David R. Henderson  

Popcorn Pork

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As the late Professor Olson might have observed, the popcorn subsidy will likely become fiscal law because almost no one, other than the popcorn growers, will notice. Being a small lot, they have all the incentive they need to lobby their members of Congress to do their bidding. The general public will have no incentive even to know the subsidy is in the works, much less to incur the costs to oppose its enactment.
This is from "Popcorn As Political Pork," by Richard B. McKenzie. It is one of the two December Econlib Feature Articles.

This next excerpt applies Tullock's famous "transitional gains trap" insight:

Moreover, the beneficial effects of subsidies for farmers are not likely to be long lasting. As public choice economist Gordon Tullock argued nearly forty years ago, any net gains that farmers receive from subsidies will likely be largely (if not fully) captured in higher prices of farmers' resource inputs, primarily fixed assets, for example, land. If there are net gains to farmers from any farm program, the price of farm property will rise along with demand, with those higher prices feeding into higher cost structures for farmers, which will be fully evident to people who seek to become farmers after the subsidies. The farmers who are in business when the subsidies are instituted will be the prime beneficiaries, since their property rises in value. New entrants to farming will have to pay prices for land and other assets that reflect the stream of anticipated net government benefits going into the relevant future.

Once the subsidies have been fully capitalized, Tullock argued, government policy makers will be effectively "trapped" in maintaining subsidies, or even increasing them if succeeding generations of farmers are to garner any net gains. If policy makers try to cut the subsidies, they will face the howls of existing farmers who paid good money for their farms in anticipation of the stream of subsidies being maintained into the future.

Comments and Sharing

COMMENTS (5 to date)
Joe Cushing writes:

You could say the same thing about nearly all government subsidies. Even those that don't have the tie to fixed assets are hard to get rid of. LAWRENCE W. REED wrote a paper, in the 70s I think, called The Fall of Rome and Modern Parallels. Later he updated it with another similar paper. In this paper he talks about how government spending gets fixed and nearly impossible to get rid of; that this is nothing new and it happened in Rome; and that this spending inevitably grows until it leads to the collapse of government and possibly society. It makes perfect logical sense, as he explains it. This paper is one of the final pushes for me to convert from minarchy to anarchy. It expresses the total hopelessness there is to the liberty movement working with government.

You can either read the paper yourself or do what I did and have both of them read to you by Stefan Molyneux on his YouTube channel in one video of the same name as the first paper (I'm not sure of the title of the second). In addition to the paper, Stefan interviews Lawrence Reed on his channel in another video. The reading of both papers is about 23 minutes and is well worth a listen. The logic behind it is so simple and compelling as to be something you remember and want to share. It might even contribute to a shift in your world view as it did mine.

Mike W writes:

If policy makers try to cut the subsidies, they will face the howls of existing farmers who paid good money for their farms in anticipation of the stream of subsidies being maintained into the future.

The same applies to the mortgage interest deduction...which is why I don't hold out much hope for meaningful tax reform.

Tom E. Snyder writes:

Joe, thanks for the tip. I'm downloading the youtube video as I type.

David, correct as usual, King Friday.

Ray B writes:

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Joe Cushing writes:

Hey, I'm glad somebody got something out of it.

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