers, rural Americans, and the public at large. We will need to provide sufficiently sound education and analysis of the food system, resources, and the environment to be viewed by society as worth retaining as a profession. We all agree with Offutt's observation that fewer of our profession's resources will go into traditional areas of agriculture. I and others in the profession who bear many scars from questioning the economic wisdom of current commodity programs are appalled by Offutt's statement that "the profession has done little to illuminate or move the terms of debate (about commodity programs) away from marginal analysis of the status quo. " Being candid about commodity programs has not endeared us to many of our traditional clientele. The thesis of the remainder of this discus

Regarding the first criticism, a basic principle of economics is that a subsidy can raise efficiency by helping the market bring forth an optimal quantity of a good characterized by a positive externality. If the marginal utility of income is equal for all, the subsidy raises well-being of the nation. If family farms exhibit positive externalities, the issue is efficiency and not equity as our critics argue. No subsidy is justified, however, if the social gain from internalizing the extemality is offset by national income lost by mismanagement and ineffectiveness of commodity programs in preserving family farms.' Because the politics of such issues blow hot and cold, we preferred to analyze the more lasting issue of economic externalities. Our critics contend that support for agriculture should be measured by political preference functions. This is a completely different issue in political science that may explain legislative behavior but does not say whether it is consistent with the economics of improving the well-being of people. We already know from surveys that the public has farm fundamentalist beliefs favoring agriculture.2 Our question was whether there is any basis in fact for these beliefs. The second criticism is that our results are not scientifically robust due to (1) lack of control for sociodemographic factors; (2) comparison of farmers with residential groups; and, (3) small sample size. First, we were constrained by time, space, and data from a detailed comparison of differences between farmers and others after controlling for age, race, education, income, net worth, self-employment status, and other attributes. Farmers are farmers partly because they display some of these characteristics such as self-employment. In some instances, where we believed such factors could influence our conclusions, we performed additional tests. For example, we controlled for gender in the case of attitudes toward government spending and for self-employment in the case of work satisfaction. This is noted and discussed in the text. We suspect that farmers share some attributes with others of particular

Modern technology, communication, transportation, and economics have transformed the farming industry and may have altered the typical farmer's character and personality. However, this study concludes that farmers have not lost their uniqueness. Results indicate that farmers differ from the general population in some aspects of morality, political ideology, work ethic, and outlook. Compared with the general population, the farm family is more stable, and the typical farmer is more religious, politically more conservative, and happier and more satisfied with some aspects of life. In many respects, particularly those concerning work ethic and outlook, farmers are not significantly different from others. They are more satisfied with their jobs, which appears to be a function of self-employment. As a group, farmers are among the better-adjusted members of society. They are optimistic and have a healthy outlook in terms of interpersonal relationships and general viewpoint.

The Federal Agricultural Improvement and Reform (FAIR) Act of 1996 opted for the market instead of the government to allocate resources and set returns in agriculture. Decoupled transition payments will continue to year 2002, after which they may be discontinued. A modest safety net of marketing loans and crop insurance may remain after 2002, but the era of government supply management of primary crops appears to be over. In this paper, our objective is to consider appropriate public policy for U.S. agriculture without price-related subsidies and attendant managed supplies. The discussion is suggestive, not exhaustive, and is intended to stimulate thinking on how postcommodity program policy might better serve the needs of agriculture and the public at large.

Problems of low income, high incidence of poverty, inadequate or expensive community services, net out-migration and high dependency rates in rural areas are now well documented and widely recognized. Not so well recognized is, “What can be done about these problems?” This paper suggests systems analysis to answer this question. Following a description of the systems approach to planning, a case is made for applying such an approach to rural development. Finally, some new observations are presented on the economic payoff from various public programs suitable for inclusion in systems planning.

The trend toward larger and fewer farms has alarmed many persons who view the small farm as an integral part of American society. Advocates of the small farm have called for policies to halt the continuing decline in the number of small farms in the United States. In evaluating the merits of potential policies, understanding the composition of small farms in the U.S. is critical.Appropriate public policy would be very different if small farms were operated solely by households with substantial off-farm income and who need no public assistance, solely by households pursuing an alternative to urban-industrial society's lifestyle and who want no public assistance, or solely by households who are aged and disabled and who want and need public assistance to avoid absolute deprivation.

As a student of agricultural development for over thirty years and as an economic policy trouble shooter in many countries for much of that same period, I have observed a recurring policy pattern or process among countries experiencing economic difficulties. This economic degradation process, or EDP, degrades economies worldwide-ranging from latent discomfort in developed countries such as the United States, to severe retardation in centrally planned countries such as Poland and Nicaragua, to immiserization of millions in numerous developing countries. EDP analysis focuses on the web of policies causing economic breakdown and not on the more familiar remedial economic stabilization and structural adjustment policies following an economic breakdown. The EDP emphasizes that corruption in government, parastatal inefficiency, autarky, indebtedness, or overvalued currency cannot be viewed in isolation but are symptoms of a larger process. The economic degradation process stands in contradistincton to the economic immiserization process (Bhagwati, Bodenheimer). The latter attributes third world poverty to external factors, such as declining international terms of trade, transnational corporations, dependency, and colonialism. In contrast, the economic degradation process attributes poor economic performance to internal factors, such as culture, a late start in development, and, especially, domestic policies. EDP places the responsibility for economic growth or decline not on outsiders but principally on the policy choices made by each country. The purpose of this essay is to define the economic degradation process and analyze its causes and cures. I first address stages in the process and implications for agriculture before defining elements of economic policies to avoid the EDP. The third main section lists hypotheses explaining why nations experience the process.

A visit by the Director of one of the Economic Development Districts in Oklahoma motivated this study. Because of declining unemployment prior to 1970, several counties in his district had lost special funding under Titles I and IV of the Public Works and Economic Development Act of 1965 (PL 89-163). The director contended that substantial poverty and other signs of economic and social distress persisted in previously designated EDA counties, and that a new criterion (specifically underemployment) was needed to gear benefits to real needs.